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PUC Stays Requirement For Retail Suppliers To Use "Fixed", "Variable" Labels For Products (Was Outgrowth Of "Fixed Means Fixed" Finding)

PUC Stays Requirement For Customers To Be Dropped To Default Service If Supplier Exercises Regulatory Out Clause, And Does Not Obtain Affirmative Consent For Continued Service

September 28, 2017

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Copyright 2010-17
Reporting by Paul Ring •

The Public Utilities Commission of Ohio issued an order staying its prior guidance that all residential electric contracts shall be labeled as a "fixed", "variable", or "introductory" rate, as PUCO said that the issue should be addressed in a rulemaking rather than through piecemeal orders.

The requirement for electricity plans to fit one of the three labels was first set forth in a 2015 order (see story here), which most notably adopted a "fixed means fixed" policy, in which PUCO held that fixed rate electric contracts, initially for all customer classes, may not contain pass-through clauses, but may contain regulatory-out clauses that allow suppliers to cease service under fixed rate contracts under terms as delineated in the contracts

PUCO in its 2015 order defined the terms as follows:

• "Fixed Price: An all-inclusive per kWh price that will remain the same for at least three billing cycles or the term of the contract, whichever is longer"

• "Variable Price: An all-inclusive per kWh price that can change, by the hour, day, month, etc., according to the terms and conditions in the supplier's disclosure statement."

• "Introductory Price: For new customers, an all-inclusive per kWh price that will remain the same for a limited period of time between one and three billing cycles followed by a different fixed or variable per kWh price that will be in effect for the remaining billing cycles of the contract term, consistent with terms and conditions in the supplier's 'disclosure statement.'"

PUCO clarified in a March 2017 order that all residential plans must use one of these three labels.

The Retail Energy Supply Association sought rehearing of PUCO's orders, arguing, among other things, that not all existing products (let alone new innovations) fit into PUCO's three labels.

In an order issued yesterday, PUCO stated, "The Commission finds that rehearing on this assignment of error should be granted and that the guidance that residential contracts should be labeled as fixed, variable, or introductory should be stayed pending the outcome of the rulemaking on the CRES standards."

"[W]e do agree that the question of labeling contracts is better addressed through the rulemaking process," PUCO said, noting, as previously reported, that the Commission has opened Case No. 17-1843-EL-ORD to conduct this rulemaking and a workshop has been scheduled for October 3, 2017

PUCO stressed that, "The Commission continues to maintain that identifying residential customer contracts as fixed, variable or introductory will reduce customer confusion since these labels are widely used for a variety of consumer products, and customers are familiar with the plain meaning of such labels. However, in order to reduce potential disruptions to the competitive retail electric service market, we conclude that it is better to address this issue during a complete review and reform of all CRES standards rather than through a piecemeal approach."

PUCO had also previously ruled that, for a supplier invoking a regulatory out clause, the customer must be returned to default service if the supplier does not obtain affirmative consent to continue serving the customer. RESA sought rehearing of this provision as well

PUCO granted rehearing and stayed its guidance that CRES providers, following the invocation of a regulatory out provision, must transfer to default service customers who do not affirmatively consent to new contract terms and conditions.

"Thus, following the invocation of a regulatory out clause, a CRES provider may continue to serve a customer who does not give affirmative consent to new contract terms and conditions at the existing contracts terms and conditions," PUCO said

"As with the issue of contract labeling discussed above, we believe that a piecemeal approach to these issues runs the risk of disrupting the market for competitive retail electric services. Instead, all issues regarding regulatory out clauses should be, and will be addressed in the rulemaking process in Case No. 17-1843-EL-ORD," PUCO said

"These issues include, for example, an explicit definition of when a regulatory out may be invoked, standard language for regulatory out clauses, and standards for customer notice in the event a regulatory out clause is invoked," PUCO said

While PUCO stayed the default service requirement related to regulatory out clauses, PUCO was skeptical of RESA's claim that the automatic drop to default service is particularly absurd in situations where the CRES supplier is willing to serve the customer under the same terms and conditions as existed prior to the triggering of the regulatory out clause.

"The Commission notes that regulatory out clauses should be invoked in very limited circumstances, such as a regulatory change or a change in law for which a CRES provider is unable to hedge. Thus, the regulatory out clause is intended to protect CRES providers from contracts which have become uneconomic due to circumstances beyond the CRES provider's control Therefore, we are not persuaded that our ruling was erroneous by RESA' s claim that it is absurd for a CRES supplier to return a customer to standard offer service, after triggering the regulatory out clause, when the 'supplier is willing to serve under the same terms and conditions' that were in place prior to the invocation of the regulatory out clause," PUCO said

"A CRES supplier who is willing to serve under the existing contract's terms and conditions should not invoke the regulatory out clause in the first place," PUCO said

Case No. 14-568-EL-COI

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