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Pennsylvania PUC Adopts Rate Cap On Retail Suppliers' Service To Low-Income Customers

Affects Low-Income Customers Currently On Competitive Supply

PUC Reverses ALJ's Recommendation For Changes To Proposed Restrictions Meant To Allow More Low-Income Shopping

PUC Vice Chair: Changes, "Will Likely Force All CAP Customers To Return To Default Service"

Powelson: Once We Start Restricting Shopping, "Where Will That End?"

October 27, 2016

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

The Pennsylvania PUC, in addressing default service at PPL Electric Utilities for the period beginning June 1, 2017, has adopted restrictions on the ability of Customer Assistance Program customers to shop for a competitive supplier.

Effective June 1, 2017, a newly created Standard Offer Program specifically for CAP customers (CAP-SOP), "is the only vehicle that a CAP customer may use to shop and receive supply from an EGS [electric generation supplier]."

PPL has about 41,000 CAP customers. Currently, there are about 20,000 CAP customers who shop

The PUC adopted the CAP shopping restrictions on a 3-2 vote, with Vice Chairman Andrew Place and Commissioner Robert Powelson dissenting from the majority's decision to adopt the CAP shopping restrictions.

The PUC adopted the CAP-SOP program as follows:

(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 will be returned to the CAP-SOP pool and be re-enrolled in a new CAP-SOP contract, unless the CAP customer requests to be returned to default service or is no longer a CAP customer.

(g) 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."

(h) 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.

(i) 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.

(j) EGSs must enroll separate from the standard SOP to be a participating supplier in the CAP-SOP. EGSs are free to voluntarily elect to participate in none, one or the other, or both the traditional SOP and the proposed CAP-SOP. Enrollment will be for a three-month period, and shall conform to the enrollment process for the standard SOP. EGS 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.

EGSs shall pay an enrollment fee to acquire customers under the CAP-SOP. The fee would mirror the standard SOP enrollment fee, which is currently $28

The PUC reversed an ALJ's recommendation regarding treatment of CAP-SOP customers at the end of the initial 12-month term of the CAP-SOP product. In a bid to make the program more attractive to retail suppliers and ensure participation by EGSs, an ALJ had recommended that, rather than re-assigning CAP-SOP customers to the CAP-SOP pool at the end of a term (which would result in the existing EGS, which paid a $28 enrollment fee under the CAP-SOP, losing the customer and another EGS paying the same enrollment fee to serve the customer for another term), EGSs shall have the ability to retain customers at the end of the CAP-SOP term provided that the EGS has agreed to the requirement that it will not raise rates higher than the PTC was on the reaffirmation date.

The PUC found the ALJ's recommended change unsupported by evidence.

The PUC said that restrictions on CAP shopping are necessary

"The data provided by PPL in this proceeding demonstrated the economic harm experienced as the result of unrestricted CAP customer shopping decisions. The identified economic harm affects the ability of CAP customers to remain on CAP, as higher costs result in a quicker erosion of the CAP customers’ limited allocation of CAP credits and also affects non-CAP customers by increasing the subsidy they incur to support the universal service objectives within the Competition Act. We find that this unrefuted evidence is sufficient to permit the Commission to impose CAP rules that may partially restrict or limit the ability of these customers to shop for electricity," the PUC said

An ALJ had 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 had 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.

Powelson noted, however, that the period that PPL considered when examining its CAP costs (January 2013 to October 2015) included the Polar Vortex, when many shopping customers across the Commonwealth experienced higher electricity costs.

"Additionally, in the wake of the Polar Vortex, the Commission took great lengths to enhance consumer education and implement safeguards such as 3-day business switching, contract expiration notification rules, and greater disclosure requirements for variable rate contracts. These measures take time to have an impact on the market and may not have been fully captured in PPL's data," Powelson said

Place said that the CAP shopping restrictions adopted by the PUC, "will likely force all CAP customers to return to default service over time."

Place noted that EGSs are unlikely to participate in the program and noted that CAP customers, "seeking offers from EGSs below the current default service price, even products that offer prices for multiple years, will not be able to lock in and hedge low market priced fixed rate products."

Powelson noted that if EGSs do not participate in the CAP-SOP program due to its restrictive nature, "CAP customers will not have any opportunity to take advantage of the innovative product offerings or low prices offered by EGSs in the Commonwealth."

Place noted that there may be alternatives to allow CAP shopping outside of a CAP-SOP program, noting such potential alternatives as including (in a non-exhaustive list):

• New, non-CAP SOP contracts should include fixed offers not to exceed the Default Service price at time of offer. After expiration of the fixed rate period, this same limitation should apply. The new offered rate would need to be at or below the then current Default Service Price.

• New, non-SOP contracts which are variable rate offers should require the 6 consecutive month average rate to be below the 6 month average rate for default service rate [rolling 6 month average test].

• The post SOP roll-over option should be limited to meet the same rolling 6 month average test. If the EGS is unable to accomplish this, it would immediately return the customer to Default Service, or have the customer sign up for the SOP program or another fixed rate EGS contract at or below the current default service rate.

• Any existing, fixed rate contract, or any rollover contract option must meet the same requirements.

Powelson suggested that the PUC should have first, as suggested by RESA, encouraged CAP customers to participate in PPL's existing SOP program which offers a 7% discount to the then-current PTC (without restricting other product offerings), noting that education to CAP customers about this product could have a genuine impact.

"If we start placing limitations on the ability of certain customers to shop out of a fear that they will not do it well, where will that end," Powelson cautioned.

Docket P-2016-2526627

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