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RESA: Proposed Maryland Rules Would, "Drive Suppliers Out Of The Market," Make It "Impossible" to Retain/Renew Customers

December 30, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Proposed revisions to customer protection rules in Maryland, "would effectively make it impossible for suppliers to retain and renew customers, driving suppliers out of the market, to the detriment of customers," the Retail Energy Supply Association said in comments to the PSC (PC 35).

As previously reported by EnergyChoiceMatters.com, PSC Staff have proposed that the Commission adopt regulations that would require a notice of change in a retail supplier's rate prior to the rate being billed to customers and require what Staff terms a "soft verification" that demonstrates the customer's willingness to maintain the revised agreement with new rates and or fees, requiring retail suppliers to obtain new customer consent for any rate change (click here for details)

"If adopted, the Proposed Rules would effectively make it impossible for suppliers to retain and renew customers, driving suppliers out of the market, to the detriment of customers," RESA said.

"To be sure, the Proposed Rules would eliminate variable rate supply offerings from the Maryland market. However, the Proposed Rules would also require affirmative consent to renew fixed price products, handicapping suppliers' ability to retain customers, while driving up costs for both suppliers and customers. As a result, suppliers would not be able to economically serve Maryland customers, forcing suppliers out of the Maryland market," RESA said.

"[T]he Proposed Rule Changes would require affirmative customer consent for any change in price, up or down, to effectuate a contract renewal. Currently, suppliers generally obtain customers' consent to renew at the onset of the contractual relationship, consistent with current COMARs. The new Proposed Rule Change would essentially require suppliers to reenroll customers monthly, annually, or whenever the applicable contract term ends or price changes, regardless of whether the customer had given consent (or wants to give consent) when the contractual relationship began. This type of rule burdens both customers and suppliers. Customers that are happy with their supplier and their retail supply service will find themselves kicked back, essentially slammed, to utility service upon expiration of their contract term if they miss or fail to respond to a renewal communication from their supplier. This would be a significant detriment to customers enrolled in fixed price products at a lower price than the applicable utility service," RESA said.

"RESA strongly encourages the Commission to consider alternate safeguards, such as a cap on rate variability beyond which a supplier would be required to notify customers. As RESA detailed in its previous comments filed in this docket, suppliers that do not limit variability should be required to say so in their initial contract with the customer, and should also be required to notify customers of a price increase that exceeds a certain Commission-specified percentage threshold from the prior term. This would apply to both month-to-month variable price products and renewals of longer-term fixed price products. Suppliers may also offer variable products that are capped or require notice beyond a certain level as specified in the customer contract. A supplier that exceeded a self-imposed cap or surpassed the self-imposed threshold would be required to notify the customer pursuant to the contract or new rule," RESA said.

"[T]he Proposed Rule Changes target variable rate contracts with new requirements that a customer affirmatively approve each rate change in advance. Because prices on market-based variable rate contracts may change each month, these proposed rules would essentially require customers to reenroll each month. Implementing this requirement would result in substantial administrative costs that will be reflected in the price charged to customers, and creates a disincentive for suppliers to decrease prices when market conditions otherwise allow. If a customer does not respond to a price change notice, whether it be a price increase or decrease, the supplier is limited to two options: (1) return the customer to Standard Offer Service or (2) maintain the customer's current rate. RESA anticipates that this proposal, if adopted, will drive suppliers out of the market and would likely mean the end to variable rate contracts which, as explained above, can be desirable products for many customers. The loss of suppliers from the market, resulting in fewer choices from which customers might choose, is inconsistent with Maryland policies favoring the establishment of retail energy markets and would deprive customers of the benefits of competition," RESA said.

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