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Regulator Orders All Hardship Customers To Be Returned To Default Service, Including Those On Existing Contracts (Final Order), Extends Effective Date

Retail Suppliers Prohibited From Serving Hardship Customers

December 18, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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The Connecticut PURA issued a final decision under which PURA ordered that all hardship electricity customers shall be returned to standard service (default service), and the EDCs shall implement system programming to prevent hardship customers from enrolling with an electric supplier.

No later than July 1, 2020, The Connecticut Light & Power Company d/b/a Eversource Energy and The United Illuminating Company shall return all hardship customers to standard service and shall prevent future hardship customers from enrolling with a third-party electric supplier.

Subsection (b) of Conn. Gen. Stat. § 16-262c defines a hardship customer as: (i) A customer receiving local, state or federal public assistance; (ii) a customer whose sole source of financial support is Social Security, Veterans’ Administration or unemployment compensation benefits; (iii) a customer who is head of the household and is unemployed, and the household income is less than three hundred per cent of the poverty level determined by the federal government; (iv) a customer who is seriously ill or who has a household member who is seriously ill; (v) a customer whose income falls below one hundred twenty-five per cent of the poverty level determined by the federal government; and (vi) a customer whose circumstances threaten a deprivation of food and the necessities of life for himself or dependent children if payment of a delinquent bill is required.

"The Public Utilities Regulatory Authority finds that customers defined as hardship pursuant to Sections 16-245o(m) and 16-262c of the General Statutes of Connecticut receiving electric supply from third-party suppliers have paid more for electric service than they would have receiving standard service supply from the electric distribution companies and they have not received commensurate value for this overpayment. This overpayment affects not only the hardship customers, but also all Connecticut ratepayers contributing to the hardship payments. As a result, all hardship customers shall be transferred to standard service immediately upon the electric distribution companies’ completion of system programming necessary to prevent hardship customers from contracting with third-party electric suppliers," the final decision states

Pursuant to Conn. Gen. Stat. § 16-245o(m), the Authority will initiate a docket, to re-evaluate the prohibition on retail supplier serving hardship customers, two years from the date of the final decision in this docket or, if appealed, two years from the conclusion of the appeal.

In the final order, the Authority has extended the implementation deadline of the hardship prohibition to July 1, 2020. "This extension has four primary benefits. First, as noted, it allows the EDCs extra time to ensure implementation is complete. Second, it coincides with the change in standard service rate ... Third, implementing on July 1 mitigates any harm caused to suppliers by terminating their contracts with hardship customers prior to the contract expiration ... Finally, extending the implementation deadline to July 1 allows more time to ensure hardship customers have received notification of the transition to standard service and allows the EDCs greater opportunity to address any questions addressed through customer inquiries," PURA said

"As noted by suppliers during oral argument, allowing existing contracts to continue for even a portion of the contract substantially diminishes harm to the supplier for early termination. By allowing the contracts to continue for an additional six months, six-month contracts would be completed and twelve-month contracts initiated at or after the date of this Decision would be, at minimum, halfway through their terms," PURA said

The Authority ordered that suppliers may not charge an early termination fee as a result of the decision. "Suppliers charge an early termination fee when a customer terminates his contract early. In the instant case, there is no action by the customer to terminate the contract with the supplier; this Decision terminates the contract. It is unconscionable to impose an early termination fee on a customer that is required to abide by the application of a duly-passed statute," PURA said

The Authority found that the most efficient method for suppliers to implement the decision is to ask customers at the beginning of the marketing transaction if that customer has a designated hardship status.

However, PURA said that, although the Parties presented no evidence that a customer would not know or disclose their hardship status, the Authority heard from suppliers that they preferred the EDCs send them sync lists containing hardship customers. "To diminish the number of marketing calls to customers that are unable to contract with a supplier, the Authority will order the EDCs to provide sync lists to suppliers a minimum of annually, or as often as the suppliers and EDCs agree after the meeting discussed below. Once determined, the EDCs shall submit a compliance filing indicating the method and frequency determined for provision of sync lists and indicating that the EDCs have entered into appropriate non-disclosure agreements with the suppliers and, if necessary, suppliers’ third-party vendors, regarding the exchange of such information," PURA said

"As the Authority has articulated herein, it envisioned implementation would involve a process whereby the EDCs performed the necessary IT upgrades to both return hardship customers to standard service and prevent them from being enrolled with a supplier in the future, and the EDCs would notify hardship customers of this change. Although the Authority does not share the suppliers’ concerns regarding difficulty with implementation, it recognizes the importance of effective communication regarding the implementation. To facilitate the implementation of this Decision’s Orders the Authority will order the EDCs and suppliers to meet by May 15, 2020 for the sole purposes of allowing the EDCs to provide an update to the suppliers regarding the status of implementation and notification and to determine the frequency of the provision of sync lists containing hardship customers," PURA said

