Updated: PUC Says Customized Flat Bill Offer Presupposes Reliance On Hourly Interval Data That Is Not Yet Available To Retail Suppliers

(Earlier): PUC Denies Rule Waiver Sought By Retail Supplier As Part Of Marketing Flat Bill Product, Without Prejudice

October 8, 2020

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Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Updated, 10/8:

PUCO has issued a written order denying, without prejudice, a petition from Astral Energy, LLC for a waiver of a rule requiring the specific listing of the rate to be charged per month in marketing materials that accompany a contract, for its flat bill product

Further details on Astral's sought waiver are in our earlier story below.

Of note in the written order is that PUCO premised its denial on the finding that a waiver is not justified given that, as found by PUCO, Astral, "is currently unable to offer any meaningful customer-specific, algorithmic pricing options," because such customization, "presupposes reliance on hourly interval data reported by an electric distribution utility to PJM for settlement purposes."

"As of the date of this decision, this information is not yet available to Applicant or any other CRES provider," PUCO said

PUCO stated, "As to the merits of the application, we initially note that Applicant’s waiver request is narrowly tailored to address marketing disclosures that do not exist under its business model. Applicant proposes to prepare individual six-month flat-monthly rate marketing offers based on a range of rate factors such as 'the customer’s historic usage, peak vs. off peak usage, and other factors.' Application at ¶ 6. Applicant submits that it cannot include a rate offer in its marketing materials as directed by Ohio Adm.Code 4901:1:21- 05(A)(4) because its offers will be based on a proprietary algorithm, which provides a customized rate offer that is purportedly specific to each customer’s historic usage. With this information in mind, the Commission must assess the value of the proposed consumer product in comparison to the impact on the consumer protection safeguards that are the subject of the waiver request."

PUCO stated, "Ohio Adm.Code Chapter 4901:1-21 is intended to provide standards and safeguards to protect consumers from deceptive, unfair and unconscionable marketing practices and to ensure that they can make informed decisions about offers from CRES providers. Within this chapter are defined marketing requirements that are intended to allow customers ease-of-pricing comparisons in their CRES analysis before they commit to service contracts. Ohio Adm.Code 4901:1-21-05. In addition to requiring Apples-to-Apples pricing information on marketing and solicitation materials, the rules provide that marketers must include comparative pricing information on marketing materials that accompany contract proposals, and on the EnergyChoice website so that customers can educate themselves easily and early in their decision-making as to potential choice considerations. Ohio Adm.Code 4901:1-21-03(D)."

"Applicant’s proposed business model is unique among CRES providers. Prior to this waiver request, the Commission has yet to consider a flat-rate marketing model that attempts to correlate monthly residential pricing to a customer’s actual, rather than assumed, individual usage. Here, Applicant intends to individually tailor each of its flat-rate customer pricing offers based on a computer algorithm, which will generate an offer price based on a review of a customer’s historic electricity consumption as measured in load and usage. As the load and usage of each customer may be widely variant, Applicant submits that it is impossible for it to produce and include in its marketing materials 'a specific listing of the rate to be charged per month for the duration of the contract,' as is required by Ohio Adm.Code 4901:1-21-05(A)(4)," PUCO said

"In considering Applicant’s waiver application, we note that we remain supportive of the rights of consumers to purchase their electricity in a variety of ways, that there may be value in the consumer’s mind to offering a flat-rate pricing plan, and that there is no prohibition against this type of pricing plan, provided that it is offered into the market in a manner consistent with existing rules. Such a plan might be preferable to some consumers, whether that outcome is measured in terms of overall cost savings, budget predictability, hedging against market conditions, incentivizing reduced consumption, or some other consumer preference," PUCO said

"Juxtaposed against the benefit of consumer choice is the consumer protection associated with the early marketing restrictions that the waiver encompasses. In considering this aspect of the waiver request, we must consider the feasibility of Applicant’s proposed business model as it relates to the provision of requisite data as described by Applicant. There is no reason to waive consumer marketing protections unless Applicant demonstrates a reasonable basis for why its product requires the waiver," PUCO said

