OCC Suggests That UI Pay Retail Suppliers For Difference Between Capped Termination Fee And $100 For Loss Of Customers Who Leave As a Result Of Corrected Default Service Rate Notice

June 11, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Connecticut Office of Consumer Counsel has proposed that United Illuminating compensate retail electric suppliers for any costs not covered by a capped early termination fee for customers who decide to leave the supplier after receiving written notice from UI that an earlier posting of standard service rates was inaccurate, and that customers should review their recent supplier choice

See background on the issue here

As previously reported by EnergyChoiceMatters.com, UI, in proposed customer notices to recently switched customers concerning the correct standard service rates, has proposed language encouraging customers to review their recent supplier choice

While UI would reimburse the customer for any early termination fee, RESA had noted that because ETFs are capped in the Connecticut mass market, suppliers could still be exposed to unrecovered costs due to any switch incited by UI's letter

OCC said that, "[T]he Retail Energy Supply Association ('RESA'), on page 6 of their Motion filed June 6, 2019, makes the sound point that ETFs for residential customers are capped at $50 by General Statutes § 16-245o(h)(7). The amount of $50 may well not cover the acquisition costs incurred by the supplier."

"Of course, we do not possess even a rough figure in the record regarding what the average acquisition costs are for an electric supplier to contract with a standard service level customer," OCC said

"OCC would propose the following to try to address this issue: to the extent that (1) one of the 3,500 Switching Customers switches away from a given supplier, call it Supplier X, after issuance of the UI notice; and (2) Supplier X has an ETF in its contract; and (3) Supplier X affirmatively seeks to enforce its ETF against the customer; and (4) the customer notifies UI that it had to pay the ETF because of UI’s error (using UI’s form); then (5) UI shall pay to the supplier the difference between $100 and the ETF. So, for example, if Supplier X has an ETF of $50 and enforces the ETF, then UI would (1) reimburse the customer for the $50 ETF, and (2) pay the supplier an additional $50 ($100 - $50 ETF) to defray the acquisition costs. In this way, Supplier X would achieve $100 total ($50 from the customer, and $50 from UI) to compensate for the loss of its customer, and not just the $50 ETF. Is this a perfect solution? Perhaps not— there are no perfect solutions here short of a time machine. It would provide greater compensation to the electric supplier for its loss of a customer, potentially as a result of UI’s error," OCC said

"Suppliers who do not have any ETF in their contract have presumably built the risk of losing a customer any time, without notice, into their business model, so they would not qualify for additional compensation under the above-described approach," OCC said

"In terms of UI’s exposure, OCC would offer a high estimate that perhaps 700 customers (1 out of 5) would fall into the category of (1) heeding the new UI notice; (2) taking affirmative action to switch suppliers; (3) thereby incurring an ETF; and (4) seeking reimbursement from UI because UI caused the need to switch supply offers. Under such a high estimate, the total UI exposure would be $70,000, which OCC does not believe is an exorbitant penalty for the trouble caused by this UI error," OCC said

OCC also submitted proposed revisions to the language of the customer notice letter. See OCC's proposed changes here

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