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Pennsylvania ALJ Would Institute Rate Cap on Retail Supplier Service To Low-Income Customers

Would Prohibit EGS Service To Low-Income Customers Outside of New SOP Program

August 18, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A recommended decision from a Pennsylvania ALJ in PPL Electric's default service plan proceeding would prohibit retail suppliers from serving Customer Assistance Program (CAP) customers generally, and would only allow electric generation suppliers (EGSs) to serve CAP customers through a new Standard Offer customer referral program specific to CAP customers (CAP-SOP), whose rate would be capped and regulated by the PUC.

The ALJ noted that while some current CAP customers who shop pay more than default service and some pay less, the net monthly energy charges for all CAP (OnTrack) shopping customers at PPL was $228,656 more than the Price to Compare, for an annual cost of $2.7 million. The ALJ noted that this results in some CAP shopping customers reaching their limit on CAP credits faster than if they were on default service, resulting in their exclusion from the CAP program.

The ALJ found that the PUC has authority to impose restrictions on CAP shopping. While the ALJ said that, ideally, CAP shopping restrictions should be addressed statewide, interim measures are required at PPL now.

Specifically, the ALJ would adopt, with one modification, a proposal to prohibit CAP customers from shopping in any manner other than through a new CAP Standard Offer Program, which was recommended by PUC Bureau of Investigation and Enforcement Staff and consumer advocates. Essentially, CAP customers may only shop through the CAP-SOP customer referral program, under which customers are placed with an EGS by calling PPL or via PPL's website.

The ALJ recommends:

(a) Effective June 1, 2017, the CAP-SOP is the only vehicle that a CAP customer may use to shop and receive supply from an EGS.

(b) Any CAP customer shopping request that does not get processed through the CAP-SOP will be denied.

(c) EGSs participating in the CAP-SOP must agree to serve customers at a 7% discount off the PTC at the time of enrollment. This price shall remain fixed for the 12-month CAP-SOP contract unless terminated earlier by the customer.

(d) CAP customers may terminate the CAP-SOP contract at any time and without any termination or cancellation fees or other penalties.

(e) A CAP customer who terminates a CAP-SOP contract or whose CAP-SOP contract reaches the end of its term can re-enroll in the CAP-SOP.

(f) At the conclusion of a 12-month CAP-SOP contract, the CAP customer may: (i) be returned to the CAP-SOP pool and be re-enrolled in a new CAP-SOP contract, (ii) be returned to default service, or (iii) remain with the EGS which has agreed to the EGS participation requirement that it will not raise rates higher than the PTC was on the reaffirmation date.

This last point is where the ALJ departs from the recommendation of PUC Staff and other parties, in a bid to make the program more attractive to retail suppliers

PUC Staff had proposed that at the end of the initial 12-month term for a CAP-SOP customer, the customer would default to being reassigned to the CAP-SOP pool, where they would again receive a price 7% below the currently effective PTC, fixed for 12 months.

EGSs pay $28 for enrollments under the CAP-SOP. The ALJ noted that reassigning the customer to the CAP-SOP pool would require the payment of another $28 by the CAP customer's new EGS. "[W]hile an introductory rate of 7% below the PTC at the time of enrollment with an EGS is an incentive to enter the competitive market that EGSs see as a legitimate introduction worth the cost and the $28 enrollment fee, keeping the rate year after year while paying additional enrollment fees each year is a burden on the EGSs that they may not see as worthwhile," the ALJ said

"[T]o be fair, there is made here a single modification to the approved Joint Litigation Proposal, and that is to allow the EGSs who are separately participating in the CAP-SOP to have flexibility to charge rates up to and equal to the PTC to CAP customers after the first 12 months of the 7% discount if their written contracts so provide. This will serve two purposes," the ALJ said

"First, it is an equalizing measure to provide incentive to EGSs to participate in the CAP-SOP, and it eliminates the need to re-enroll the low-income customers who are happy with their service provider, as well as the $28 enrollment fee for continuing customers. The PTC which will be used for comparison is that which is in effect at the end of each 12-month period that the customer remains with the EGS. If the customer leaves that EGS but wishes to shop, the customer must use CAP-SOP to ensure that the new EGS has agreed to the CAP-SOP terms," the ALJ said

"Second, it recognizes that the Choice Act was not meant to prevent EGSs from charging rates that are equal to the PTC to any class of customer, including CAP customers. While the SOP is acceptable as a program which introduces customers to shopping, requiring that the participating EGSs continue to offer a 7% discount to CAP customers is unnecessary so long as the rates charged, after the introductory period of 12 months has ended, do not exceed the PTC. This modification should mitigate RESA's dire prediction that the CAP-SOP will eliminate competition for CAP customers," the ALJ said

Under the ALJ's recommended decision, transitioning CAP customers who are shopping as of the effective date of June 1, 2017 would be handled as follows:

(a) All CAP customer shopping fixed-term contracts in effect as of the effective date of the CAP-SOP will remain in place until the contract term, "expires and/or is terminated."