"At this time, we conclude that Applicant has not shown good cause for the requested waiver. The specific price comparison information that is required to be incorporated in marketing materials and updated on the EnergyChoice Ohio website is a critical consumer protection aspect of Ohio’s CRES choice program. In order to receive the requested waiver, Applicant must demonstrate that the marketing and nonconforming pricing of its services as described in its business model outweighs the negative impacts on consumer protections provided for in Ohio Adm.Code Chapter 4901:1-21. We find that Applicant’s proposed business model currently fails to justify the requested waiver, as more fully described below," PUCO said

"Applicant’s proposal to offer individualized pricing based on actual historic customer load and usage presupposes reliance on hourly interval data reported by an electric distribution utility to PJM for settlement purposes. As of the date of this decision, this information is not yet available to Applicant or any other CRES provider. Accordingly, Applicant is currently unable to offer any meaningful customer-specific, algorithmic pricing options that would justify the requested marketing waivers. Absent the ability to make marketing offers based on customers’ actual historic electricity load and usage, there is no basis for diminishing the consumer protections from deceptive, unfair and unconscionable marketing practices that safeguard consumers’ abilities to make informed decisions about CRES," PUCO said

"While unique in its described approach toward conservation incentives and customer budgeting, Applicant’s proposal does not provide for the required price comparison information that benefits customers when initially considering CRES choices. Further, the significance of the lack of price comparison is heightened by Applicant’s purported need to access specific customer account and usage information in excess of the information that marketers already receive in order to prepare individual rate proposals prior to offering price information to proposed customers. Ohio Adm.Code 4901:1-10-24(E)," PUCO said

"In disapproving Applicant’s current waiver request, we reserve the right to revisit this issue in the future. Through the integration of advance metering equipment, it is reasonable to conclude that the information needed to make meaningful customer-specific, algorithmic offers may soon be available for Applicant’s intended use. Advanced metering equipment that measures individual customer load and usage in a manner that Applicant purports to consider for rate offering purposes is being widely deployed across the state. It is reasonable to conclude that the granular customer-specific information that Applicant requires to tailor its rate offers may be available at a future date. Assuming that occurs, the Commission may re-evaluate the consumer protection analysis provided in this decision. Moreover, we may also re-evaluate the criteria required for posting a residential offer on the EnergyChoice website (Ohio Apples-to-Apples chart) in regard to a re-filed waiver application should Applicant choose to propose an otherwise acceptable pricing alternative that is offered on a non-volumetric basis relating to criteria other than the individualized usage data that Applicant purports to presently require. Accordingly, Applicant is authorized to file another request for waiver of the marketing considerations described herein in the future should the customer-specific data necessary to implement its marketing business plan become available. Until such time as that customer usage data is available to Applicant, we decline to grant the requested waiver as proposed," PUCO said

Commissioner Daniel R. Conway dissented.

Among other things, Conway took issue with the Commission's emphasis that calculation of a flat bill price as proposed by Astral would be inappropriate without PJM interval settlement data

"Nor do I think that we should reject the Applicant’s waiver request based on a belief that its proprietary algorithm is not an adequate tool for the Applicant to rely upon to develop its customer-specific flat per-month rate. The adequacy of its algorithm to produce price offers that are good enough to implement its business model is a judgment that, in my view is squarely within the Applicant’s bailiwick, not ours. In that regard, I don’t believe it is accurate to interpret the Applicant’s request, which the Entry does, as depending upon having access to historical PJM load and/or usage data that is specific to prospective Ohio customers in order to develop its flat per-month rate offers. As I read the filings that Applicant has made, the customer’s historical retail billing information included in his/her past bills, whatever that includes, will be sufficient for it to run its algorithm. In any event, if the Applicant’s algorithm produces rates that are unattractive to prospective customers (because, for example they are too high, coupled with other more qualitative benefits that are not enough to offset the cost), the competitive market and shopping customers will turn their thumbs down on the product. If the rates are too low to meet the Applicant’s profit requirements, it will have to make adjustments to its algorithm, make changes to it wholesale power procurement approach, etc., or exit the market," Conway said

