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Pa. Commonwealth Court: PUC Has Authority To Impose Price Cap On Retail Supplier Rates For CAP Customers, Restrict Shopping

Denies Appeal Of PPL CAP-SOP Program


May 3, 2018

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

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The Commonwealth Court of Pennsylvania on May 2 ruled that the Pennsylvania PUC acted within the PUC's authority when it restricted Customer Assistance Program (CAP) customer shopping at PPL Electric to a CAP-specific Standard Offer Program (CAP-SOP), which includes a price ceiling of 7% off the Price to Compare at the time of enrollment.

As previously reported, the PUC established that the CAP-SOP program would be the only vehicle for CAP customers to shop at PPL (see story here)

In denying an appeal of the PUC's order filed by the Retail Energy Supply Association, the Commonwealth Court held that, "PUC has the authority under the Choice Act to implement PPL's CAP-SOP and substantial evidence supports PUC's determination to implement PPL's CAP-SOP; PPL's CAP-SOP does not result in governmental slamming."

Key in the Court's finding was that customers otherwise eligible for CAP may still shop for electricity if they elect to give up their CAP status.

The Court said, under the PUC's order, "if a CAP customer is able to obtain a better offer than the one in the CAP-SOP, the CAP customer is not prevented from doing so, but the CAP customer would then have to pay the entirety of his bill."

"Thus, a CAP customer is free to drop out of the CAP-SOP and arrange for electric supply outside of the CAP-SOP with an EGS, which may be at a rate higher or lower than seven-percent off the PTC," the Court said

The Court noted that the record shows that the CAP participation rate of confirmed low-income customers is 24 percent.

"Thus, some low-income customers do choose to shop," the Court said

The Court also found that, consistent with prior precedent, the CAP-SOP program met the requirement that a restriction on competition is, "necessary."

"[I]n order for a rule restriction to survive our review, is that there be substantial evidence in the record showing a substantial reason why a restriction on competition is necessary, that is to say, there are no reasonable alternatives to restricting competition. Stated simply, the CAP-SOP, as it constitutes a restriction on competition, must be necessary. A restriction on competition is necessary when, one, there is a harm associated with competition and, two, there is no reasonable alternative to the rule that restricts competition," the Court said

"On the issue of harm, the evidence presented showed that between January 2012 and October 31, 2015, on average, nearly 10,000 CAP customers each month were paying above the PTC. (R.R. at 122a, 248a-49a.) These customers, together, were paying each month, on average, $298,406 more than had they simply paid the PTC. (R.R. at 123a, 147a.) Even when these overpaying CAP customers were considered together with those CAP customers who were paying below the PTC, the CAP was still more costly than the PTC, in the amount of $228,656 each month, or more than $2.7 million a year," the Court said

"There is substantial evidence to support PUC's finding this data demonstrated a pattern of a significant number of CAP customers overpaying for electricity," the Court said

"Moreover, as a natural corollary to overpayment, there was substantial evidence that these CAP customers eroded their CAP credits more quickly. The data showed that between January 2012 through February 2016, 34,780 CAP customers were removed from the CAP, and of this number, 27,600 shopped with an EGS at some point. (R.R. at 264a.) Since CAP customers only pay a portion of their bill, non-CAP customers had to pay greater subsidies than had CAP customers simply paid the PTC. See CAUSE-PA, 120 A.3d at 1103 (noting that the Choice Act 'expressly requires the PUC to administer [low-income programs such as the CAP] in a manner that is cost-effective for both the CAP participants and the non-CAP participants'). In short, substantial evidence supports PUC's determination that unrestricted shopping for CAP customers was resulting in harm both to CAP and non-CAP customers," the Court said

"Based on PUC's determination that harm was occurring as a result of unrestricted competition, some restriction on competition was permitted," the Court said

The Court also agreed with the PUC that no viable alternative to CAP-SOP was presented by parties in the record.

The Court affirmed its prior finding that, "the Choice Act permits PUC to effectively limit competition and choice for low-income customers, provided there are no reasonable alternatives to restricting competition, so that other important policy concerns of the General Assembly, such as access, affordability, and cost-effectiveness, may be served."

"As the General Assembly recognized in Section 2802 of the Choice Act, if CAP customers were given direct access to the competitive market, they would be priced out of the market because they cannot afford to pay the entirety of their bills. Further, PUC could find that PPL's prior CAP, which did allow for greater competition in that a CAP customer was permitted to enter into any contract with any licensed EGS and pay any price for service regardless of whether the price was higher or lower than PPL's PTC, was causing harm to both CAP and non-CAP customers in terms of access, affordability, and cost-effectiveness. Substantial evidence in the record supports PUC's finding ... that PPL's prior CAP, without any shopping restrictions, resulted in about half of shopping CAP customers paying above the PTC who then exhausted their CAP credits more rapidly, while non-CAP customers had to pay higher rates since they subsidize the cost of electricity for CAP customers. PUC's approval of PPL's CAP-SOP is designed to alleviate harms to access, affordability, and cost-effectiveness resulting from unrestricted CAP shopping," the Court said

"We recognize that there is a 'tension' between competing policy concerns promoting competition and choice, and protecting access, affordability, and cost-effectiveness; however, PUC's approval of the CAP-SOP seeks to strike a balance between these concerns under the authority the General Assembly gave it through the Choice Act," the Court said

The Court affirmed the PUC's CAP-SOP decisions

No. 230 C.D. 2017

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