(b) Once the existing CAP customer shopping contract expires or is terminated, the CAP customer will have the option to enroll in the CAP-SOP or return to default service, but in any event will only be permitted to shop through the CAP-SOP.

(c) PPL Electric will revise its CAP recertification scripts/process so that all existing CAP shopping customers receiving generation supply on a month-to-month basis after June 1, 2017 will be required at the time of CAP recertification to enroll in the CAP-SOP or return to default service, but in any event will only be permitted to shop through the CAP-SOP.

Note that while CAP customer shopping may only occur through the CAP-SOP program, the current regular SOP program allows customers to select a specific EGS (rather than being randomly assigned). It was not immediately clear if the CAP-SOP program will adopt this feature, and if so, if it would be permissible for retail suppliers to market to CAP customers and direct CAP customers to select them when given the option in the CAP-SOP program

Under the ALJ's recommendation, EGSs must sign up separate from the standard SOP to be a participating supplier in the CAP-SOP. EGSs would be free to voluntarily elect to participate in none, one or the other, or both the traditional SOP and the proposed CAP-SOP. EGS enrollment in the program will be for a three-month period, and will conform to the enrollment process for PPL's standard SOP. As such, EGSs may opt in to participate in the CAP-SOP on a quarterly basis, and are free to leave the CAP-SOP on a quarterly basis.

The ALJ rejected RESA's alternative to address CAP shopping, which did not include any limitations on CAP shopping, but which would encourage CAP customers to avail themselves of the current Standard Offer program to save money.

"This 'cross your fingers and hope they will listen' approach is simply insufficient. It fails to protect the CAP shoppers from the negative effects of paying more than the PTC and reduces the ability of the individual customers to stay on CAP as long as possible. It reduces the overall ability of the CAP program to offer participation to as many customers as possible within the permitted expenditure as well as maximizes the burden on other residential ratepayers who fund CAP, some of whom are themselves low-income customers," the ALJ said

Currently, there are about 20,000 CAP customers who shop (of 40,000 total CAP customers)

Other Issues

The ALJ also addressed the requirement that PPL offer a Time of Use option under its default service plan. The ALJ noted that two prior mechanisms whereby PPL offered TOU generation rates itself failed due to problems with rate setting and cross-subsidization, while a court has rejected PPL's latest mechanism of relying on EGSs to meet the statutory TOU default service requirement. A settlement in the PPL default service case merely noted that the issue of EGS-offered TOU rates for statutory compliance is on remand before the PUC. The settlement withdrew a proposed continuation of the program, but offered no alternative TOU program in light of the uncertainty on remand.

However, the ALJ said that under statute, the default service plan must include a TOU option. Accordingly, the ALJ would direct PPL to develop a new TOU option

"Omitting the TOU program from a DSP case will not pass judicial muster. Accordingly, there is no choice but to direct PPL Electric to develop a proposed TOU plan and file it within three months of the final Commission order in this matter, with the understanding that the Commission may subsume this initiative into the remand proceedings from DCIDA in favor of a state-wide collaborative or directive regarding TOU plans in general," the ALJ said

Regarding all other issues, the ALJ would adopt an uncontested settlement without modification, setting the default service procurement process and design for the period June 1, 2017 to May 31, 2021, barring any petition for a mid-course adjustment

As previously reported, residential default service would consist of supply procured via laddered, fixed-price, full-requirements, load-following contracts, except for an existing 50 MW block which expires in May 2021

The settlement retains the use of six and 12-month contracts exclusively for the full requirements portion of residential default service, but changes the ratio between the two contract term lengths, as a result of shifting the amount of load bid in any single procurement.

Specifically, under the settlement, 80% of the residential full requirements portfolio will be 12-month contracts, and 20% will be six-month contracts.

Click here for the specific procurement dates, amounts, and term lengths for residential default service under the settlement.

For Small C&I customers (under 100 kW), PPL will procure layered six-month and 12-month full requirements products twice per year, in April and October, with the first procurement occurring in April 2017 for default service beginning June 1, 2017.

About 45% of the Small C&I portfolio will be served under six-month contracts, and about 55% will be served under 12-month contracts. More specifically, each semi-annual procurement will obtain 45% of supplies via six-month contract, and, depending on the specific procurement, 25% or 30% via 12-month contract.

The Residential and Small C&I Price to Compare will be fixed for six months, and will be reconciled every six months. PTCs will be posted 30 days in advance of the effective date

For Large C&I customers (over 100 kW), PPL will obtain default service supply on a real-time hourly basis through the PJM spot market. PPL Electric will issue a single annual solicitation to obtain competitive offers from suppliers to provide the default service spot market supply to the Large C&I customer class. These annual procurements will coincide with the PJM planning period. Annual solicitations will be held in April for the upcoming PJM planning period.

Docket P-2016-2526627

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