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Ohio Creates Rebuttable Presumption That Submetering Entities Are Utilities If They Charge Greater Than Default Service -- Could Scare Multi-Family Dwelling Owners Away From Retail Supply

PUCO Does Grant "Safe Harbor" For Competitive Retail Contracts, But Burden of Showing Safe Harbor May Still Leave Multi-Family Dwelling Owners Leery

Website Allowing Submetered Customers To Compare Their Rates To Default Service To Be Created

June 22, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

In a rehearing order, the Public Utilities Commission of Ohio confirmed that it will apply a price test versus default service in determining (under a rebuttable presumption) whether a submetering entity is acting as a public utility, and further specified that, under this test, a submetering reseller shall be, under a rebuttable presumption, considered a public utility if the reseller charges an amount that is greater than what the submetered residential customer would have been charged through the local public utility's default service tariffs

See background on the price test here, where RetailEnergyX.com first noted such a comparison to default service may favor utility supply and scare multi-family dwelling unit owners away from competitive supply due to the risk a temporarily above-market competitive retail contract (e.g. a fixed price contract entered into before the market moves downward) could expose the unit owners to regulation as a utility.

"[T]he Commission adopts a zero percentage threshold for the Relative Price Test established in the December 7, 2016 Order. Should a Reseller sell a particular utility service to a submetered residential customer and charge an amount that is greater than what the submetered residential customer would have been charged through the local public utility's default service tariffs, a rebuttable presumption will exist that the Reseller is acting as a public utility under the third prong of the Shroyer Test. A Reseller may overcome the rebuttable presumption if it can prove that it falls within a Safe Harbor established through this Entry on Rehearing," PUCO said

"Further, the Commission clarifies that the rebuttable presumption. Relative Price Test, and Safe Harbor will only apply to submetered residential customers," PUCO said

PUCO did create a "safe harbor" under which a reseller could overcome the rebuttable presumption in the case where the reseller is merely passing-through the costs of a competitive retail contract

"A Reseller will overcome the rebuttable presumption and thus will not be subject to Commission jurisdiction under the third prong of the Shroyer Test if the Reseller demonstrates that (1) the Reseller is simply passing through its annual costs of providing a utility service charged by a local public utility and competitive retail service provider (if applicable) to its submetered residents at a given premises; or (2) the Reseller's annual charges for a utility service to an individual submetered resident do not exceed what the resident would have paid the local public utility for equivalent annual usage, on a total bill basis, under the local public utility's default service tariffs," PUCO ruled

While this safe harbor carve-out for competitive retail contracts is superior to PUCO's initial order, we note that it can be invoked only after a rebuttable presumption has been created deeming the reseller to be a public utility, and which may expose multi-family dwelling owners to risk, who may decide that the simplest and safest way to avoid regulation as a public utility is to take Standard Service Offer supply from the utility

PUCO's initial order regarding the price test did not set a specific threshold for the test, above which resellers would be considered public utilities

On rehearing, PUCO established a price test threshold of 0%.

"With respect to the specific threshold percentage, we will accept the recommendations of both the Residential Advocates and NEP, in setting the threshold percentage of the Relative Price Test at zero. In calculating the Reseller's charges under the Relative Price Test, a submetered residential customer should include any administrative fees or similar charges, but should exclude any charges for common areas," PUCO said

"For common areas, the Commission will not assert jurisdiction over a Reseller where a Reseller is simply passing through its costs of providing a utility service charged by a local public utility and competitive retail service provider (if applicable) to its submetered residents at a given premises," PUCO said

"Thus, in any given case, the rebuttable presumption will be invoked where the Reseller charges the submetered residential customer more than the customer would have paid the local public utility under the default service tariff for the equivalent usage on a total bill basis," PUCO said

"To summarize, a submetered residential customer can trigger the rebuttable presumption through use of the Relative Price Test. Specifically, a submetered residential customer can take his/her bill and compare the Reseller's utility service charge against what the customer would have paid the local public utility. If the submetered customer is paying the Reseller more than what he/she would have paid the local public utility, then the rebuttable presumption is triggered, and the Reseller is presumed to be a public utility under the third prong of the Shroyer Test. This would invoke Commission jurisdiction over the Reseller. The Reseller, however, will avoid Commission jurisdiction under the third prong of the Shroyer Test if it can prove that it falls within one of the Safe Harbor provisions described above," PUCO said

"In order to facilitate an orderly and expedient resolution of any potential complaints, the electric, gas, water and sewer distribution utilities are directed to work with Staff to develop a website tool or other mechanism to provide submetered residential customers with an estimated calculation of the what [sic] the customer would have paid the local public utility for equivalent usage, on a monthly total bill basis, under the utility's default service tariffs," PUCO ordered

PUCO clarified that its order does not extend to behind-the-meter distributed generation.

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