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OPC: Low-Income Customers On Competitive Supply At Single Utility Paying ~$20,000 More Per Month Than SOS, In Aggregate

Utility Voluntarily Provided Aggregate Bill Data To OPC; OPC Asks PSC To Order Other EDCs To Provide Data

July 23, 2020

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Reporting by Paul Ring •

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The Maryland Office of People's Counsel reported that low-income residential customers who are served by a competitive retail electric supplier at the Southern Maryland Electric Cooperative (SMECO) paid, on average, about $20,000 more in aggregate than what they would have paid under SOS, in each of the four months reviewed during the past year.

OPC has repeatedly sought, in an annual proceeding on the Electric Universal Service Program, an order from the PSC directing that utilities share aggregate cost data showing costs paid by low-income customers served by retail suppliers, versus the cost that would have been paid under SOS. The PSC has denied such requests, but SMECO voluntarily provided the data to OPC.

OPC received data for four months showing the aggregate dollar amount charged to Electric Universal Service Program (EUSP) and Maryland Energy Assistance Program (MEAP) customers served by electric suppliers at SMECO, compared to the aggregate dollar amount that these energy assistance customers would have paid under SMECO’s SOS price

The aggregate costs paid by SMECO EUSP/MEAP customers who were served by competitive suppliers, versus the SOS, are below.

Billing          Aggregate Cost
Period             Above SOS

June 2019         $15,756.27

Sept. 2019        $22,980.54

Dec. 2019         $20,088.76

March 2020        $25,251.36

4-Month Total     $84,076.93

"SMECO’s aggregate billing data reveals massive net losses for each of the four reported months. The table [...] summarizes the additional data provided by SMECO and totals up to an overall net loss of $84,076.93 -- representing just four of the past twelve months from the utility with the smallest customer base among the five reporting electric companies," OPC said

"The magnitude of the losses occurring just in the four reported months is remarkable. In the aggregate, EUSP/MEAP customers paid thousands of dollars more than they would have if they were charged SMECO’s SOS rate. The additional data provided by SMECO shows that low-income customers served by retail suppliers paid higher prices in the aggregate for all the reported periods. In light of this data, OPC urges the Commission to direct the rest of the electric companies to provide aggregate billing data," OPC said

OPC reported that, in SMECO’s service territory, 13.3% of EUSP/MEAP customers were served by a retail supplier in March 2020, whereas only 2.7% of SMECO’s overall residential customers were served by a supplier in that month.

"While OPC cannot definitively conclude that low-income customers are being targeted by suppliers at this point, the information obtained from the five electric companies in response to Order No. 89215 is consistent with the observations included in the Abell Foundation Report issued in December 2018 on the retail supply market," OPC said, stating that the Abell report described extensive marketing activities by suppliers in low-income areas of Baltimore

See details on the Abell report here

As noted, of the five reporting utilities, only SMECO provided the information about the aggregate charges and SOS comparisons for each of these periods to make OPC's analysis possible.

However, the PSC did direct that the EDCs provide information on the number of low-income customers served by competitive suppliers in each service area

OPC said, "The data also shows that in each reported quarter, energy assistance customers (i.e. those receiving EUSP and/or MEAP) of some utilities are more likely to be served by a competitive retail supplier than residential customers as a whole."

For example, over the past year, the number of energy assistance customers served by a retail supplier at BGE was about 27%-28%, while overall residential shopping was about 23%

As noted, in SMECO’s service territory, 13.3% of EUSP/MEAP customers were served by a retail supplier in March 2020, whereas only 2.7% of SMECO’s overall residential customers were served by a retail supplier in that month.

Customers in the Pepco and Delmarva service territories were served by retail suppliers at more or less the same levels regardless of whether they received EUSP or MEAP benefits

OPC said that the aggregate competitive supply cost data is needed for the other utilities, "because low-income customers paying higher rates for commodity translates into a higher bill that must be paid to avoid an arrearage or service termination. Each dollar of BPA [bill payment assistance] or ARA [arrearage retirement assistance] used to pay excessive supplier rates does not reduce the household energy burden or free up money those households could use to pay for other necessities. Therefore, OPC once again requests that the Commission order utilities to collect and report the data needed to evaluate the impact of charges by retail energy suppliers on the electric and gas bills of low-income families participating in both the EUSP and MEAP so that the information will be available for the EUSP Operation Plan filed for FY 2022."

Specifically, OPC once again requested that the Commission direct the utilities to report (for the past 24 months and then on an ongoing basis):

(a) how many EUSP or MEAP customers receive electric or gas supply from a retail supplier for each billing period in the past 24 months;

(b) the total aggregate amount those customers paid in retail supply charges for each billing period in the past 24 months;

(c) the total aggregate usage (in kWh or Therms) appearing on those customers’ bills for each billing period in the past 24 months; and

(d) the total aggregate amount those customers would have paid for default (e.g. SOS or SS) service from the utility based on the usage for each billing period in the past 24 months.

The Retail Energy Supply Association opposed OPC's request.

"RESA remains concerned that the information requested by OPC would not provide a useful comparison between shopping and non-shopping EUSP and MEAP customers and could be used to draw misleading conclusions and comparisons," RESA said

Citing its prior comments to similar past requests from OPC, RESA reiterated that, "competitive supply products and utility default service products are fundamentally different products and cannot be directly compared. Absent a full unbundling, SOS and SS prices reflect wholesale supply costs plus administratively-determined adders. SOS and SS prices do not include all the services and related costs that a competitive retail supplier's price includes. This false comparison should be avoided. Moreover, price alone does not provide a full picture of the value of a supplier's offering."

Citing its past comments, RESA reiterated, "In today's market, more and more value-added products and services are included in supplier offerings. A customer may select a long-term fixed price energy supply product to lock in their price, allowing them to budget their energy costs more effectively. At a single point in time, this fixed rate may be higher than the SOS or SS rate, but this basic analysis does not recognize that this product can protect consumers from increases in rates charged by the utilities over the long term. Paying a premium for price certainty is not limited to the electric and natural gas markets. Comparing supplier fixed prices with periodically fluctuating utility SOS and SS prices is like concluding that a customer with a 30-year fixed rate 4% mortgage is overpaying if variable mortgage rates subsequently dip below 4%. Many mortgage customers choose a 30-year fixed rate mortgage even though the interest rate is typically higher than a variable rate product. There is a value associated with the customer selecting a fixed price product over a product with a rate that changes periodically, and that value would not be quantified or reflected in the requested data."

"RESA continues to recommend that the Commission deny OPC’s request, but instead consider providing an opportunity for broader stakeholder input and suggestions for considering issues of retail choice and pricing in the competitive electricity and natural gas supply markets," RESA said

"To the extent that OPC may obtain specific supplier pricing data or market share data, RESA also remains concerned about the confidentiality and competitive sensitivity of this information," RESA said

Case No. 8903

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