Regulator Says 25% Rate Increase Notice Requirement Applies To All Contracts, Not Just Variable Rates

July 12, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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The Connecticut PURA issued a ruling stating that the 25% rate increase notice ("Form 4") which must be sent by retail electric suppliers to residential customers applies to all contracts, both fixed and variable

Vistra, citing extensive history from legislation and prior PURA decisions, had sought clarification from PURA that Form 4 need only be provided to legacy residential variable price customers. As more fully discussed below, Vistra expressed concern about the potential for customer confusion, given other, newer notice requirements as well as new deadlines for the submission of rates to the EDCs which apply to other contract types (e.g. fixed renewals), if Form 4 were applied to contracts other than variable rate contracts

PURA, however, clarified that the notice requirements (Form 4) enumerated in the Authority’s Final Decision, as mandated by Section 16-245o(g)(3) of the General Statutes of Connecticut (Conn. Gen. Stat.), applies to all residential customer contracts, whether fixed or variable.

"The Authority created Form 4 as a means for electric suppliers to notify residential customers of a twenty-five percent increase in supply rates pursuant to Conn. Gen. Stat. § 16-245o(g)(3), as amended by Public Acts 14-75 and 14-94. Recently, § 16-245o(g)(3) was amended by Public Act 21-117 (PA 21-117) and now states that: 'No electric supplier shall charge an electric generation service rate to a residential customer that is twenty-five per cent more than the original contract price or more than the first price term offered in the contract, without notifying such customer of the rate change thirty days before it takes effect. Any notification described in this subdivision shall be provided pursuant to the method agreed to by the customer in the contract and may include written notice through United States mail, electronic mail, text message, an application on a cellular telephone, or third-party notification service approved by the authority. The electric supplier shall maintain documentation of the original method of communication of the notice,'" PURA said

"The plain language of Conn. Gen. Stat. § 16-245o(g)(3) as amended by PA 21-117 does not differentiate between fixed and variable contracts. The Final Decision also does not make any such distinction. Therefore, the Authority clarifies that the notice requirement enumerated in Conn. Gen. Stat. § 16-245o(g)(3) applies to all residential customer contracts, whether fixed or variable," PURA said

PURA noted that recently adopted legislation (P.A. 21-117,) which makes existing residential variable rate contracts "null and void", does not change the Authority’s analysis (see more details on P.A. 21-117 here)

In its request for clarification, Vistra had stated, "If the Form 4 is used for automatic fixed price contract renewals, contrary to the clear legislative and regulatory intent ... customer confusion could occur given the bill redesign process now requires suppliers to provide the electric distribution companies with a customer’s next billing price 32 days in advance. There is a mismatch between this 32 day deadline to transmit the next billing price to the electric distribution company and the Form 4 timeline requiring transmission up to 20 days in advance (15 days in advance plus three business days in advance of the notification deadline). First, if a customer waits until right before the 32 day cutoff to make a decision to affirmatively select a new plan or subsequent to the 32 day cutoff makes a decision to move to another provider, a supplier may have already begun to process that same customer’s Form 4 notice to make sure it would otherwise have gone out on schedule. This creates confusion if the customer receives a Form 4 about their old plan around the same time they receive a welcome package with information about their affirmatively selected plan or a welcome package from another provider. Second, if a customer that hasn’t taken any action in response to the renewal notice, receives the Form 4, and then reaches out to the supplier to make a change, the 32 day cutoff has already passed and the customer is forced to either return to standard service or wait a billing cycle to effectuate their decision. Neither of these scenarios create the ideal customer experience and Vistra believes it was not the intent of the legislature or the Authority that the Form 4 would be generated in these fixed-to-fixed scenarios."

Vistra had said, "In the converse, if the Form 4 was not contemplated solely for consumers on variable price agreements, subsequent changes to the market have rendered the Form 4 largely obsolete. The clear legislative intent of the Form 4 notification was to educate variable price consumers and provide them with the ability to choose a new (fixed) price within the 15 days following receipt of the notice. Currently, due the 32-day cutoff created by the subsequent bill redesign process, the Form 4 notice no longer has the same effect. Prior to the bill redesign process implemented in December 2019, a United Illuminating customer had those 15 days following receipt of the Form 4 to prevent receipt of the higher price communicated in the notice by selecting a new price with their supplier (United Illuminating applied prices forward) and Eversource customers previously had 45 days from receipt of the Form 4 notice to select a new price from their supplier (Eversource applied prices retroactively). In either scenario a consumer receiving a Form 4 had between 15-45 days after receiving the Form 4 to take action and avoid receiving the price communicated in the Form 4."

Vistra had said, "Now due to the bill redesign changes, supplier prices are locked-in 32 days in advance and as a result, a consumer cannot avoid receiving the price communicated in the Form 4 and maintain their existing supplier. In other words, if a customer takes affirmative action to select a new plan with their existing supplier as a result of the Form 4, the new plan will not take effect on the next billing cycle (as it would be less than 32 days away) so the customer would be on a renewal term pricing for at least one billing cycle. The result is that in current practice, the Form 4 communicates more of an inevitability; it does not provide the level of choice it did when it was implemented by the legislature in 2014. The intent of the Form 4 could not have been to frustrate consumers by notifying them of a price increase, without providing adequate time to select another plan with that supplier."

Docket 13-07-18

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