Daily Email







Retail Suppliers Oppose Limiting Electric Choice To 10% Of Load During Arizona Transition

Retail Supplier Proposes Retail Auction To Assign POLR Obligation

Rules' "Written Authorization" Provision For Enrollments Draws Retail Supplier Attention

July 12, 2019

Email This Story
Copyright 2010-19
Reporting by Paul Ring •

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of

In commenting on a report from Staff of the Arizona Corporation Commission regarding "possible" modifications to the ACC's retail electric competition rules, retail suppliers opposed limiting electric choice to 10% of load during a transition period

See's exclusive analysis of the proposed rules in our prior story here and an update on the proposed customer eligibility thresholds for choice in our prior story here

A transition period to electric choice is contained in the current legacy rules, which initially provides for a 20% cap on choice load at the start of the transition. Staff's draft would revise this level to provide that, at the start of the transition, "at least" 10% of load shall be made available for choice sales.

Staff's proposed start date for the transition is to be determined. Furthermore, Staff's draft also provides that all eligible customers shall be "able" to take competitive supply by a to-be-determined date.

Staff's draft does not contain any further details about the schedule or interim choice levels during any transition period

The Arizonans for Electric Choice and Competition (AECC) said that, "Making at least 10 percent of system peak demand available for competitive generation may not attract the number of ESPs needed to have a robust market."

"Generation marketers can better provide information during the upcoming workshop regarding the sufficiency of 'competitive' electric load needed in order to create a more vibrant market," AECC said

"Staff's proposed rule is unclear on how the market can (or will) grow over time, and exactly what eligibility requirements will be required after the transition. Although Phelps Dodge invalidated portions of the Competitive Rules mandating divesture [sic] of generation assets, nothing in the decision prohibits the Commission from placing a moratorium on new generation assets and/or acquisitions, including Purchased Power Agreements ('PPAs'). The Commission should consider such a moratorium as a tool to increase the number of customers available for the retail market over time, as existing utility generation assets can provide standard offer service until fully depreciated. Such an approach may also have a beneficial effect for customers on the issue of stranded cost recovery," AECC said

In separately filed comments, Shell Energy North America said that it supports a "reasonable" transition period leading to full implementation of retail competition, but said that the first phase of the transition should be at least 33 percent, not 10 percent, of the utility's system retail peak demand.

"If only 10 percent of a Utility's retail peak demand is eligible to participate in direct access in the first phase, many customers will be discouraged from participating in the first-come, first-served process. Moreover, some ESPs may choose not to participate, as it is unlikely that many of the customers contacted by an ESP will be able to leave the Incumbent Utility," Shell said

Shell Energy proposes a three- phase transition over a three-year period, with 33 percent of eligible customers allowed to participate in the first year, another 33 percent of eligible customers allowed to participate in the second year, and all remaining eligible customers allowed to participate in the third year of the program.

Staff's draft would continue the current default service structure from the legacy rules, with the utilities serving as the POLR

Shell said that, "as the competitive retail market evolves, the incumbent utilities should exit the generation/procurement market altogether. The utilities should no longer serve as the POLR."

"Instead, a process should be established to assign (or 'auction') the POLR obligation to one or more eligible (and financially secure) entities that seeks to provide POLR service in an incumbent utility's service area. A competitive process should be established to allow third parties to bid to become a POLR," Shell said

In separately filed comments, the National Energy Marketers Association likewise said that utilities should exit the commodity merchant function and that the POLR function can and should be rendered by a competitive electric supplier(s).

NEM noted that in Texas, where retail suppliers serve as true last resort providers with no default options, "over one hundred retailers are participating in the marketplace to provide consumers with over three hundred unique products, an approximate 31% reduction in rates since the introduction of competition, robust customer shopping in all customer classes, extensive availability of price comparison information and consumer education resources, and an exceedingly low complaint rate."

"By contrast, those retail choice jurisdictions that chose to retain the incumbent utility monopoly as a direct competitor with other competitive suppliers in the marketplace have all experienced related market development difficulties as a direct result. This is caused by incumbent utility market power and economies of scale coupled with inadequate utility delivery rate unbundling and lack of market-based pricing signals to consumers. While there have been regulatory efforts undertaken in numerous jurisdictions to level the playing field under those circumstances, the numerous and distinct advantages of the incumbent utility monopoly are difficult to overcome when they are permitted to compete in the retail marketplace. It inhibits competitive supplier market entry and participation and limits the ability of suppliers to offer competitive prices, products and innovations against artificially understated utility monopoly rates," NEM said

Shell also opposed various provisions in the draft rules under which the Commission will regulate, and in some cases approve, the prices, terms and conditions of service between an ESP and its customers.

"Commission regulation of the price, terms and conditions of an ESP's service is not necessary as ESPs are fully 'at risk' for the products and services they offer, they do not enjoy the guaranteed rate recovery that is afforded the Incumbent Utility. Therefore, these proposed provisions should be stricken," Shell said

Shell did not opine on how its proposal that the Commission should not regulate or approve the retail prices charged by ESPs conforms to Phelps Dodge and the ACC's constitutional charge to ensure just and reasonable rates

Addressing the previously reported eligibility limits for choice see our prior story here, the National Energy Marketers Association recommended that all classes of consumers should be permitted to shop for a competitive electric supplier, and residential consumer shopping should not be limited to aggregations

"Staff's Report offers no rationale or justification for imposing limitations on consumer eligibility to shop. Indeed, NEM submits that no reasonable rationale or justification exists. Consumers, including residential consumers, are becoming increasingly savvy about energy and technology-enabled energy products and services and are demanding access to energy choice options. 21st century consumers are far more technologically savvy, and the internet provides unfettered access to abundant informational resources, that can be supplemented through targeted consumer education campaigns about retail energy choice. Moreover, consumers in the digital age expect to be able to shop and purchase all manner of goods and services and have those purchases fulfilled instantaneously, or nearly so. There is simply no reason to differentiate energy and energy-related services from the products that consumers to shop for," NEM said

As exclusively reported by, the legacy rules only provide for "written authorization" for enrollments, and there is no proposed change to this provision in the Staff report

NEM said that the proposed rules should reflect and explicitly permit not only written authorization to switch, but also telephonic and web-based enrollments, as is permitted in other choice jurisdictions. "Indeed, electronic signatures have the same legal effect as 'wet signatures' under federal law," NEM said

NEM also said that delivery service rates must be properly unbundled

Several parties such as Salt River Project and the Residential Utility Consumer Office said that the timeframe between publication of the Staff report on July 1 and the July 11 comment deadline did not permit time for substantive comments given the expansive nature of the rules. However, both SRP and RUCO, in separately filed comments, expressed general concerns with retail choice and competition

Docket RE-00000A-18-0405

NEW Jobs on
NEW! -- Energy Contracts Counsel -- Retail Supplier
NEW! -- Senior Natural Gas Energy Trader -- Retail Supplier
NEW! -- Operations Manager -- Retail Supplier
Quality Assurance and Customer Service Manager -- Retail Supplier

Email This Story


Copyright 2010-16 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.



Daily Email