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RESA Concerned PSC's Disappointment With Supplier Participation In TOU Workgroup Based On Incomplete Picture

Says Incentive Structure Under Pilot Favors Utility SOS Pilot Program Over Supplier Programs, Discourages Supplier Proposals

July 5, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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The Retail Energy Supply Association on June 28 filed a letter with the Maryland PSC to clarify RESA’s participation in the second phase of the PC44 Rate Design Workgroup process, addressing SOS and retail supplier Time of Use pilots, as referenced in a Report and Letter Order in the proceeding.

As previously reported, the PSC had directed that two generation pilots be developed, one for SOS customers, and one that would rely on retail suppliers for TOU service (see details here)

As previously reported, in a May Letter Order, the Commission expressed disappointment that, "retail supplier stakeholders did not generally participate in the second phase of the workgroup discussions." In such letter order, the Commission noted the importance of the retail supply pilot moving forward and capturing data, and, "strongly encourage[d] retail suppliers to bid on the retail supply pilot offerings."

"RESA appreciates the Commission’s concern with the implementation of a retail supply pilot and notes the Commission’s direction that suppliers are encouraged to participate. RESA agrees that the competitive market plays a key role in providing innovative rates to consumers and should be an integral part of any rate design pilot," RESA said in its June 28 letter

"To that end, suppliers, including RESA, participated fully in the first phase and proposed rate design pilot programs modelled off existing, successful programs in Pennsylvania. As RESA explained to the workgroup at the time and to the Commission, rejecting RESA’s proposed programs and requiring suppliers to compete against a utility pilot program would make it difficult for suppliers to participate in a supplier pilot program," RESA said in its letter

"RESA also participated in the second phase and made its concerns known to the stakeholders and the workgroup leaders. To be clear, the discussions during the second phase generally focused on the utilities’ rate design pilot programs. RESA provided written comments on and suggested edits to the proposed supplier RFP, making numerous suggestions that, if included in the RFP, would likely encourage supplier participation in the program. Additionally, RESA’s counsel and certain RESA members communicated these and other concerns to the workgroup leaders in several 'off-line' discussions over a period of weeks prior to the submission of the Report," RESA said in its letter

"During the second phase, RESA’s proposed edits to the RFP documents, which RESA believed, if adopted, would increase the likelihood of a successful supplier pilot. RESA identified several proposed RFP requirements that were unnecessary or conflicted with the Commission’s regulations in COMAR 20.53, and would increase costs for suppliers to participate in the pilot. All potential costs associated with participating in the pilot must be factored into the participating suppliers’ risk premiums, increasing prices as compared to the SOS pilot, which receives full cost recovery for all costs incurred by the utilities," RESA said in its letter

RESA said in its June 28 letter that during the PC44 process, RESA noted the following:

• Requiring a security deposit and assessing a potential penalty for failure to meet a minimum of 1,000 customers may discourage supplier participation.

• Requiring signatures for inbound customer enrollment requests is inconsistent with COMAR and Maryland law and may discourage participation.

• Requiring affirmative consent and a full contracting process to renew a customer at the conclusion of the pilot runs counter to COMAR renewal regulations, COMAR, and increases the costs to suppliers to retain customers at the conclusion of the pilot period.

• Due to timelines involved in the pilot, submitting marketing materials and contracting documents to the workgroup for review in advance may be challenging. In addition, not allowing joint marketing materials results in increased costs to suppliers. RESA proposed submitting all materials for inclusion in the final pilot report.

RESA said in its June 28 letter that, "The utilities are proposing to run a program with no risks to the utilities’ shareholders and full cost recovery, while suppliers receive no guaranteed cost recovery and face substantial costs and risks to participate, including those listed above. Indeed, the utilities are proposing incentives for each customer that participates in the utility SOS pilot program surveys, with full cost recovery from all customers. This incentive structure favors the utility SOS pilot program over the supplier programs."

RESA said in its June 28 letter that if there is a planned incentive for customers participating in the supplier pilot program, RESA is not aware of it.

RESA said in its June 28 letter that, "Ultimately, RESA stood alone with regards to its concerns on the supplier RFP and its suggestions were generally not included in the final Report. RESA is concerned that the Commission’s disappointment with retail supplier stakeholder participation is based on an incomplete picture of its involvement in, and rejected contributions to, the second phase of the workgroup."

"RESA fully supports a retail supply pilot and therefore committed extensive resources to participate in the PC44 rate design workgroup process over the last year-and-a-half. However, RESA remains concerned that critical issues in the proposed supplier RFP (attached to the Report as Attachment A), which RESA brought to the stakeholders and workgroup leaders’ attention during the workgroup’s second phase, may present far too many risks and challenges that could discourage suppliers from bidding. If that happens, the opportunity for robust and competitive supplier participation in the programs, complete with capturing the data that the Commission is looking for, will be lost," RESA said in its June 28 letter

"RESA speaks for itself as a trade association and does not speak for individual retail energy suppliers, so RESA cannot say whether any retail suppliers will bid on the RFP structure as proposed in the Report and approved in the Letter Order. That said, the key to encouraging supplier participation is to produce an RFP to which suppliers will want to respond. In this regard, the most recent draft RFP received from the utilities continues to include provisions identical or similar to those describe above, which, in RESA’s view, would discourage responses," RESA said in its June 28 letter

"RESA strongly encourages further work on the Supplier RFP and pilot and remains committed to a successful retail supply pilot. RESA appreciates the engagement of the current workgroup leader and will continue to work with the leader and other stakeholders to advocate for an RFP that has the best chance of meeting the Commission’s goals. RESA looks forward to continued work on the pilot program," RESA said in its June 28 letter

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