Challenging Retail Supplier's Regulatory Change Clause, Consumer Counsel Asks Regulator To Direct Utilities To Hold Supplier Receivables In Escrow, Use Supplier Bond Proceeds To Keep Customers Whole
December 21, 2018 Email This Story Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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The Connecticut Office of Consumer Counsel requested that the Connecticut PURA take certain actions to protect customers subject to a regulatory change clause being invoked by Agera Energy, in light of the fact PURA does not have restitution power, should the charge ultimately be found by PURA to be impermissible
As previously reported by EnergyChoiceMatters.com, Agera Energy has invoked the regulatory change clause in contracts with several hundred non-residential customers. For a detailed discussion of the changes that Agera has said authorizes it to invoke the regulatory change clause, see our exclusive prior story here.
In its motion, OCC said, "General Statutes § 16-245o(h)(8) protects all customers, including but not limited to business customers, by stating that '[a]n electric supplier shall not make a material change in the terms or duration of any contract for the provision of electric generation services by an electric supplier without the express consent of the customer.'" The evidence in the record so far shows that numerous customers are facing a unilateral proposal by Agera to change the most fundamental term in the contract—the price term. Agera is already attempting to defend itself by claiming that the unilateral price change is within the terms of the contract based on a 'regulatory change' provision therein. "
OCC said in its motion that it, "expects to be able to show that Agera’s claimed regulatory changes Agera [sic] were either known in advance by Agera before relevant contracts were entered into or renewed, or were ordinary ISO-New England tariff changes that occur with great frequency and are not truly regulatory changes, or were immaterial in size. That is, OCC expects to be able to show that Agera is using the 'regulatory change' provision in its contract as a one-way ratchet to unfairly overcharge its customers as of January 1."
"Based on filed letters, Agera’s price changes will affect customer’s January bills. As PURA well knows, PURA does not have restitution authority under Title 16. Thus, if Agera is permitted to unilaterally change the price provision on its January bills, the customers will be without recourse, other than a possible (and expensive) separate court proceeding, to achieve protection from the increase. In other words, OCC fears that even if OCC and customers are successful in showing that Agera’s price change actions have been illegal, Agera will retain the ill-gotten gains from the price change. Obviously, this would make a mockery of the customer protection established by the Legislature in General Statutes § 16-245o(h)(8)," OCC said in its motion
"In this situation, OCC respectfully recommends that PURA promote fairness to all by crafting a set of orders that maintain the status quo. If, after a complete proceeding, PURA determines that Agera is correct and acted within its rights, then Agera should be paid in full the amount of its price change. On the other hand, if OCC is right that Agera is acting illegally, the customers should receive protection from being gouged on the price while the case is pending before PURA," OCC said
OCC therefore recommends that PURA consider taking the following steps, or similar ones, on an emergency basis:
1. For affected Agera customers who receive billing only from their electric distribution company (EDC), that is, for customers for whom Agera is billing through the EDC, OCC recommends that PURA issue an order to the electric distribution companies to hold in escrow the ongoing difference between (a) what a customer will pay to Agera with Agera’s proposed January price change; and (b) the amount a customer would have paid to Agera based on the rate in effect for the customer’s November bill. The EDCs should be expressly permitted to recover the prudent costs of this escrow activity through a non-bypassable charge. "Such an escrow order would obviously be legal under General Statutes § 16-11 as a 'manner of operation' regulation," OCC said. At the end of the case, the escrowed funds will then be delivered to Agera or returned to customers, depending on whose argument is successful, OCC said
2. For affected Agera customers who are being billed directly by Agera, PURA should announce that the bond required of Agera pursuant to General Statutes § 16-245(c) will be held by PURA as a reimbursement fund in the event that Agera’s price change is determined to be illegal. The reimbursements would again be the difference between: (a) what a customer will pay to Agera with Agera’s proposed January price change; and (b) the amount a customer would have paid to Agera based on the rate in effect for the customer’s November bill, up until the contract between the customer and Agera is terminated. In this way, Agera will remain whole if it is successful in this matter, and the customers will also be made whole if they are successful. OCC notes that PURA will have to monitor the amount in the bond over time to ensure that the bond is high enough to fully reimburse customers under the above calculation approach. If the bond is not high enough, PURA has blanket authority to raise the "bond or other security in amount or form" under General Statutes § 16-245(c), OCC said
"At this point, the inquiry as to Agera’s pending price change is at an early stage. Neither Agera nor customers should face a defeat before they receive due process. Customers face an instant defeat in this matter based on PURA’s lack of restitution authority. Therefore, OCC respectfully recommends that PURA take the steps outlined above or similar steps before issuance of any January customer bills," OCC said