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Noting "Stagnant" Retail Market, NRG Energy Petitions Pennsylvania PUC To Implement Supplier Consolidated Billing By 2Q 2018

Proposes Switch "Block" Mechanism For Customers With SCB Past Due Balances

December 8, 2016

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Copyright 2010-16
Reporting by Paul Ring •

Note: Story updated at 10:51 am to provide more discussion on the block mechanism

NRG Energy, Inc. has filed a petition with the Pennsylvania PUC to implement, for electricity, supplier consolidated billing (SCB) by the second quarter of 2018

NRG Energy noted that the legal authority for an order directing the implementation of SCB has been endorsed by the Commission in its retail market investigation, but previously deferred implementation due to, "other, more pressing priorities." NRG noted that since the time of the final order in the PUC's retail market investigation, the PUC has addressed these other priorities.

NRG further noted that despite the improvements made through the retail market investigation, shopping has remained stagnant over the past five years.

"Over five years ago, the Commission noted that nearly two-thirds of consumers were not participating in the retail market. Based on these shopping statistics, the Commission found that consumers were not moving into the retail market at a pace that would be expected in a well-functioning market. The shopping statistics are nearly the same today," NRG said

"The time is now to implement SCB because consumers are better informed and better educated than ever and are able to switch suppliers so easily," Mike Starck, NRG general manager, said in discussing the petition. "The PUC must enable competitive retail suppliers to build better relationships with their customers through regular communication. This happens when suppliers can bill their customers directly for all energy costs, rather than just appearing as a line item on utility bill."

NRG called SCB, "a natural and necessary next step in moving Pennsylvania toward the robust market that has been envisioned for twenty years."

"With Supplier Consolidated Billing customers gain access to more innovative products and services that meet their individual needs – including bundled products like home security or surge protection, and new payment options like Pre-Pay and Flat Bill that allow customers to take control over their energy budgets. With SCB, suppliers will be able to build lasting, long term relationships with customers and improve customer satisfaction. While this is an important step, it’s certainly not the end of making the Pennsylvania electricity market even more competitive," NRG said in describing the petition.

Under NRG's proposal, in order to provide SCB, the EGS would be required to purchase the full value of the receivables of the EDC, meaning that it would be a zero discount rate. The payment period proposed by NRG is 30 days. NRG further proposed that the purchase would be without recourse for all charges and, otherwise, on the same terms that the EDC purchases EGS receivables for the existing utility consolidated billing (UCB). The EGS, in turn, would be responsible for collecting from the customer all the charges owing to the customer.

NRG also proposes to preserve all existing protections enjoyed by Pennsylvania's retail customers, particularly with respect to the Commission's standards and billing practices for residential service set forth in Chapter 56, with which EGSs serving residential customers are required to comply.

Under NRG's proposal, the EGS offering SCB would be permitted to instruct the EDC to institute the physical termination protocols in accordance with Chapter 14 of the Code and Chapter 56 of the Commission's regulations. The EDC would continue to be responsible for physically terminating service to a non-paying customer, when termination is permitted by the Commission's rules.

While SCB could include non-commodity services, consistent with the requirements of UCB, NRG proposes that a customer's electric service could not be terminated for nonpayment of non-commodity value-added services under SCB; rather, the service could be terminated only for non-payment of the electric distribution and generation/transmission portion of the bill. As noted further below, NRG suggests further rules may need to be developed to address termination under SCB.

To further enhance consumer protections, NRG proposes that EGSs offering SCB would be obligated to meet more stringent financial requirements than are currently imposed on EGSs to maintain their licenses and to demonstrate the technical expertise to perform billing and related functions.

NRG did not propose specific more stringent financial requirements in its petition, but said that, "[s]uch standards could include pre-defined financial requirements or posting necessary minimum financial guarantees; a minimum number of years of serving customers in Pennsylvania and other competitive electricity markets; a condition that the EGS has not defaulted on a power supply contract over a certain number of years; documentation of an on-going risk management policy; maintaining a local office in Pennsylvania; experience serving a minimum number of residential electric customers; experience with call center/complaint handling functions; and experience with billing/credit and collections."

