Arizona Staff: In Most States, Default Service Rates Lower Than Retail Supplier Rates

Staff Cites "Bait & Switch", Termination Fees, Customer Complaints, Civil Penalties

Two Commissioners Seek Further Process, Workshops

Olson: Draft Retail Rules Need To Explicitly Include Community Choice Aggregation

February 26, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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During an Arizona Corporation Commission workshop on its investigation of retail electric choice, ACC Utilities Division Staff reiterated its previously articulated concerns regarding retail competition

The workshop addresses draft rules for retail electric choice, see our prior story for further details on the draft

Elijah Abinah, Director of the Utilities Division for the ACC, said that, "Based on our experience, based on the research that we've performed, we've seen that, in most states, when it comes to residential retail competition, if you look at the traditional service provider, compared to the competitive providers, the traditional provider has a lower rate than the competitors."

Abinah cited instances where retail supplier customers were subject to, "bait and switch," under which customers initially have a low rate, and then the rate goes up

Abinah also cited instances in which retail supplier customers must pay "huge" penalties to leave the supplier

Abinah further cited that Staff has seen a lot of complaints against retail suppliers in its research, as well as many civil penalties imposed against suppliers

"I'm not saying there's no benefit to competition, but ... this is a snapshot of what we found," Abinah said

Abinah cited Connecticut and Massachusetts in which there are efforts to get away from residential electric competition

Abinah cited Staff's prior recommendation that the ACC should proceed with caution in its inquiry.

"I believe that our job is to make a recommendation that is in the public interest, and at the appropriate time we will do that," Abinah said, but Abinah said his comments thus far were based on Staff's research. Abinah said that it is up to the Commission to make a decision, and that Staff will implement any direction from the Commission

Abinah said that Staff is not ready to make a recommendation, but if requested to do so by the Commission, will do so at the end of the workshop, which is continuing this afternoon

Commissioner Justin Olson said that it is "irrefutable" that residential electric rates have gone down in Texas under retail choice

Commissioner Boyd Dunn reiterated his desire for more process, and said that the Commission should hear from more ratepayers. Dunn cited Commissioner Lea Márquez Peterson's previously reported proposal for a series of workshops.

Dunn reiterated his concerns with the ACC's jurisdiction under restructuring (and tension with FERC), and stranded costs

Márquez Peterson said that additional research and workshops are needed

Testifying on behalf of Tucson Electric Power, former Connecticut Consumer Counsel Elin Swanson Katz provided previously reported information showing that Connecticut customers on retail supply paid more than default service, such as the latest finding from OCC that, from approximately 2015-2019, Connecticut consumers with third-party electric suppliers have paid an estimated $240 million more than consumers on the utility standard service (see details here)

Jorge Fuentes, director of Arizona's Residential Utility Consumer Office, said that presentations from retail choice supporters during the workshop amounted to a "sales job". RUCO emphasized Swanson Katz's statement that no consumer protections sought and won by OCC through a series of legislative changes were effective in protecting customers

Fuentes also said that states' voices in policy are being diminished by FERC in a restructured environment, stating, "FERC doesn't care what you think," and that FERC is going to do what FERC is going to do

The "potential risk is huge," from retail choice, Fuentes said

Fuentes also said that he didn't see buy-in from Arizona stakeholders for retail choice, apart from suppliers

ACC Chairman Bob Burns pushed back on claims concerning customer understanding of choice and arguments that customers in other states have found that it is too complex

Burns said that a Commission will never find a "perfect" model, and compared the situations to the cellular service market, where there might be dissatisfaction with certain plans, but that customers are able to shop and seek out desired services

Burns also compared complaint rates in eastern states cited by choice opponents, to the lower complaint rate in Texas

Addressing a discrete issue, a proponent of opt-out municipal aggregation noted that, while the draft rules define the term community choice aggregation, the rules do not explicitly authorize CCAs or address their enrollment of customers

Olson said that he "agree[s] completely" that both drafts need to be explicit that the CCAs can co-exist and can have access to the wholesale market, and would support text changes to that effect.

Representatives from the National Energy Marketers Association and NRG Energy were among those speaking in support of retail electric choice

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