Pennsylvania ALJ: PUC Lacks Authority To Determine "Reasonableness" Of Rate Charged By Retail Supplier

November 3, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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An initial decision from a Pennsylvania PUC ALJ in a customer complaint proceeding against Energy Plus Holdings, LLC would find that the Pennsylvania PUC, "does not have the authority to determine the reasonableness of a rate charged by an Electric Generation Supplier."

Although the ALJ's initial decision cites precedent in which such a finding is implicit, the specific finding that the PUC lacks the authority to determine specifically the "reasonableness" of an EGS rate is novel.

The initial decision is not final and parties may file exceptions to the initial decision

In the case, the complainant, a former customer of Energy Plus served under a variable rate contract, alleged that the variable rate increased from $0.089/kWh in August 2012 to $0.144/kWh in April 2014.

The complainant alleged that the rate was not "variable" but rather was, "gradually and steadily increasing and then remained constantly high."

Among other defenses, Energy Plus in various filings said that the changes in the complainant's variable prices were consistent with the terms and conditions of service, which stated that the variable prices would reflect the cost of electricity, including energy, capacity, settlement, ancillaries, related transmission and distribution charges and other market-related factors plus all applicable taxes, fees, charges, costs, expenses and margins. Energy Plus also denied that the complainant's variable price increased without explanation

Energy Plus also argued that the complainant made no factual averments about the marketing practices of Energy Plus and did not allege that any promises of savings were made during the sales transaction. Energy Plus noted that the complainant enrolled online and did not interact with a sales agent, and that the complainant made no claims that he was charged a higher price than permitted by the disclosure statement. Energy Plus further noted that, although the complainant alleges that he was 'overcharged' by Energy Plus, he offered no basis for that claim other than the fact that his variable price increased over the life of the account, which Energy Plus said was consistent with the terms and conditions of his contract.

Energy Plus also cited the PUC's 2015 decision in Office of Small Bus. Advocate v. FirstEnergy Sols. Corp., Docket No. P-2014-2421556, in which the PUC had said, "A review of this authority makes it clear that Commission jurisdiction does not extend to interpreting the terms and conditions of a contract between an EGS and a customer to determine whether a breach has occurred, or setting the rates an EGS can charge." Notably, the ALJ did not cite this decision in the ALJ's findings discussed below.

In summarizing the complainant's case, the ALJ said that the complainant's pleadings, "clearly indicate[] that he wants the Commission to review his pricing structure because he believes his rate was unreasonable."

"This Initial Decision dismisses the Complaint filed in this matter because the Commission lacks jurisdiction to determine the reasonableness of a rate charged by an Electric Generation Supplier," the ALJ said

The ALJ said that, "the Commission has addressed its authority over the rates charged by EGSs. In Review of Rules, Policies and Consumer Educ. Measures Regarding Variable Rate Retail Elec. Prod., Docket No. M-2014-2406134 (Order entered March 4, 2014) (Variable Rate Order), the Commission recognized that in early 2014 many EGSs had to increase their retail prices to customers in order to recover the higher wholesale electric energy costs they incurred in January, 2014. In the Variable Rate Order, the Commission noted that in many cases, the EGSs voluntarily absorbed losses in order to maintain long term contractual relationships with their customers. However, the Commission acknowledged that not all EGSs acted to mitigate the financial hardships experienced by their customers and some EGSs passed on the costs to their retail customers."

"The Variable Rate Order stated that the rates consumers pay in the retail electric market are governed by the terms of the contract with their EGS. The Commission emphasized that it was important for consumers in variable rate contracts to review the terms and conditions of those contracts to determine if they were at risk for large rate increases. Underlying this discussion in the Variable Rate Order is the acknowledgement by the Commission that it does not have jurisdiction to regulate the rates charged by an EGS or order a refund of unreasonable rates," the ALJ said

The ALJ noted that the complainant did not allege any violation for which the PUC has previously found it is authorized to issue refunds (such as cases of slamming or violation of PUC regulations such as not abiding by disclosure statement regulations). Note that the PUC's authority to issue refunds for violations of its own regulations was recently struck by Pennsylvania's Commonwealth Court (see story here)

"[S]ince the Complainant's Complaint requests that the Commission determine that the rate charged by Energy Plus was an unreasonable rate, and that he should receive a refund of what he believes he overpaid as a result of that unreasonable rate, Energy Plus' Preliminary Objections are sustained and the Complainant's Complaint is dismissed for lack of subject matter jurisdiction," the ALJ said

Docket C-2020-3021334

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