Pennsylvania Utility: Some Retail Suppliers, "Are Not Putting Customers First"
Consumer Group: Retail Supplier Pricing During Polar Vortex Shows Need For Default Service
August 27, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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In reply comments in a Pennsylvania PUC proceeding concerning potential changes to electricity default service, including a potential move away from a "plain vanilla" default service product, PPL Electric Utilities said that, "some retail suppliers are not putting customers first"
As noted in EnergyChoiceMatters.com's exclusive analysis (story here), the PUC has opened a proceeding which may end the state's "plain vanilla" default service mechanism. As previously reported, the inquiry was prompted by a desire for non-shopping customers to realize the benefit of "smart energy" behaviors, such as load shifting and peak reductions, and may include value-added default service alternatives. The PUC also specifically sought comments on various wholesale cost allocation issues (capacity tags, transmission cost allocation, etc.)
PPL was responding to this proposal and other calls from competitive supply parties to remove the EDC from the default provider role.
PPL made note of the electric generation suppliers' (EGS) proposal to remove the EDC as the default service provider, as well as recent comments from EGS parties in a separate docket concerning service to Customer Assistance Program (CAP) customers.
PPL said, "In RESA's CAP Shopping Comments, RESA proposed the Commission allow EGSs to
charge highly vulnerable, low-income CAP customers a 20% premium to the EDC PTC.
WGL's CAP Shopping Comments offered products and services beyond the per kWh PTC
measure that should be incorporated when considering if a CAP customer should be able to shop
and choose a rate above the PTC."
"Both examples show that some retail suppliers are not putting
customers first, in that instance, low-income CAP customers. The same analysis should be
applied here to conclude that the EGS Coalition, RESA, WGL, P3 and other similarly situated
parties are acting in their own interests, not a customer's, when seeking to eliminate the PTC and
an EDC's role in providing default service. PPL Electric recommends the comments by these
parties be completely rejected," PPL said
Other utilities, including the FirstEnergy Pennsylvania EDCs, PECO, and Duquesne Light also separately filed comments opposing removal of the EDC from the default supplier role
The FirstEnergy Pennsylvania utilities said that, "The current default service framework has been successful in creating robust competition and
affording retail customers the ability to shop for their electricity or choose to remain with their
EDC provider, while consistently allowing for procurement of a competitively-sourced product
consistent with the statutory mandate that such be secured at the least cost over time. The
procurement methodology is well understood by all participants- suppliers, EDCs, independent
evaluators, and regulators."
"Removing the EDC would eliminate a type of product that some electricity customers may
prefer -- a product where a customer receives all power supply components from one provider -- the host EDC. Moreover, the introduction of various alternative providers of default service would
inject confusion and informational complexity for customers who may not know who their default
service supplier is or, even worse, may think they are shopping when in fact they are not. From a
regulatory perspective, playing the game of 'Who is the default service supplier now?' may result
in other adverse outcomes. For instance, periods of placing less financially stable companies in
that key role would increase, ironically, the risk of default of the default service provider and, at
the very least, this inefficient option would likely increase the cost of the products provided and
the need for regulatory oversight of providing default service -- contrary to the 'least cost over
time' standard," the FirstEnergy EDCs said
"The Companies disagree with the propositions advanced by some commenters -- namely
PJM Power Providers, EGSC and RESA -- that by removing the EDC as the default service
provider all retail customers -- shopping and non-shopping -- will experience benefits. To the
contrary, the removal of the EDC as provider of default service removes a choice from a customer
who affirmatively elects not to shop and instead prefers- for many possible reasons that they as
customers should be entitled to -- the 'plain vanilla' power supply service from the host EDC.
Eliminating that choice would be counter to competitive and efficient outcomes, the inherent spirit
of 'choice' that was intended by the effort to deregulate Pennsylvania's electric industry, and
ultimately, the public interest. For the reasons listed above, the Companies are strongly against
removing the EDC from its customary and valued role of default service provider and believe the
EDC is a critical market participant to preserve in a default service market structure that is
sustainable into the foreseeable future," the FirstEnergy EDCs said
The Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania (CAUSE-PA) also said that the PUC should reject retail suppliers' request to, "transform default service to a product offered by competitive suppliers at prevailing market rates," citing, in particular, the polar vortex.