Earlier (10/7):

The Public Utilities Commission of Ohio today denied, without prejudice, a petition from Astral Energy, LLC for a waiver of a rule requiring the specific listing of the rate to be charged per month in marketing materials that accompany a contract, for its flat bill product

A written order was not available as of publication time. This story will be updated Thursday upon issuance of such order

As exclusively reported by EnergyChoiceMatters.com (story here), Astral Energy, LLC filed a petition with the Public Utilities Commission of Ohio asking PUCO to waive application of Rule 4901:1-1-21-05(A)(4) with regards to Astral’s "Ultimate Power Plan" (UPP), which is a flat bill product

See background on the specifics of the product and waiver request in our prior stories linked below

Astral petition

PUCO Staff recommendation to deny petition

Under Astral’s UPP, the customer pays a flat-rate dollar amount per month for competitive retail electric service (CRES) for a six month contract period. Astral determines the customer’s monthly flat-rate price based on a proprietary algorithm that analyzes the customer’s historic usage, peak vs. off peak usage, and other factors. Thus, the flat rate charged is unique for each UPP customer.

In its original waiver petition, Astral said that the mechanics of signing a customer up for a UPP plan work as follows: a prospective customer first contacts Astral to request a quote for a UPP plan. Astral obtains permission from the customer to access the customer’s generation usage history. Astral then uses its proprietary algorithm to determine the flat-rate UPP offer, which typically takes 48 hours to generate. Astral contacts the customer with the flat-rate UPP offer and provides the customer with a proposed UPP contract with the flat-rate monthly dollar amount to be charged specifically listed. The customer then decides whether to accept the offer and execute the proposed UPP contract or to decline the offer. If the customer executes a UPP contract, once its six-month term has expired, the customer may choose to drop or switch service from Astral Energy without penalty or fee.

Astral noted that Rule 4901:1-1-21-05(A)(4) provides that each competitive retail electric service (CRES) provider that offers retail electric generation service to residential or small commercial customers shall provide, in marketing materials that include or accompany a service contract, sufficient information for customers to make intelligent cost comparisons against offers they receive from other CRES providers. By rule, offers shall at a minimum include, for flat-monthly rate offers, "a specific listing of the rate to be charged per month for the duration of the contract."

Astral sought a waiver due to the requirement for this "specific listing of the rate to be charged per month" with regards to marketing materials. Such marketing materials are provided before Astral obtains permission from the customer to access the customer’s generation usage history, which as noted above is used to generate a customer-specific offer that is then communicated to customers via a proposed UPP contract with the flat-rate monthly dollar amount to be charged specifically listed therein, Astral said

Astral has said that while the UPP is a flat-rate offer, by the nature of the program the flat-rate charged can be different for each customer. "Thus, it is not possible to identify a specific dollar amount in marketing materials for the UPP as Rule 4901:1-1-21-05(A)(4) requires. In addition, due to the number of factors that Astral’s propriety [sic] formula uses to determine the flat-rate offer, it could be misleading to provide a dollar amount in marketing materials that is identified as an 'average household' price," Astral said

At today's PUCO meeting, Commissioners voted to deny the sought waiver

PUCO Chair Sam Randazzo stressed that the Commission's action was without prejudice, and said that the Commission is trying to signal its interest in innovation while equipping customers with information to evaluate offerings

Randazzo said that there is nothing wrong with a flat monthly charge product, but that customers must have the information to determine what they're paying for the service (generation supply) versus the "insurance" associated with the flat bill offering

Commissioner Lawrence Friedeman also stressed that PUCO's order is not intended to be a blank prohibition on flat monthly bills and that 4901:1-1-21-05 addresses pertinent requirements for products

Case 18-743-EL-WVR

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