NRG said that SCB is needed in order for suppliers to offer innovative and value-added products that cannot be accommodated by UCB, including prepaid service and flat bill products.

"While the Commission has recognized the importance of other value-added products and services and innovations in the market, the current reality is that the way the market is structured, price is the key driver of all shopping decisions, and a large portion of the residential customers are not participating in the market. Rather than creating a market where customers seek additional value and consider a variety of factors when considering whether to switch to an EGS, existing policies -- including the inability of EGSs to offer SCB -- have ensured that customers remain focused on price (and particularly the price charged by EDCs that does not accurately reflect market conditions) to the exclusion of all else," NRG said

"Additionally, because the existing EDC billing systems are designed for tariffed utility services, they simply cannot accommodate the plethora of billing needs of multiple EGSs. It is not economically feasible for the EDCs to continually update their billing systems to accommodate the changing needs of the competitive marketplace," NRG said

Discussing innovative product offerings, NRG noted PECO's recent petition to offer a prepay pilot (first reported by here), and NRG noted that prepay service cannot be offered through the current UCB. "PECO should not be permitted to use its monopoly status as the only consolidated billing entity to offer a competitive service that EGSs are precluded from offering," NRG said

Notably, NRG said that retail suppliers under SCB should be permitted to display EDC charges on the SCB as a single, combined price for all energy consumed during the billing period, and have the option of absorbing any increase in distribution rates instead of passing them on to the customers. EnergyChoiceMatters notes that while such is the case in Texas, it's important to note that in Texas, retail providers are the only billing entities, and customers have no relationship with the utility, and the customer of the utility is the retail provider, not the end-use customer. In contrast, in Pennsylvania, utilities would continue to bill under UCB, or for default service customers. As such, certain stakeholders may balk at a SCB mechanism that does not mandate that EDC charges are listed as specific line-items so that customers may verify the charges are consistent with the EDC tariffs for service to which customers are entitled.

NRG said that under SCB, EDCs should continue to administer low-income programs, calculate each low-income customer's payment (and the resulting subsidy) and provide this information to the EGS via EDI to be included on the customer bill.

NRG proposed that SCB include a mechanism to prevent customers with a "past due" SCB balance from switching a supplier or dropping to default service.

"Under SCB, an EGS needs a means of assuring that a customer on a payment arrangement cannot use their ability to switch EGSs to avoid paying all of their charges, including charges for supply and delivery. A tool is needed to permit EGSs to apply a block on a customer's account to prevent a customer from switching to another EGS or the EDC until that customer has paid his or her past due bill in full," NRG said

Note while NRG does refer at one point to a, "payment arrangement," it also less precisely describes the need for a block mechanism for customers' whose accounts are "past due" (without a specific cite of a payment arrangement being present)

EnergyChoiceMatters would note that a mechanism applying to past due balances generally would go beyond the Texas switch-hold mechanism, which (at a high level) only applies if the customer has entered into a deferred payment plan with a retail provider or to a customer who is delinquent at the time of entering into an average payment plan -- not the broader universe of all customers with past due balances.

NRG said that consistent with current rules, until EGSs replace the EDC as the default service provider, EGSs that provide SCB would be required to provide price to compare information on the SCB, as well as a bill message informing customers of the frequency of the default service price changes.

Regarding suppliers' ability to direct the EDC to disconnect a customer under SCB, NRG said possible changes to the regulations to address such issue would include rules for EDC termination of utility service, the allocation of "pre-termination" activities, such as complaint handling, customer deposits and other Chapter 56 requirements. This would also include reviewing the current rules regarding information required on the EDC and supplier (dual) bill to determine its applicability in the SCB context. New rules may be needed to address how non-commodity products and services are to be included on an EGS SCB with an appropriate "payment priority scheme" to deal with partial payments. One approach would be to promulgate a single regulation dealing with the allocation of Chapter 56 responsibilities, and amendments to the provisions dealing with information on the customer's bill, payment priority and inclusion of non-commodity items on the bill. An efficient vehicle for pursuing these changes may be the recent Chapter 56 rulemaking initiated by the Commission, at Docket No. L-2015-2508421 (Proposed Rulemaking Order entered July 21, 2016), NRG said

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