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Direct Energy to Cap All Residential Variable Rates in Pennsylvania, Proposes All Suppliers Be Required to Set Limit on Residential Variable Rates
Direct Energy said that, effective April 1, the company will add a price protection feature to its current residential electric variable rates in each Pennsylvania utility service area in which the company serves.
"This will provide Direct Energy variable customers with the flexibility of a month-to-month plan with protection against extraordinary price spikes," Direct Energy said.
Direct's price protection levels below are above its current rates, and represent the maximum variable residential electric rates Direct Energy would charge in Pennsylvania in the event of another round of unforeseen and unexpected extreme market volatility.
The variable rate caps are (cents per kWh):
Direct is committing to these price protection levels for a six month period.
After the initial six month variable price protection period ends, to the extent that Direct Energy determines it needs to adjust these price protection levels, Direct Energy will provide its residential customers with a minimum of 30 days advance notice of any proposed change to enable those customers to determine which plan is right for them.
In addition to its voluntary actions announced today, Direct Energy is proposing the following improvements to the state's competitive retail energy market to enable customers to have both choice and control of their energy bills:
• A new standard for retail suppliers to offer residential variable electric rates with price protection. Direct Energy believes that all retail suppliers should provide a specific cents-per-kilowatt-hour maximum variable rate for any residential variable electric price products and provide customers 30 days advance notice of any changes the retail supplier makes to that price protection level.
• Clearer customer disclosures. Direct Energy believes all suppliers should be required to identify and communicate clearly to customers all pricing and term information, any early termination penalties and the details for how the supplier will serve the customer after the expiration of any initial contract period.
• Minimize delay when changing suppliers. Currently, when a customer wants to change suppliers, the process can take one to two billing cycles to complete. Direct Energy supports working with stakeholders to make efforts to ultimately move to a same-day switch model, but in the interim work toward a target of three to five days.
• Full smart meter deployment. "Smart meters enable retail suppliers like Direct Energy to offer advanced products and services. This not only fosters greater customer engagement but also gives customers fuller control of their energy usage and bills. Direct Energy already offers several innovative products that use smart technology to help customers manage their energy use, which can be particularly helpful during unpredictable weather conditions. Full smart meter deployment would enable Direct Energy and other suppliers to offer more of these types of products and services across the state," Direct said.
• Wholesale market risk allocation. "Direct Energy believes that certain underlying wholesale market conditions and infrastructure constraints need to be addressed to mitigate the impacts of extreme weather events, such as the Polar Vortex or other situations, on end use customers. The Company is advocating that the emergency costs needed to run the system in these types of situations be included in the locational marginal price to give prudent retailers the opportunity to plan ahead and minimize the impact to customers."
On this last point, it appears to us to be a band-aid that won't address the root causes of what is, in our view, a broken and non-competitive wholesale market. While allocating runaway costs in LMPs will initially shield those retail suppliers who have hedged their load, and therefore shield their customers, any risks shifted to load following hedging providers will simply be rolled into new hedges, eventually forcing a drastic increase in retail rates to account for the risk (or the cessation of a robust hedging market as hedging providers cease offering load following contracts due to risks)
"In addition to these priority areas, Direct Energy also supports enhancements that include increasing the financial fitness standards for retail suppliers, stronger enforcement against suppliers and sales representatives that violate customer protection regulations, and new measures to promote fixed price contracts," Direct Energy said.
In Pennsylvania, Direct Energy has more than 286,000 customer relationships
Notes:
• The residential electric variable rate price protection does not include incremental services procured including but not limited to: green products, rewards, home services, or other non-energy related items.
• The residential electric variable price protection levels are the absolute highest rates pending any future regulatory or legislative changes that impose greater costs on retailers
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March 13, 2014
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
Duquesne Light: 13.0
Met-Ed: 12.2
PECO: 14.5
Penn Power: 11.3
Penelec: 12.2
Pike County: 14.2
PPL: 13.7
West Penn Power: 11.2
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