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Not With a Bang, But A Whimper: Pennsylvania Retail Auction Bill Dies; Legislature's Focus Now on Regulating Retail Supplier Pricing (Banning Variable Rates)

March 12, 2014

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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Runaway wholesale electric prices have doomed another attempt to expand electric choice, this time in Pennsylvania -- a state which increasingly looks more and more like New York, Connecticut, and dare we say it, Maryland, thanks to unchecked and uncompetitive wholesale pricing.

Specifically, Senator Bob Mensch has abandoned his proposal to eliminate utility-provided, hedged default electric service, via an auction of retail customers.

While Mensch indicated that additional market reforms would be introduced in a new bill, and a hybrid concept similar to an opt-out, AGL-style assignment was floated, most of these reforms appear to emphasize greater regulation of retail electric supplier offers.

"[R]eports of rate spikes of two to three times the amount they were paying raise serious concerns and the Attorney General, as well as the PUC are correct to look at these cases for potential wrongdoing," Mensch said.

"These incidences underscore the need for us to have stronger consumer protections here in Pennsylvania accompanied by a more robust education campaign on behalf of the Public Utility Commission and the electric suppliers. New legislation I will be introducing very shortly will do just that, including provisions that will:

• "Maintain the current default electric structure as a choice for consumers with no change in supplier,

• "Ensure rate stability for all term contracts, including into the 13th month (and beyond) after the expiration of a 12 month contract;

• "Manage and set limits on upside rate spikes impacting consumers with variable rate contracts, making them more predictable for the consumer;

• "Charge the Public Utility Commission and the industry with providing much more consumer education – an area that has been clearly lacking;

• "Provide additional protections for commercial and industrial customers, large and small;

• "Improve the timeframe for contract conversions, so consumers choosing to switch are able to immediately lock in on the rate they choose."

According to various media reports, Mensch has said that the new legislation would still push customers off default service, while retaining default service for customers affirmatively electing the option. Specifically, customers would receive a notice alerting them that they would be assigned to a specific electric supplier (in a process to be determined, but which would not include an auction) if they do not affirmatively respond. However, we expect the apparent opt-out nature of this new proposal to be as toxic as the original auction proposal in the current environment.

Meanwhile, other legislators have seized on the polar vortex retail pricing to impose new requirements on variable rate contracts, or eliminate variable rate contracts entirely.

Sen. Lisa Boscola said that she would introduce a bill that would require electric suppliers to:

• "Adhere to a 24- hour notification requirement to alert residential customers at times when their variable rate increased by 200 percent or more from the previous hourly rate;

• "Post their variable rate publicly on their website — with continuous real-time updates; and

• "Mandate person-to-person communication to clearly and plainly disclose the full details of variable rate plans, including: that the variable rate is uncapped, the market in which the rate is derived from, and the full terms and conditions of the contract the customer is entering.

Sen. John Gordner, majority caucus chair for the Senate Republicans, said that he would introduce a bill to prohibit variable rate contracts for residential customers.

"What we've seen in the last four to six weeks was unconscionable," Gordner said. "Nobody who signed up for a variable rate was expecting their rate to quadruple or quintuple."

Several senators have proposed accelerating the switching timeline as well.

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