Updated:
Pa. PUC Says Costs Of "Tangible" Products "Distinct And Separate From Generation Service" Must Be Disclosed Separately By Retail Supplier

All Retail Supplier Offers Must Disclose A Price Per kWh (Including Flat Bill, At Set Usage Levels)

For Introductory Rate, Supplier Must Also Disclose Price Offered After The Introductory Period

Pennsylvania PUC Prohibits Imposition Of Early Termination Fees In Final 30 Days, New Per kWh Price Disclosure Rules Adopted

February 27, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Updated: Feb. 27, 3:10 p.m.

In the PUC's final rule concerning electric supplier disclosure requirements, the PUC removed proposed language that provided that all EGS products must be disclosed based on, "the actual prices per kilowatt-hour," with the deletion of such language allowing for innovative products such as flat bill offers. However, the PUC will require per-kWh rate disclosures at specified usage levels for flat bill and other offers (apart from TOU, which is still subject to a per kWh disclosure, but not at multiple usage levels)

The disclosure regulations discussed below apply to only residential and small business customers

As noted by the language below, the PUC said that, "If the product is priced on some other basis than per-kWh, the supplier is obligated to explain the pricing structure and what the customer charges are. Importantly, this does not mean that other types of products are necessarily exempt from calculating and displaying for the customer the per-kWh unit price for different usage levels under § 54.5(c)(4) [which are quoted below]."

Under the required disclosure statement as revised by the new rules, the disclosure of generation charges must conform to the following requirements:

(i) if the customer will be billed under a price per kilowatt-hour price structure, generation charges must be disclosed according to the actual prices per kilowatt-hour.

(ii) if a customer will not be billed under a price per kilowatt-hour price structure, the contract’s terms must clearly explain the pricing structure and what the customer’s price for generation charges will be for a given period of time.

(iii) generation charges must include an estimate of all applicable taxes except for state sales tax and county tax.

Furthermore, under the disclosure statement, if the unit price changes based on actual customer usage or if the offer includes fees in addition to the unit price, "the price per kWh must factor in all costs associated with the rate charged to the customer, including any fees, and show the average price per kWh for usages of 500, 1,000 and 2,000 kWh of electricity in a table format."

Under the disclosure statement, "If the offer includes an introductory price, the disclosure statement must show the average price per kWh of the introductory price, including any fees, and the price offered after the introductory period, including any fees, in separate tables," the final rules state

The separate contract summary also requires, "Full disclosure of any introductory price, including the introductory price and the price after the introductory period expires."

Under the disclosure statement, "If the price is a fixed monthly amount, including any fees, that does not change based on actual customer usage, the disclosure statement must show the average price per kWh for usages of 500, 1,000 and 2,000 kWh of electricity in a table format," the final rules state

If the price varies based on when the customer actually uses electricity, such as a time-of-use offer, the disclosure statement must show the price per kWh for each time period in table format.

Under the disclosure statement, if the price is introductory, the pricing statement must include a statement that the price is an introductory price, the duration of the introductory period, "and the price for the first billing cycle after the introductory period."

For variable rates, the pricing statement must also include the, "conditions of variability (state on what basis prices will vary) including the factors that the EGS will rely upon to establish the variable price." This final language omits the earlier proposal that the EGS must disclose the, "EGS’s specific prescribed variable pricing methodology."

Under the disclosure statement, for variable rates, the EGS shall also state that the price can change each billing period, "which must be printed in font size larger than the font size appearing in the terms of service."

Under the disclosure statement, for variable rates, the EGS shall state whether there are any limits on price variability, and, if there is not a limit on price variability, "the EGS shall clearly and conspicuously state that there is not a limit on how much the price may change from one billing cycle to the next."

Under the disclosure statement, for variable rates, the EGS must provide a description of when and how the customer will receive notification of price changes. Additionally, if the customer will not know the price until the time of billing, this must be disclosed in font size larger than the font size appearing in the terms of service.