Addressing further the impact on suppliers, PURA said, "The Authority has attempted to mitigate some of the financial harm to suppliers by postponing the date to implement the Decision, as requested. Because the postponement allows suppliers more time to engage in the contracts, it gives suppliers more time to recover any sunk costs. As noted previously, suppliers were aware of the existence of Conn. Gen. Stat. § 16-245o(m) and the possibility that hardship customers could be returned to standard service at any time. Although suppliers were not allowed to refuse service to hardship customers, nothing prevented suppliers from pricing to reflect the contingency that they could lose a block of customers. The evidence in this docket indicates suppliers did exactly that by receiving a premium on prices charged to hardship customers. Suppliers cannot be heard to argue that after overcharging hardship customers for, at minimum, the past two years, they now must collect a $50 early termination fee to recover costs of contracting with hardship customers."

"Furthermore, suppliers receive a substantial benefit from the current way the purchase of receivables (POR) is structured. Most suppliers do not bill customers directly. Instead, EDCs bill customers and the suppliers’ generation charges are included on EDC bills to customers, which include other charges such as transmission and distribution charges, conservation charges, etc. Customers also do not pay the supplier directly for generation services. Instead, customers pay the EDC based on the EDC electric bills. The EDCs, in turn, pay all suppliers’ generation charges directly to the suppliers through a POR. Under POR, a supplier receives almost one hundred percent of its billed amounts each month, whether or not the customer pays. Hardship customer uncollectibles are borne by the EDCs, and ultimately by the ratepayers, but not by the suppliers. Therefore, suppliers have received the full benefit of the overcharged rates documented in this docket and should not need to collect an early termination fee to offset the termination of hardship customer contracts," PURA said

Concerning the rationale for its decision, PURA said, "OCC presented compelling evidence based on analysis of two years’ of billing data that hardship customers purchasing electricity from third-party suppliers from October 2016 through September 2018 paid $7.2 million more during that time period than they would have if they had purchased electricity through standard service. Baldwin PFT, p.4. Furthermore, OCC presented evidence that seventy-eight percent (78%) of hardship customers receiving service from an electric supplier paid more than they would have on standard service."

"The Authority finds reducing the rate for 78% of hardship customers and saving $7.2 million to be a substantial benefit. While this savings reflects a point in time from 2016 through 2018, the Authority has reason to believe it is indicative of the amount of continued savings that could be recognized in the future if hardship customers were returned to standard service. The two years examined by OCC do not appear to be anomalies in circumstances or prices offered. The Authority rejects RESA’s arguments regarding differing results of OCC’s study had the timeframe been prior to 2015. Prior to October 2015 variable rates existed for residential customers. As a result, comparison to years prior to 2016 is not useful," PURA said

"The Authority finds that whether or not suppliers offered rates that were lower than standard service during the time period in question, hardship customers contracting with suppliers paid more during the examined time period than they would have paid on standard service. This indicates to the Authority that OCC’s data is accurate regarding hardship customers faring worse with third-party suppliers; better offers might have been available, but hardship customers did not receive them," PURA said

"Theoretical savings are unconvincing when compared with the reality of hardship customers paying more than $7 million too much. Even more so, theoretical savings in the future are unconvincing when compared to actual past costs," PURA said

"The Authority is concerned by the evidence that the supplier market harms hardship customers in particular. OCC presented uncontroverted evidence that during the time period in question hardship customers contracting with a supplier paid sixty-nine percent (69%) more than non-hardship customers contracting with a supplier ... This overpayment by hardship customers harms not only the customers, but also other Connecticut ratepayers funding the state and federal programs in which the hardship customers participate. Pursuant to Conn. Gen. Stat. § 16-262c(b)(4), hardship customers can participate in the Matching Payments Program (MPP), which matches a hardship customer’s payments and Connecticut Energy Assistance Payments (CEAP). See LFE-1, p. 11. If hardship customers are overpaying suppliers for their electricity, it becomes unnecessarily difficult for those customers to pay down their arrearages. Furthermore, because MPP and CEAP are publicly funded, to the extent hardship customers are overpaying suppliers, all other electricity ratepayers are funding this overpayment. This overpayment results in a transfer of valuable financial aid to hardship customers, the MPP and CEAP funds, from the intended beneficiaries to third-party suppliers. Hardship customers receiving supply from third-party suppliers during the period studied on average paid $143 more than they would have paid for standard service during that period. See Baldwin PFT, p. 4. With CEAP benefits averaging only $340 to $725 per year, the premium hardship customers pay to suppliers consumes a significant portion of each hardship customer’s allotted CEAP benefits. See LFE-1, Exhibit A, p. 8. If hardship customers pay less for their supply generation, the Authority finds that the social service programs will save millions of dollars each year that may then be used to provide greater assistance to hardship customers and that these savings may also reduce the charges to all other electricity ratepayers who subsidize these assistance programs for hardship customers as well as the costs of uncollectible accounts through their electricity rates," PURA said

