Faced With Elimination Of Ability To Serve Hardship Customers, Retail Suppliers Proffer Price Cap, Aggregation
RESA Says Weighted Average Retail Supplier Prices From Study Period Are Up To ~10% Below Higher Current Standard Service Rates
May 21, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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In a Connecticut PURA proceeding examining whether all hardship customers should be placed on Standard Service, the Retail Energy Supply Association proffered several alternatives to the extent PURA reaches a conclusion that hardship customers are not sufficiently benefiting from competitive retail supply options under today’s policies
First, RESA said that an Office of Consumer Counsel analysis comparing retail supplier prices to standard service rates, "fails to conclusively demonstrate that hardship customers would be better off on standard service."
RESA also said that, concerning the OCC analysis, "A retrospective comparison of retail supplier prices to standard service rates is a fundamentally flawed metric for assessing the value of retail energy choice."
A witness for RESA said, "this type of historical price comparison does not paint the full picture. It fails to answer the question of whether individual customers would be better off being placed on standard service on a going forward basis. It fails to sufficiently acknowledge that individual customers have experienced lower prices with their chosen supplier at various points in time. It fails to acknowledge that the cost of retail supplier service relative to the standard service rate can change significantly over time. And it fails to consider the additional value-added benefits that customers may receive from their supplier."
RESA's witness said that the OCC analysis does not provide convincing evidence that hardship customers would be better off on standard service
"I would note that the information above shows aggregated values for the overall population of hardship customers. It reflects that some customers paid more relative to the standard service rate and some customers paid less. I would submit that from a customer’s point of view, the important thing is whether there is an opportunity to save or to receive some other aspect of value from a supplier offer -- not whether a group of similarly situated customers saved on average or in aggregate," a witness for RESA said
"The OCC’s own analysis shows that indeed there were a significant instances in which individual customers achieved savings relative to the standard service rate. For example, Table SMB-8 of the OCC’s testimony shows that 21 percent of The Connecticut Light and Power Company d/b/a Eversource Energy ('Eversource') hardship customer bills and 24 percent of The United Illuminating Company ('UI') hardship customer bills reviewed in the October 2016 to September 2018 period were instances of savings relative to standard service," a witness for RESA said
"The same table shows that there were 133,192 billing month instances of savings for hardship customers," a witness for RESA said
RESA noted that standard service rates experienced "significant increases" for the current pricing period from January 1, 2019 to June 30, 2019.
"The standard service rates that took effect as of January 1, 2019 are substantially higher. The standard service rates in effect during the historical study period ranged from $0.06606 per kilowatt hour ('kWh') to $0.09078 per kWh for Eversource, and from $0.07600 per kWh to $0.09663 per kWh for UI. These rates compare to January to June 2019 rates of $0.10143 for Eversource and $0.11226 for UI ... the January to June 2019 standard service rates are actually higher than the weighted average supplier prices for hardship and non-hardship customers during the study period," a witness for RESA said
RESA presented the following comparison showing that supplier rates were lower than current standard service rates
"Based on responses to RESA’s data requests, the EDCs have updated the supplier pricing information that was used in the OCC’s testimony. In the tables below I show the number and percentage of supplier billed prices for UI and Eversource hardship customers from December 2018 through March 2019 that were lower than the respective January to June 2019 standard service rate. Notably, half or more of the supplier billed prices for UI hardship customers were lower than the January to June 2019 standard service rate. Between 38 percent and 43 percent of the supplier billed prices for Eversource hardship customers were lower than the January to June 2019 standard service rate," a witness for RESA said
"I conclude that a policy decision to place all hardship customers on standard service could very likely force thousands of hardship shopping customers onto higher rates, especially if such a change were to be implemented during a relatively high-priced standard service rate period. For example, had this policy been in place during March 2019, 13,818 hardship customers, which represents 43 percent of the hardship customers served by suppliers statewide, who benefited from lower-priced supplier options that they affirmatively selected, would have been restricted to higher standard service rates," a witness for RESA said
RESA also provided testimony stating that, "[c]ompetitive alternatives to standard service offer significant opportunities for savings for Connecticut hardship customers."
Using public rate offers from suppliers, RESA said that the total statewide available savings to hardship customers from shopping is $2.8 million for a three-month period (April, May, June 2019). Such savings would be lost if all hardship customers were placed on standard service.
However, to the extent PURA reaches a conclusion that hardship customers are not sufficiently benefiting from competitive retail supply options under today’s policies, RESA provided a list of potential alternatives to moving all hardship customers to standard service with no ability to shop
A witness for RESA stated, "RESA does not necessarily endorse each of the following options. However, given that the scope of this proceeding is focused on examining the costs, feasibility and benefits of restricting hardship customers to standard service, I believe it would be prudent to also consider the costs, feasibility and benefits of these policy alternatives before implementing the drastic measure of eliminating energy choice for a class of customers."
Among those alternatives cited by RESA is a price cap for hardship customers:
"Price cap for hardship customers: PURA could consider the implementation of a price cap on supplier offers for hardship accounts. For example, hardship customer enrollments could be subject to a price cap on the supplier billed price equal to some threshold above the currently applicable standard service rate, such as 25 percent. This would ensure that hardship customers are protected from supplier prices that exceed this threshold, but would still be free to enroll in any supplier product that remained below this price cap, such as fixed price plans or plans offering premium green energy content.
RESA also cited an aggregation program and standard offer program:
• "Aggregation programs for hardship customers: PURA could consider the implementation of an auction or request for proposal ('RFP') process to select a competitive supplier to provide service to hardship customers. This type of aggregation program could include program rules that would only award the contract and enroll hardship customers if the winning bid price provides savings relative to current or future known standard service rates.
• "Hardship customer supplier referral program: PURA could consider the implementation of a supplier referral program for hardship customers. Under such a program, participating suppliers would agree to provide service to hardship customers at a rate that is equal to or less than the standard service rate. A similar program has been implemented in Pennsylvania.