Similarly, in terms of price disclosures for "advertised prices" (marketing), the new rules provide that, "If the unit price changes based on actual customer usage or if the offer includes fees in addition to unit prices, written or electronic marketing materials that offer terms of service for acceptance by consumers and authorizes enrollment must factor in all costs associated with the rate charged, including any fees, and show the average price per kWh for usages of 500, 1,000 and 2,000 kWh of electricity in a table format. If the offer includes an introductory price, the EGS shall show the average price per kWh of the introductory price, including any fees, and the price offered after the introductory period, including any fees, in separate tables."

For such marketing disclosures, "if the price is a fixed monthly amount, including any fees, that does not change based on actual customer usage, the EGS shall show the average price per kWh for usages of 500, 1,000 and 2,000 kWh of electricity in a table format."

For such marketing disclosures, "if the price varies based on when the customer uses electricity, such as a time-of-use offer, the EGS shall show the price per kWh for each time period in a table format."

As indicated by the rule language above, the price per kWh disclosure will apply to "flat bill" products, which the PUC discussed in its order

Cornering the disclosure statement requirements for a per kWh price, the PUC said, "we agree with the OCA that charges for generation service must be disclosed on a cents-per-kilowatt-hour basis, regardless of how they are structured, which includes time-of-use rates, flat bills or fees related to that service."

"We also agree with OCA that this requirement should apply to 'flat bill' products (products where a customer is billed a flat monthly, pre-disclosed amount regardless of usage). For such products, the supplier should provide the 'flat bill' amount under subsection (c)(1), and what that works out to be on a per-kWh basis for subsection (c)(4). We see no reason why this cannot be done and reject arguments that this would inhibit or prohibit such products," the PUC said

The PUC also said, in discussing its adoption of the language quoted above concerning the disclosure of the price following an introductory rate, "We will also insert language clarifying that if the product also has an introductory component (see subsection (c)(2)), a table must be included showing the introductory pricing information and a separate table displaying the pricing that applies after the introductory period expires."

Concerning the required per kWh disclosure for time of use rates quoted above, the PUC said, "We revised our proposal to create an exception for dynamic/time-of-use products – suppliers will not be expected to provide per kWh prices for three different usage levels."

The PUC, "acknowledge[s] that it is possible there could be products in the future that do not fit neatly into any of the requirements."

"In such instances, we expect suppliers to make a good-faith effort to provide adequate information to potential customers so they can make informed decisions and comparison shop. We advise suppliers to contact Commission staff for guidance when encountering such situations," the PUC said

The PUC further cited existing regulations concerning supplier marketing that require that accurate information be provided to customers. The PUC noted that regardless of product, the EGS, "Shall provide accurate and timely information about services and products being offered. Information includes rates being offered, contract terms, early termination fees and right of cancellation and rescission," and that the EGS, "Shall ensure that product or service offerings made by a supplier contain information, verbally or written, in plain language designed to be understood by the customer. This includes providing written information to the customer in a language which the supplier’s representative has had substantive discussions with the customer or in which a contract is negotiated."

The PUC also addressed the bundling of generation service with other "tangible" products

The OCA had said during the proceeding that if a "product" (as such term was used in the rules) is a tangible product or a service such as a home security system, an HVAC maintenance contract, or a smart thermostat, then these charges should be unbundled from the generation service and disclosed separately. OCA argued that these charges are similar to non-basic services and must be disclosed to the customer as to their cost impact on the monthly bill

The PUC addressed OCA's comments by stating, "We also agree with the OCA that for tangible products and services that can be provided in a manner that is distinct and separate from generation service, their costs or charges are to be disclosed separately. Accordingly, we have replaced the term 'product' with the term 'offer' or removed it altogether to eliminate any potential confusion."

