OCC: Hardship Customers On Retail Supply Paid $7.2 Million More Than Default Service Over 24 Months
Only 22% Of Hardship Customers On Retail Supply Saved Versus Default Service
OCC Testimony Calls For Prohibiting Retail Suppliers From Serving Hardship Customers
February 27, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
The following story is brought free of charge to readers byEC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com
The Connecticut Office of Consumer Counsel has filed testimony in which OCC says that, from October 2016 through September 2018, hardship customers on competitive retail supply paid $7.2 million more than they would have under default service, as OCC said that retail suppliers should be prohibited from entering into new contracts with hardship customers
"I recommend that PURA exercise its statutory authority to prohibit third-party suppliers from entering into new contracts with hardship customers," OCC's witness testified
"Based on the most recent 24 months of data available in this docket, hardship customers paid approximately $7.2 million more during this two-year period to purchase electricity from third-party suppliers than if they had purchased standard service, which translates into an annual average net loss of $143 per hardship household," OCC's witness testified
"Out of the approximate 607,000 bills rendered to hardship customers on behalf of third-party suppliers during the time period spanning October 2016 through September 2018, only 22 percent corresponded with savings relative to standard service. The average loss by those experiencing a loss was $17.03 per bill and the average gain by those experiencing a savings was only $6.19," OCC's witness testified
OCC's witness testified that, "[H]ardship customers in the Eversource region pay a premium, on average, of $0.0183 per kWh," when on retail supply
"On a statewide basis ... hardship customers pay a premium, on average, of $0.0171 per kWh," when on retail supply, OCC's witness testified
"I determined that very few suppliers charge rates that lead to gains. For example, as I show in Section III of my testimony, in the Eversource Energy ('Eversource') region, of the 33 suppliers serving hardship customers, only five suppliers, which account for only 6 percent of all the third-party supply hardship bills rendered between October 2016 and September 2018, charged rates that on average, led to a net gain for their hardship customers and the savings was far less than a penny per kWh," OCC's witness testified
"Similarly, during the same time period, of the 31 suppliers serving hardship customers in The United Illuminating Company ('UI') region, only five suppliers, accounting for only 6 percent of all the third-party supply bills rendered to hardship customers, charged rates that led to a net gain for their customer base," OCC's witness testified
OCC's witness testified that, "35 percent of hardship customers purchase electricity from third-party suppliers, in comparison with the 27 percent participation rate of non-hardship customers1, and, therefore, hardship customers disproportionately experience financial harm associated with this high-priced market."
"In some communities, the participation rate by hardship customers is as high as 51 percent," OCC's witness testified
"Hardship customers participate disproportionately and also pay higher prices for purchasing service from third-party suppliers than do non-hardship customers," OCC's witness testified
Specifically, OCC's witness testified that, "hardship customers are far less likely to save money by purchasing from third-party suppliers than are non-hardship customers. In total, statewide, for hardship customers, only 22 percent of bills had savings compared to the bill that they would have received had they been on standard service. This compares with 38 percent of the statewide bills for non-hardship residential customers that led to savings relative to standard service. Furthermore, the average bill savings, when it occurs, is $6.19 for hardship customers compared to $8.93 for non-hardship customers. Correspondingly, the average loss on a bill is $17.03 for hardship customers compared to $16.70 for non-hardship customers."
"In the minority of instances when hardship customers save money, they save less than do non-hardship customers. In the majority of instances when they lose money by participating in the third-party supplier market, hardship customers lose more than do non-hardship customers. These results combined with other results that I discuss throughout my testimony demonstrate that the third-party supply market has a disproportionate negative impact on hardship customers (though it is not producing net savings for non-hardship customers either)," OCC's witness testified
"[A]ll customers, on average, pay more to purchase from third-party suppliers than from standard service and also shows that hardship customers pay even more than do non-hardship customers who purchase from third-party suppliers. For example, expressed on a per-kWh basis, in the Eversource region, non-hardship customers pay a per-kWh premium of $0.0108 and hardship customers pay a per-kWh premium of $0.0183; that is, approximately three-quarters of a penny more than non-hardship customers pay to purchase from third-party suppliers," OCC's witness testified
OCC's witness included in the testimony various data showing the weighted average rates charged by specific suppliers (with the suppliers named) to hardship customers, the premium over default service, and the number of bills rendered (see the testimony here)
OCC's witness testified that, in one instance, a supplier's weighted average rate charged to hardship customers was approximately 8 cents per kWh more than the weighted average price for standard service
Furthermore, OCC's witness testified that, "the supplier-specific gap between the hardship and non-hardship premium is substantial, ranging between a half-penny and three and a half cents per kWh ... meaning that hardship customers (including the state’s most vulnerable customers) are the ones paying the most to purchase an essential service—the supply of electric service."
"Hardship customers living in communities with high percentages of non-white populations disproportionately participate in the third-party supply market and pay high premiums to do so. This pattern also exists in communities with high percentages of households lacking English proficiency," OCC's witness testified