"The market has faced a number of challenges since 2013, all of which underscore the need for stable default service provided at the least cost over time, consistent with the mandates of the Competition Act. The 2014 polar vortex caused electric supply prices to spike dramatically. As a result, thousands of Pennsylvanians who were served by EGSs – including many uniquely vulnerable low income households – faced dramatically increased and often substantially unaffordable winter heating costs. Several multi-year investigations and enforcement actions resulted from this extreme weather event, which brought to light a range of deceptive and abusive trade practices by suppliers across the state. In fact, the Commission only recently concluded an enforcement action against one of the offending suppliers. By any account, justice has been slow to materialize for some consumers through the course of these enforcement actions. Fortunately, many ratepayers who elected to remain on default service were shielded from the worst of the financial hardship caused by the prolonged and extreme cold weather that year. In the absence of default service as presently designed, the devastating financial impact of the polar vortex would have been even more profound, and the ability for consumers to access meaningful relief available through the Public Utility Code and Commission regulations may have been significantly constrained and/or further delayed. If anything, the challenges presented since the Commission’s 2013 RMI, End State Final Order have underscored the need for stable, least cost default service to remain available to all Pennsylvanians in its current form," CAUSE-PA said
In contrast, the EGS Coalition, which includes NRG Energy, Inc., Direct Energy Services, LLC, Interstate Gas Supply, Inc., and Vistra Energy Corp., said that the implication in the PUCs inquiry -- that default service should serve as a source of rate innovation -- reflects the real barrier that default service presents to the retail market
The EGS Coalition said, "Default service, as we know it, currently stands as a stark barrier to the growth of the
competitive market. Indeed, the Commission's inclination to rely on regulated utilities to
develop innovative products illustrates that the time has come to transition to an end-state in
which all consumers receive their electricity from the retail market. The optimal end-state is
one in which default service is nothing more than a backstop supply service when contracted
supplies are not delivered by the selected EGS. As a transition to that ultimate end-state, it is
critical that the Commission take steps to move the utility out of the default service provider role
and immediately implement measures to ensure that default service remains a plain vanilla
product, which is properly priced to reflect current market conditions and all of the costs that are
incurred to provide the service."
The Retail Energy Supply Association pushed back against claims that customers have "chosen" default service.
"The claim by some commenters that the shopping statistics prove there is a competitive
market in Pennsylvania today and nothing more needs to be done lacks empirical support. The
majority of those consumers availing themselves of competitive supply options are large
commercial and industrial customers. Of the residential consumers, 29.8% of them are
receiving competitive supply from an EGS. Stated another way, 70.2% of Pennsylvania's residential consumers are continuing to receive utility provided default service. This is not a
market functioning to its full potential," RESA said
"Moreover, the trend in recent years has been a steady decline in residential consumer
shopping. After steadily growing starting in 2009 and peaking in April, 2014 at 1,864,000, as of
July 2019 the number of residential customers taking service from suppliers fell to 1,528,757.
This is the lowest level of residential shopping since 2012. Between April 2009 (when 128,000
residential accounts were taking service from an EGS) and April 2014, the Commission was
embarking upon a significant number of appropriate market structures to nurture the initial
growth of competition including: Purchase of Receivables, Customer Referral, Eligible Customer
Lists, ensuring EGS access to critical customer information, development of a best-in-class
Power to Choose website and a robust consumer education campaign endorsed by the
Commission. Following the Polar Vortex in 2014, the Commission shifted focus to tightening
consumer protections requirements, more aggressive enforcement of suppliers and restrictions on
the ability of low-income customers to freely shop. Now that the Commission's processes
focusing on customer protection and enforcement have been well-developed and established, the
steady decline in residential shopping statistics supports the need to redirect attention to
designing structures to reinvigorate the competitive market," RESA said
"RESA does not agree with commenters who argue that consumers are 'choosing' utility
provided default service and, therefore, the low shopping statistics for residential customers is
not indicative of a less than optimal competitive market structure. There is no valid evidence
upon which to support this claim. Where, as here, the default service product is provided by the
utility and consumers have never been required to actively make a choice to affirmatively select the utility provided default service product, there is no basis upon which to conclude that the
default service customer made an 'active choice' to receive default service," RESA said
"Also important to remember is that the default service product and the competitive EGS
product are not reasonably comparable products developed by the same type of entity within the
same set of rules. The EDCs enjoy certain competitive advantages in their provisioning of
default service that are not available to any EGS today. This includes the Commission's
historical efforts to encourage consumers to compare the EDC's default service rate (known as
the Price to Compare, or 'PTC') to EGS pricing. As such, the consumer is not (because he or
she cannot be) presented with a real choice between two similarly situated and reasonably
comparable products," RESA said
"For all these reasons, one cannot reasonably conclude either that default service
customers are: (1) 'actively' choosing a utility's default service; or, (2) such alleged 'active'
choice one that is fully informed about the differences between the default service product and
the EGS products. Thus, RESA vigorously rejects the view that the current state of the
Pennsylvania market and/or the current shopping statistics mean that the Commission need not
do anything else to support the development of the competitive market. On the contrary, there
are significant barriers standing in the way of unleashing the full potential of the competitive
market for consumers and RESA urges the Commission to take this opportunity now to start
addressing these barriers," RESA said