The PUC's language was part of a discussion in which the PUC said (in context), "We recognize that some suppliers may also offer other services or value-added products with the basic generation service. While these other products and services may induce consumers to choose that supplier, in the end, the consumer must know what they are purchasing and what the cost of all the products and services are. With that said, we agree with the OCA that charges for generation service must be disclosed on a cents-per-kilowatt-hour basis, regardless of how they are structured, which includes time-of-use rates, flat bills or fees related to that service. We also agree with the OCA that for tangible products and services that can be provided in a manner that is distinct and separate from generation service, their costs or charges are to be disclosed separately. Accordingly, we have replaced the term 'product' with the term 'offer' or removed it altogether to eliminate any potential confusion."

Elsewhere in the order, the PUC says (repeating its conclusion with slightly different wording, "We recognize that some suppliers may also offer other services or value-added products with the basic generation service. While these other products and services may induce consumers to choose that supplier, in the end, the consumer must know what they are purchasing and what the cost of all the products and services are. We also agree with the OCA that tangible products and services that can be provided in a manner that is distinct and separate from generation service, their costs or charges are to be disclosed separately. Accordingly, we have replaced the term 'product' with the term 'offer' or removed it to eliminate any potential confusion. Rather than attempting to develop a definition for product that encompasses all current and potential future product offerings, the Commission finds that simply referring to whatever the EGS is offering avoids any need for interpretation and avoids confusion."

No rule language specifically addresses the PUC's discussion concerning "tangible" products that are distinct and separate from generation service

Concerning the prohibition on charging early termination fees after the second (options) contract expiration notice is sent to the customer (which equates to a 30 day period), first reported in our original story below, the PUC said, "one of our primary motives for this change is the fact that a customer has no control over the precise date of a supplier switch."

"We find that suppliers are sophisticated enough to be able to hedge against any potential losses that may occur due to a customer leaving a contract less than 30 days before it ends and should be the ones that bear that risk, not the residential or small business customer," the PUC said

As noted in our story below, the prohibition on charging early termination fees after the second (options) contract expiration notice applies only to residential and small business customers.

Furthermore, the PUC explicitly provided that this prohibition on charging early termination fees after the second (options) notice does not apply to existing contracts.

"[P]re-existing contracts prior to that start date [of the new rules] will not be interfered with nor abrogated due to the enactment of the new revised regulations," the PUC said, as the rules apply prospectively

The PUC rejected OCA’s suggestion to impose caps on the amount charged by EGSs for ETFs. "While we do have concerns about the perception of the competitive market caused by large ETF amounts and the resulting impact on consumers’ willingness to participate and shop, imposing caps would be a significant change to the market and one that has not been fully vetted by all the stakeholders," the PUC said

Under the final rules, the contract summary will now be required to include an explanation of the customer’s 3-day right of rescission per 52 Pa. Code § 54.5(d) and how to exercise this right.

In terms of the rules' effective date, the PUC will provide 60 days after the date of publication of the final IRRC approved rules for EGSs to implement the final regulations.

Docket L-2017-2628991

Earlier:

* This is a breaking news story. A more detailed report will follow

The Pennsylvania Public Utility Commission (PUC) today approved a final rulemaking concerning electric supplier rules and disclosure requirements

Notably, for residential and small business customers, the new rules prohibit early termination fees (ETFs) during the final month of an expiring contract.

Specifically, the ETF exclusion period will begin from the date that the second (options) notice of an expiring contract is sent to the customer. This second (options) notice is issued no later than 30 days prior to the expiration of the contract. This will in effect create an ETF-exclusion period of approximately 30 days -- compared to a 60-day period originally proposed.

According to a PUC press release, the new rules include. "Requirements that EGSs display their prices in a format that allows for easier price comparisons."

Specifically, this includes "per kWh" price disclosure requirements even for products which may not need charged on a per kWh basis

The PUC's order was just issued and a more detailed explanation will follow in an updated story

The PUC also said the new rules include:

• Requirements that any introductory price be clearly identified and explained to the customer and disclose both the introductory price and the price after the introductory period expires.

• Requirements to provide more information about variable prices and time-of-use products.

• Use of common, consistent terminology by EGSs in their customer communications, including marketing, billing and disclosure statements.

• Simplifying the format of customer contract summaries that customers receive with their full EGS disclosure statement.

Docket L-2017-2628991

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