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Regulator Orders That Municipal Aggregations Must Always State That "Savings Cannot Be Guaranteed" Whenever Price Is Referenced, Even Where Aggregation Does Not Otherwise Mention Savings

Regulator Concerned Municipal Aggregation Savings Being Touted Without Disclosure That Savings Not Guaranteed

Warns Consultant On Savings Language Directive

January 16, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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The Massachusetts DPU in several recent orders approving opt-out municipal electric aggregations raised concern that aggregations are still touting savings under the plans without adequate disclosures that such savings are not guaranteed.

The DPU has long viewed that municipal aggregations are not a means to guarantee savings, stating in a 2012 order that, "Municipal aggregation is not a means to guarantee cost savings (vis-à-vis basic service) at all times; instead, municipalities considering municipal aggregation must understand the risk that prices received through the competitive market may exceed basic service rates at times, and should evaluate this risk in comparison with the benefits that the competitive market can provide in terms of improved products and services."

As a result, the DPU has required in various orders approving aggregation plans (see story here on a 2017 directive) that municipalities, "must clearly explain that customers are not guaranteed cost savings compared to basic service."

In a January 2017 order on a City of Gloucester aggregation, the DPU had explained what constitutes the required disclosures by stating, "While the [Gloucester] exemplar opt-out notice provided by the City does contain language indicating that 'there is no guarantee of future savings,' this language does not appear until the final paragraph on the second page of the notice (Plan at Exh. B). In contrast, language regarding 'reduced electric rates' and language indicating that customers will 'benefit' from the 'lower rate' appears several times more prominently in the notice, without any accompanying explanation of the duration of any savings or the fact that such savings cannot be guaranteed beyond a certain date. To address these issues, the City shall file a revised exemplar opt-out notice that clearly explains, in each instance where cost savings or lower rates are referenced, that such savings cannot be guaranteed. The revised opt-out notice shall clearly identify the applicable date of National Grid’s next basic service rate change, explain that the negotiated fixed price is guaranteed to remain below the basic service rate only until that date, describe how to access the basic service rate, and disclose that a customer may choose the basic service rate without penalty."

However, the DPU found that municipal communications related to an aggregation seeking DPU approval did not meet this standard

In a November 2018 order approving, subject to compliance with various directives, an aggregation by the Town of Avon (17-182), the DPU expressed its concern with statements made by a town official promoting the aggregation and information prepared by the town's aggregation consultant. While some of the materials cited by the DPU were created before the City of Gloucester decision, certain of the language which raised the DPU's concern occurred after the DPU's January 2017 decision regarding the City of Gloucester where the DPU set forth its directives regarding language which cites savings

The DPU said of the Avon aggregation, "Information prepared or presented by Good Energy in conjunction with Board of Selectmen meetings included language related to 'lower [costs]' and 'price stability' without any accompanying explanation or disclaimer that such savings cannot be guaranteed (Petition, Att. 1, Exhs. C, E1). The Department is particularly concerned in this case that these representations by Good Energy regarding lower electricity costs are reflected in the comments filed by the Town where the Town Administrator indicates that the residents and businesses of the Town want to 'take advantage of municipal aggregation to . . . reduce electricity rates' without any acknowledgement that the Town understands that savings, reduced electricity rates or lower bills are not a guaranteed outcome of municipal aggregation (See Town of Avon Comments (May 1, 2018))."

The DPU further said, "In particular, an 'Outline of the Aggregation Program' created by Good Energy to be read at the Board of Selectmen meeting, provides that the objectives of the aggregation program are to 'lower the cost of electricity [and] gain longer term price stability' (Petition, Att. 1, Exh. E1). Consistent with Good Energy’s representations, the Town Administrator, in a presentation at the November 2, 2017 Board of Selectmen meeting, identified the objectives of the Program as '[lowering] the cost of electricity' and “[gaining] longer term price stability' (Petition, Att. 1, Exh. C at 2). Further, as part of his presentation at the same Board of Selectmen’s meeting, Good Energy’s director of marketing represented that the consultant 'strategically buys energy at the best times in the market to get a better price for residents' and that Good Energy’s current municipal aggregation programs in Massachusetts are 'all saving money' without any disclaimer that program participants are not guaranteed lower bills or cost savings as compared to basic service (Petition, Att. 1, Exh. C at 2)."

As a result, in the Town of Avon order, the DPU held that, "The Town and its consultant shall ensure that all future communications and information regarding the Program (including, but not limited to mailings, advertisements, website postings, presentations to consumers, etc.) contain a disclaimer that 'savings cannot be guaranteed' in each instance where price is referenced, regardless of whether references to 'savings' or 'price stability' or the like are made. The Department notes that Good Energy acts as a program consultant for numerous municipal aggregation programs in Massachusetts. In its role as consultant, Good Energy shall ensure all of its communications with municipalities regarding municipal aggregation fully disclose that savings cannot be guaranteed. A failure by Good Energy to adhere to these directives in the future will result in remedial action, including further municipal education, prior to plan approvals."

The DPU reiterated this concern and directive in a January 11, 2019 order approving, subject to compliance with certain directives, an aggregation plan from the City of Melrose

The Melrose plan and other information prepared by the City did include language related to the "best possible price" and "savings" while also disclosing that savings cannot be guaranteed

Still, the DPU in the Melrose order (18-59) reiterated that, "The City, and its consultant, shall ensure that all future communications and information regarding the Program (including, but not limited to mailings, advertisements, website postings, presentations to consumers, etc.) contain a disclaimer that 'savings cannot be guaranteed' in each instance where price is referenced, regardless of whether references to 'savings' or 'price stability' or the like are made."

Good Energy provided the following statement to concerning the DPU's orders:

Statement by Good Energy:

"Good Energy is aware of, and shares, the Department of Public Utilities concerns that customers be fully-informed of potential Basic Service price changes when deciding whether to join a municipal aggregation. In working with over 40 communities on the preparation and implementation of aggregation plans approved by the Department, Good Energy has used its best efforts to comply with the Department’s requirements and fully disclose to customers that the aggregation program prices can not be guaranteed to produce savings compared to Basic Service rates because the Basic Service rates are subject to change every 3 months (commercial and industrial customers) or 6 months (residential and small commercial customers). Good Energy intends to continue to work with its clients to fully comply with the Department’s directives for municipal aggregators and their consultants."

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