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Draft Connecticut Decision Would Not Allow Month-to-Month Rates for Fixed Contract Rollovers, Would "Encourage" Suppliers to Waive Termination Fees for Auto-Renewals

September 10, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

A draft interim Connecticut PURA decision would prohibit electric suppliers from serving residential customers on a month-to-month, or variable, rate at the end of a contract term if such contract was executed after October 1, 2015.

The draft states that recent legislation banning variable rates for residential customers, "explicitly prohibits renewal to variable pricing."

Accordingly, the draft would conclude suppliers would have three options at the end of a contract:

• return the customer to EDC Standard Service; or

• keep the customer at the original fixed contract rate until a new contract is entered into or the supplier returns the customer to EDC Standard Service; or

• renew the customer to a new fixed term of no less than four billing cycles.

"If an electric supplier offers the first option, it should timely inform the EDCs of the number of customers that may potentially be returned to Standard Service and the date(s) upon which such a switch could happen," the draft states

"Licensed electric suppliers are prohibited from offering contracts that contain variable pricing, either on an initial fixed term or renewal basis, on or after October 1, 2015. To do so would violate Conn. Gen. Stat. §16-245 and such action would be subject to penalty under Conn. Gen. Stat. §16-41. Licensed electric suppliers may include renewal language in new contracts that either returns customers to EDC Standard Service, keeps the customer on the original fixed contract rate, or starts a new fixed price term of no less than four billing cycles," the draft states

The draft noted that current law permits automatic renewals. "Moreover, Connecticut law permits that a cancellation fee can be applied to auto-renewed fixed rate residential contracts, so long as the contract renewal is administered pursuant to said statute and the cancellation fee does not exceed $50," the draft noted.

However, the draft also noted, as previously reported by EnergyChoiceMatters.com, that PURA has identified challenges in complying with statutes governing auto-renewals of contract, due to difficulties in determining the exact date a residential customer receives their electric bill as well as the exact date on which a customer takes action to terminate or cancel the contract (impacting when a cancellation fee applies), and that PURA intends to address these issues in Docket No. 14-07-20RE01

Until the Authority rules on such auto-renewals, "suppliers must assure that customers are properly and timely notified of any contract renewal containing a cancellation fee and must carefully document the customer’s actions to cancel such contracts before assessing a cancellation fee," the draft states

"Given the difficulties in pinpointing the exact date a residential customer receives his electric bill, the Authority encourages suppliers to refrain from including early termination or cancellation fees in contracts containing auto-renew provisions at this time," the draft states

The draft would also maintain the requirement that fixed rate contracts be at least four months in length. "[A]fter October 1, 2015, electric suppliers and residential customers are left to enter into only fixed term contracts, with a minimum term of four billing cycles," the draft states

The draft would also confirm that residential variable pricing may continue for contracts entered into prior to October 1, 2015

"The Act does not contemplate a flat prohibition on all variable pricing after October 1, 2015. Rather, it specifically prohibits suppliers from entering into new residential contracts or renewing a residential customer to a variable rate. Renewals are typically done at the end of the original contract term. Therefore, if a contract entrance date occurs on or after October 1, 2015, such contract cannot contain variable pricing. Similarly, if a contract is renewed on or after October 1, 2015, such renewal cannot contain variable pricing. Thus, when the customer has affirmatively consented to a variable product that is capped for the first three complete billing cycles on or before September 30, 2015, the Act gives no authority to invalidate such existing contract. The licensed electric supplier and the residential customer remain governed by the terms of the contract," the draft states

Docket 15-06-15

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