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RESA: "Unprecedented" Price Cap Program Adopted By Pennsylvania PUC "Cannot Survive" Court Test

"Pricing Restrictions" Could "Undermine" Work To Develop Nationally Recognized PA Retail Market


November 15, 2016

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

The "unprecedented" action of the Pennsylvania PUC to restrict Customer Assistance Program (CAP) customers at PPL Electric Utilities to shopping only through a new Standard Offer Program specific to CAP customers (CAP-SOP), under which the EGS must serve the customer at a 7% discount off the Price To Compare at the time of enrollment, with such EGS price fixed for 12 months, threatens to undermine Pennsylvania's nationally recognized work to create a workably competitive retail market, and cannot withstand court scrutiny, the Retail Energy Supply Association said in a petition for reconsideration

As exclusively reported by EnergyChoiceMatters.com last month, the PUC ordered that, 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]," at PPL.

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

All CAP shopping customer 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," the PUC ordered

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.

Retail suppliers must pay a $28 customer acquisition fee for referrals under the CAP-SOP.

"[C]urrent PPL CAP shopping customers (nearly 21,000) would be forced back to default service (without their consent) effective June 1, 2017 as their current fixed-price electric generation supplier ('EGS') contracts expire. This will happen regardless of: (1) whether or not their current EGS price is lower than the PPL price-to-compare ('PTC'); or, (2) the customer received any other benefit from selecting the particular EGS," RESA noted in its petition for reconsideration.

Approximately half of the shopping CAP customers are benefitting from EGS prices that are at or below the PTC, RESA noted.

"[I]f implemented, the Final Order will have the unprecedented result of forcing PPL's CAP customers who have affirmatively selected an EGS based on the factors that are important to them (including price savings, price stability, energy management tools, or value-added services) to be returned to PPL's default service without their consent," RESA said

"Imposing the severe limitations on the right of nearly 50,000 of PPL's CAP customers to shop now is premature and will result in irreversible and unnecessary damage that can be avoided through a more deliberate and cautious process. In sum, the forcible return of current CAP customers to PPL default service and the future choice between default service and only one EGS product through the CAP-SOP is an unlawful frustration of the right to shop that cannot survive the Commonwealth Court's legal test," RESA said.

RESA called the PUC's decision inconsistent with a Commonwealth Court order regarding treatment of PECO's CAP customers. In such order, the Court, while adopting a prohibition on early termination fees for CAP customers, affirmed the PUC's rejection of a restriction sought by consumer advocates that EGSs be required to cap their pricing to PECO CAP customers at or below the PTC (RESA noted that the 7% discount required under PPL's CAP-SOP is "far more restrictive" than the PECO CAP pricing restrictions already rejected by the Commonwealth Court).

In the PECO case, "[u]ltimately, the Commonwealth Court did affirm the Commission's conclusion that such restrictions on the prices EGSs could offer to CAP customers were anti-competitive and too severely limited the choices available to CAP customers," RESA said

"By approving a never-before-implemented CAP-SOP that requires EGSs to cap their prices at 7% off the PTC (and pay PPL a $28 referral fee), the Final Order imposes pricing restrictions that are far more restrictive than those rejected by the Commonwealth Court," RESA said

"While the Commission may have the legal authority to impose certain limited and narrowly tailored restrictions on the right of shopping, the Commission does not have the authority to implement such restrictions without engaging in the proper legal analysis which did not occur here," RESA said. "Specifically, because the 'overarching goal of the Choice Act is competition,' the Commonwealth Court requires that restrictions on the right to shop can only be considered upon a showing of substantial reasons why there are no reasonable alternatives to the proposed restriction on competition. And, the Commission may rely on substantial evidence showing that proposed restrictions may adversely affect available choices for CAP customers and should be rejected ... {I]n the Final Order the Commission: (1) did not engage in the required legal analysis of reasonable alternatives - and in fact, did not even identify what other alternatives were considered - to the restrictions proposed in this proceeding; and, (2) overlooked and/or failed to give the proper weight to the evidence in the record showing why the proposed and never-before-implemented CAP-SOP restrictions would almost certainly eliminate EGS provided products for CAP participants."

RESA noted that the CAP-SOP program was only proposed in rejoinder testimony

"Because the only vetting of other reasonable alternatives occurred during confidential settlement discussions, the Commission has not had the opportunity to engage in the necessary legal analysis of these options before restricting CAP customers from participating in the retail market. From an implementation and operational standpoint, the specifics of the CAP-SOP proposal were not offered until the rejoinder phase of this proceeding. As such the record is devoid of a full vetting the restrictions as well as the technical and operational details important to successful implementation," RESA said

"While RESA does not support restricting CAP customer shopping options to one product through the CAP-SOP as proposed here," to the extent the PUC were to adopt such a program, "a full and fair vetting of the proposed restrictions and, importantly, how they are going to be operationally implemented is of vital importance," RESA said

"Without such a process, the very real possibility exists that the actions taken in the context of this proceeding could irrevocably harm the retail competitive market and undermine all of the good work of this Commission over many years to foster the development of a workably competitive retail market consistent with the requirements of the Electricity Generation Customer Choice and Competition Act," RESA said.

"If the Commission elects to shut down the existing shopping market and prohibit future CAP customers from availing themselves of the competitive market, significant operational details need to be worked out. For example, how will EGSs' current CAP customers be notified that they will no longer be able to avail themselves of the EGSs' non CAP-SOP products? When an EGS organically acquires a potential new customer through its own marketing expenses only to learn that the customer participates in CAP, will the EGS have to pay PPL a $28 referral fee to serve that customer (assuming the EGS is participating in the CAP-SOP)? EGSs are required to provide existing customers notices prior to the end of existing fixed term contracts. How will EGSs know if the particular customer is enrolled in CAP such that those notices will not be accurate or meaningful? This issue is important from the standpoint of an EGS because sending this non-applicable and meaningless notice to an existing CAP customer would be a waste of time and money. The issue is also important from the perspective of the customer as receiving such notice would be confusing. Additionally, how will an EGS know when an existing customer enrolls in CAP and, at the point the customer enrolls, what will be the requirements of the EGS in regard to the then effective contract with the customer? How are EGSs supposed to manage any value-added offerings provided to the customer which are dependent on specific contract term lengths? This is not an exhaustive list of all the details which need to be addressed- and which were not in the proceeding here- if the CAP-SOP were to be implemented," RESA said

"There is no precedent in Pennsylvania for this as the Commission has not closed down an existing market before nor is there a CAP-SOP in place in any other service territory. To shut down an existing shopping market, appropriately addressing these operational issues is of significant importance and EGS involvement is critical," RESA said

Docket P-2016-2526627

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