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PUC Proposes That Variable Rates Must Be "Reasonably Reflective" of Market Conditions, Based on Index or Formula

July 25, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The Maine PUC has proposed in a rulemaking that variable rates offered by retail electric suppliers shall be specified in terms of an index or formula and, "must be reasonably reflective of electricity market conditions."

Under a proposed rulemaking issued by the Maine PUC, "Variable Rates and Charges" would mean, "any rate or charge that is not specified and fixed in dollar or dollar per unit terms in the Terms of Service. Variable Rates and Charges include any rate or charge that is defined by index or formula. Variable Rates and Charges do not include rates or charges that vary by time period or month if the rate or charge is specified and fixed for a period of time in the Terms of Service."

Per the proposed rule, applicable to residential and small non-residential customers, "Any variable rate or charge must be specified in terms of an index or formula and must be reasonably reflective of electricity market conditions."

Under the draft, each competitive electricity provider that offers and provides service with Variable Rates or Charges:

a. Must clearly specify in the Terms of Service document and on its webpage the formula and/or market indices by which the Variable Rate or Charge will be calculated;

b. Must clearly specify in the Terms of Service document and on the webpage whether there is any limit on how high the rates or charges may rise;

c. Must provide on the webpage the rates and charges that the formula and/or index would have produced over the immediately prior 12-month period;

d. For rates that are established prior to the billing period, must notify customers at least one week in advance of any change in the applicable rate or charge; and

As intimated by requirement (a) above, the proposed rule would require that suppliers, "must prominently display all effective Terms of Service documents on its webpage with an indication of the effective dates of each document." The Terms of Service document must be available and easily accessed on the webpage without any requirement that any personal customer-specific information be provided, the draft rule states.

The proposed rule would provide that termination fees, "must be a fixed dollar amount, and may not be established by formula."

The Commission also requested comments on whether there should be a cap on termination fees, and whether terminations fees should not be allowed in conjunction with variable rates.

The proposed rule would also add a requirement that customers must affirmatively consent to continued service under changed terms of service in the same manner that customers consent to initial service.

In the event that a customer does not consent, the supplier, "must maintain service pursuant to the existing terms of service document."

Regarding renewals, the draft provides that suppliers shall provide written notice to its customers between 30 and 60 calendar days in advance of a renewal of service.

In the event that there is a "material change" in the renewal Terms of Service, customers must affirmatively consent to the renewal in the same manner that customers consent to initial service. A "material change" is defined as including, "any change in price or pricing structure."

The proposed rule requires suppliers to provide written notice to its customers between 30 and 60 days in advance of any assignment of the service obligation to another supplier, and specifies that a customer must affirmatively consent to any material change in the terms of service associated with such assignment. In the absence of such consent, a supplier that is assigned customer accounts must provide service in compliance with existing Terms of Service.

The proposed rule adds a requirement that suppliers must notify medium and large customers of the potential Standard Offer opt-out fee they may incur if they switch to a retail supplier.

The PUC also sought comment on whether the required security from suppliers should continue to be based on a percentage of revenues; whether the security amount should be capped in some way; whether the amount of the security should vary with the nature of service (e.g., existence of deposits or prepayments); and whether the financial security provisions should apply to suppliers that serve medium and large customers, as well as residential and small commercial customers.

Docket No. 2014-00214

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