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Regulator's Staff Issues Straw Proposal That Would Require Retail Suppliers To Send Notice To Customers For Any Rate Increase

Proposes Limitation On Low-Income Customer Products

May 19, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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Staff of the Massachusetts DPU as well as a group of competitive suppliers have filed straw proposals addressing various Tier II issues in the DPU's ongoing review of the retail energy markets (Docket 19-07)

The straw proposal addresses various issues scoped in a hearing officer memo from March (see background on the issues here)

Most notable is a proposed notice requirement for changes in monthly price products.

For monthly price products, Staff's straw proposal would require that suppliers must notify customers of all price increases, regardless of size of increase

Staff's straw proposal states that the notification should inform customers of the following:

• current price/upcoming price/effective date

• "action required" to avoid price increase

Staff said that the timing of the price increase notification must strike a balance between providing (1) customers with adequate time to take action, and (2) suppliers with flexibility to set upcoming price

Staff's straw proposal includes the following proposed language for the notice of rate increase:

As a customer of [Supplier Name], we purchase and supply [electricity/gas] on your behalf, while your [electric/gas] utility continues to deliver the [electricity/gas] you use to your home. The price you pay for supply is subject to change monthly.

Your price for the current month is [xx] cents per [kWh/therm]. Your price for the upcoming month will increase to [xx] cents per [kWh/therm]. Please contact us at [ ] if you do not wish to continue your service with us or to find out more about electricity supply products that we offer.

Under Staff's straw proposal, suppliers would be required to report twice annually on the number of customers whose initial contract calls for a monthly-price product (i.e. products for which the initial price is fixed for three months or less)

A group of suppliers also offered a straw proposal concerning customer access to monthly rate changes (rather than a notice), and proposed a notice requirement for prices exceeding a set threshold.

The Competitive Supplier Group proposes a requirement that suppliers be required to establish the following month’s variable price no later than 15 days before the effective date of such price. Such price should be promptly made available within the supplier organization to customer service representatives and on other resources containing prices (such as websites or customer portals).

Furthermore, the Competitive Supplier Group proposes a new requirement that any price increase of thirty percent (30%) or more must be sent to the customer not less than twelve (12) days in advance of the effective date. This proposal would ensure that consumers are provided a separate notice of significant price changes without creating excessive administrative burdens or customer notice fatigue, the suppliers said

"In addition, in order to allow consumers to take action in response to these notices as quickly as possible, the Competitive Supplier Group also supports adoption of accelerated switching -- currently a Tier 2 issue but not addressed in the Memorandum -- as an important customer-friendly consumer protection that should be expedited in this proceeding," the suppliers said

For monthly price products, Staff issued the following straw proposal for language on the Contract Summary Form.

The price you will pay is subject to change monthly, based on several factors including, but not limited to, market conditions and [supplier name]’s costs to provide energy supply service. The price for the first month of service will be [xx cents/dollars] per kWh. Prices for future months will be available on our website at [supplier website address]. These monthly prices do not include the price that your electric utility will charge you for the delivery component of your electric service.

Low Income Customers

For low income customers, Staff's straw proposal would not propose capping the rate charged to low-income customers, as Staff had done in an earlier proposal (see story here)

Rather, the Staff straw proposal would provide that low-income customers must be served on the following product:

• Fixed-price product only

• No automatic renewal

• No early cancellation (or other) fees

Staff Access To Sales Recording

As previously reported, Staff is seeking a process for proactively requesting sales recordings from suppliers, rather than in reaction to consumer complaints (as previously reported, Staff had sought near real-time access to such sales recordings)

Staff offered the following Straw Proposal concerning sales recording access:

Focus on enrollments via door-to door and telemarketing (marketing channels that appear to be prone to problematic marketing practices)

• telemarketing -recordings of both sales and TPV calls

• door-to door -recordings of TPV calls

Step 1 - Identify suppliers (on a timely basis) that are enrolling customers through each marketing channel

• Staff proposes monthly reporting, by marketing channel and vendor

• In place of current bi-annual "interval" reporting of enrollments

Step 2 -Identify suppliers for further scrutiny

Step 3 - Request distribution companies to provide customer account information on customers served by supplier

Step 4 - Provide list of customer accounts for which supplier must provide recordings

• Within specified time period (3 business days?)