"The Authority finds that a long-term fixed price does not convey a substantial enough benefit to offset the overpayment by hardship customers. Moreover, RESA incorrectly refers to standard service as volatile. RESA Brief at p. 14. There are only two standard service rates in one year and these rates are published in advance. With few changes in rates and advance notification, customers can budget using standard service rates. Furthermore, RESA’s arguments miss the point -- a long-term fixed rate from a supplier that requires a customer to pay more than they would pay with standard service benefits no one other than the supplier," PURA said

"The Authority finds the 'value-added products' offered by suppliers convey no demonstrable overall benefit based on the (lack of) record evidence. RESA offered no evidence regarding how many hardship customers actually receive 'value-added products,' nor did it offer evidence regarding the actual value of these products, such as how many hardship customers receive energy-efficient thermostats, install such thermostats, or even that the hardship customers own the property in which they live and are able to install such thermostats. Furthermore, while gift cards and rebates might benefit the recipient, they do not benefit all Connecticut ratepayers that are contributing to the hardship payments and there is no evidence they offset the customer’s overpayment," PURA said

"The Authority finds that it is both feasible and not cost prohibitive to place all hardship customers on standard service. Eversource offered evidence that for a one-time cost of less than $400,000, it can both return existing hardship customers to standard service and program its system to prevent hardship customers from contracting with a supplier. See Response to Interrogatory OCC-41, LFE-4. UI offered evidence that for a one-time cost of approximately $120,000 it can do the same. See id. When balanced with the ongoing savings that could be achieved by returning hardship customers to standard service, the Authority finds these one-time costs are not excessive," PURA said

"RESA proffers many logistical hurdles, but the record indicates that all of these can be overcome. The EDCs can implement both the ability to identify a hardship customer according to the statutory definition and the ability to notify the supplier of a rejection code of 'other.' As a result of requirements in Docket No. 14-07-19RE05, suppliers must notify customers of the reason of their rejected enrollment, which will require the EDCs to submit to the suppliers a code or reason for the rejection. The EDCs could have a code encompassing reasons not implicating a failure on the part of the supplier to submit the supply summary information with the enrollment and such code could indicate the enrollment should not be resubmitted. Pursuant to the requirements of Docket No. 14-07-19RE05, a supplier receiving such a rejection code could then send the required communication to the customer to indicate that their enrollment was not permitted," PURA said

"The EDCs should be responsible for the initial communication to all hardship customers indicating the change in policy because the EDCs, not the suppliers, have the means of initially identifying the hardship customers. The Authority believes the EDCs could accomplish this via a message on customer bills or by the customer’s preferred means of communication, but will allow the EDCs to determine the most effective, least expensive means of accomplishing this communication. The Authority will order the EDCs to submit a compliance filing indicating the means of communication for the Authority’s approval. Furthermore, a hardship code associated with a customer’s name in the EDCs’ billing system can be removed when the customer no longer meets the statutory definition, thus allowing that customer to reengage with third-party suppliers in real time if he or she chooses," PURA said

The mechanism to recover costs of implementing the prohibition, including potentially through a bypassable rate, is to be addressed in EDC compliance plans

Addressing constitutional arguments that PURA's order impermissibly interferes with supplier contracts, PURA said, "To the extent the statute does substantially impair contracts, it does so for a legitimate public purpose."

PURA further said that suppliers were on notice that hardship customers could be required to be returned to default service, as PURA said that any impairment is therefore not substantial

"Suppliers have known for over five years that there was a possibility hardship customers could be returned to standard service at any time. Suppliers cannot now feign surprise at a contingency they were aware of and could have planned for. Although Conn. Gen. Stat. § 16-245r does not allow suppliers to discriminate against hardship customers, with knowledge that Conn. Gen. Stat. § 16-245o(m) is part of its business environment, suppliers could have planned financially for the contingency that they could lose a portion of their customers," PURA said

"The Authority finds that returning hardship customers to standard service and forbidding their contracting with a supplier serves a significant and legitimate public purpose. Returning hardship customers to standard service not only saves Connecticut ratepayers the extra costs illustrated in this docket and allows for a greater amount of public funds to become available to directly benefit the hardship customers for whom the funds are established, it also saves the majority of hardship customers the extra money they are paying to third-party suppliers," PURA said

Docket No. 18-06-02

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