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Pa. PUC Caps Early Termination Fees at $50 for Supplier

November 30, 2011

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Copyright 2010-11 Energy Choice Matters

EnerPenn USA, LLC d/b/a Y.E.P. and YEP Energy has petitioned the Pennsylvania PUC for reconsideration of the PUC's order granting YEP Energy an electric generation supplier license to remove various marketing and solicitation conditions placed on the license, including a limit of $50 on early termination fees.

As only reported by Matters, EnerPenn USA received a Pennsylvania supplier license in November (11/10).

The conditions placed on YEP Energy are essentially unprecedented, and stem solely from the PUC's concern arising from a settlement between PUCT Staff and Texpo Power, LP, an affiliate of YEP Energy, concerning Texpo's compliance with the PUCT substantive rules.

To date, nearly all mass market REPs in ERCOT have been found in violation of various PUCT substantive rules under the market-wide compliance audits.

However, to Matters' knowledge, YEP Energy is the only supplier upon which the Pennsylvania PUC has placed the marketing and solicitation conditions as a result of any Texas violations found in a compliance audit. The conditions placed on YEP Energy were borrowed from similar conditions placed on Just Energy when it was licensed by the PUC in 2009; however, the conditions placed on Just Energy, as YEP Energy noted, arose due to the repetition of complaints and/or civil actions against Just Energy in multiple jurisdictions, including Illinois and New York.

In contrast, the conditions placed on YEP Energy by the Pennsylvania PUC resulted solely from the PUCT compliance audit which, aside from a nominal fine, resulted in no adverse action against Texpo, and with all issues corrected and resolved to the PUCT's satisfaction.

Most Pennsylvania electric suppliers which have been subject to a settlement with the PUCT to resolve violations found under a compliance audit were licensed in Pennsylvania before the Texas violations occurred, and thus, there was no opportunity to condition the license as a result of the Texas audit results.

However, in at least two cases, the Pennsylvania PUC granted a supplier a license, or expanded license, without condition despite that supplier entering into a settlement to resolve PUCT substantive rule violations prior to the Pennsylvania license or amendment application.

Specifically, in October 2010, Reliant Energy Retail Services, LLC entered into a settlement with PUCT Staff to resolve alleged violations under a compliance audit. By this time, affiliate Reliant Energy Northeast was already licensed in Pennsylvania; however, Reliant Energy Northeast was not yet licensed to serve small volume customers in Pennsylvania. When Reliant Energy Northeast later sought an expanded supplier license to serve residential customers in Pennsylvania, the PUC did not include any conditions on the license notwithstanding the alleged Texas violations and settlement by Reliant Energy Retail Services.

Similarly, Green Mountain Energy, in September 2010, entered into a settlement with PUCT Staff to resolve alleged violations under a compliance audit. Green Mountain Energy did not apply for a Pennsylvania supplier license until March 2011, and the license was granted, without condition, in June 2011 despite the alleged Texas violations and settlement.

In contrast, in licensing YEP Energy, the Pennsylvania PUC said, "we note that the conduct of EnerPenn's affiliate in other states (particularly Texas) raises consumer protection concerns."

The Pennsylvania PUC cited the Texpo compliance audit as well as a civil suit filed in Texas which the Pennsylvania PUC conceded was dismissed with prejudice.

"[W]e believe that if we grant EnerPenn an EGS license subject to similar conditions we imposed on Just Energy, it is unlikely that EnerPenn would replicate the problematic history of its affiliates in other jurisdictions. These extensive conditions go a long way toward addressing our concerns regarding consumer protection," the Pennsylvania PUC said.

Without enumerating every specific allegation against Texpo, Reliant, and Green Mountain in the Texas compliance audits, Matters does not see any distinction in the Texpo case and does not view the alleged Texpo violations as more serious or more egregious than those levied against the other REPs. Accordingly, it is not clear why YEP Energy warranted different treatment from the Pennsylvania PUC versus Reliant or Green Mountain.

The specific conditions placed on YEP Energy include, among other things:

- Any early termination or exit fee imposed by EnerPenn will not exceed $50 per contract

- Provision of a no-fee termination period extending until 30 days after the first bill

- An affirmative obligation to state that its sales rep is not affiliated with the utility, government, or consumer group

- All marketing materials to be used, including contracts and customer facing materials, shall be provided to PUC Staff for informal comment 5 days prior to use

- YEP Energy shall file ongoing compliance reports with the PUC

YEP Energy objected to the conditions as unsupported and discriminatory.

"In the absence of finding a violation of the Commission's consumer protection regulations, the additional and extensive conditions imposed by the November 14 Order are unfair and put EnerPenn at a competitive disadvantage. In essence, the November 14 Order is penalizing EnerPenn for the possibility of some future violation that may never occur. The extensive conditions set forth in the November 14 Order are applicable to EnerPenn, while other EGSs are permitted to operate within the Commonwealth without the burden and expense of complying with such additional obligations. Compliance with these conditions will increase costs for EnerPenn, which, in turn, will inhibit EnerPenn's ability to offer alternative electric supplies at a price that is competitive to other EGSs and default service providers that are not subject to the same or similar obligations. In short, the conditions of the November 14 Order create an unlevel playing field and are contrary to the Commission's policy to encourage competition in the retail electric market," YEP Energy said.

"Unlike the Just Energy Order, the consumer protection problems experienced by EnerPenn's Texas affiliate have been corrected, settled, and dismissed ... Accordingly, EnerPenn should not be held to the same conditions," YEP Energy added.

Aside from noting that one of the two cases relied on by the Pennsylvania PUC for its concerns was dismissed with prejudice, YEP noted that the only remaining case, the Texas compliance audit, saw Texpo correct all of the violations that formed the basis of the investigation prior to settlement.

"It is well established that a finding of fact must be based exclusively on the evidence admitted to the record in the proceeding ... Here, although information regarding the Texas regulatory and administrative proceedings were submitted in response to data requests, there is nothing in the record to suggest that EnerPenn would replicate the alleged problems of its affiliate in Texas. Further, the November 14 Order ignores that, as explained above, the alleged violations by EnerPenn's Texas affiliate were either dismissed with prejudice or previously corrected and settled," YEP Energy added.

EnerPenn also said that it was never provided a reasonable opportunity to demonstrate why the extensive conditions are inappropriate.

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