Customer Complaint Scorecard

Concerning a Customer Complaint Scorecard, Staff's straw proposal would limit the scorecard to residential electric consumers only

The scorecard would present information on the ratio of number of residential complaints against a supplier to the number of residential customers served by the supplier. Complaints would be based on those filed with the Department’s Consumer Division, including complaints resolved by the supplier "after the fact". The scorecard would not include complaints related to municipal aggregation

The complaint data would be presented as the ratio of # complaints per 1000 customers served. Suppliers that average less than 1,000 customers per month would be excluded

Wholesale Index Price Benchmark

As part of consideration of monthly price products, Staff had requested that the supplier group develop a straw proposal for the method by which a monthly wholesale market cost index may be calculated for the electric and gas markets, which could allow the Department to better understand the extent to which competitive suppliers’ monthly prices track wholesale market costs.

In response, the supplier group said, "While the establishment of a Wholesale Market Price Index may appear to be straightforward at a high level, it is far more complex and nuanced when intended to be used a [sic] benchmark or proxy to compare competitive monthly variable price offerings."

The supplier group noted that following costs are billed by ISO New England to electrical load:

• Energy costs, including costs associated with congestion and losses;

• Capacity costs, including costs associated with Installed Capacity ('ICAP') and the Forward Capacity Market ('FCM');

• Costs for ancillary services related to the supply of energy and capacity (e.g., spinning reserves a/k/a operating reserves, Real Time Reserves, etc.);

• Daily Reliability Must Run ('RMR') charges not associated with any agreements (a/k/a RMR uplift);

• Regulation (a/k/a automatic generation control);

• Locational Forward Reserve ('LFR') costs;

• Credits for Financial Transmission Rights ('FTR') auction revenues (a/k/a Auction Revenue Rights);

• ISO Schedule 2 costs;

• ISO Schedule 3 costs;

• ISO credit insurance costs;

• ISO participant default costs;

• GIS administration costs; and

• ISO Load Response costs.

"In addition, pricing in the wholesale electricity marketplace is calculated at individual generating units, about 1000 load nodes (specific points on the transmission system), eight (8) load zones (aggregations of load nodes), and the Hub (a collection of locations in central New England where little congestion is evident). In Massachusetts, there are three (3) distinct load zones: NEMA (Northeast Mass.); SEMA (Southeast Mass.); and WCMA (Western/Central Mass.)," the supplier group said

The suppliers further said, "it is important for the Department to appreciate and recognize that retail suppliers need to maintain and pay for the 'corporate infrastructure' to provide innovative products and quality service to retail end-use customers. This infrastructure includes highly trained sales and marketing personnel, utility operations, customer care and call centers, state of the art IT/digital platforms, legal and regulatory support, accounting, corporate overhead, etc. These costs required to sustain the supplier’s corporate enterprise as an ongoing concern also play a role in pricing strategy and are not addressed through a regulated cost of service pricing model like that employed by the distribution utilities."

Given the complexities noted above, the suppliers said, "instead of developing a Wholesale Market Price Index the Competitive Supplier Group recommends that the Energy Switch Massachusetts website describe, in a consumer-friendly manner, the various elements that comprise the retail price of energy, with the goal to further educate the customer. The Competitive Supplier Group further recommends that the Department establish a working group, chiefly comprised of retail suppliers, to review and develop these descriptions."

"If, with the complete understanding that it is not realistic (as detailed above) for a Wholesale Market Price Index to serve as a direct comparison to competitive supplier monthly pricing or as a proxy of such, the Department still wishes to pursue a Wholesale Market Price Index, the Competitive Supplier Group recommends that, at a minimum, the Department include the three principal pricing components of LMP, Wholesale Capacity and RPS/CES as a highly generalized 'benchmark.' For example, the Department could use the publicly available LMP at ISO-NE’s Hub; the Wholesale Capacity prices known and determined by ISO-NE’s FCAs; and an assigned, monthly cost factor related to the value of the annual RPS/CES compliance requirements. While this generalized benchmark may serve to assist the Department, because of the numerous other wholesale and retail components that ultimately go into the price charged to consumers, any such generalized benchmark will not and cannot provide a direct comparison to any given supplier’s retail price and will provide little (if any) value to consumers and, conversely, will likely only create consumer confusion and frustration," the suppliers said

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