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PSC Staff Propose Treatment Of Energy Assistance Customers On Existing Retail Supply Contracts As New Prohibition On Such Service Approaches

Staff Notes Challenges In Requirement That Rate Be Lower Than SOS For Entirety of Contract

July 12, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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Maryland PSC Staff have filed comments concerning implementation of a 2021 law that prohibits retail electric and gas supplier service to energy assistance customers, outside of a PSC-approved plan that is less than SOS

See background on the relevant law, Section 4-308(b)(1) of the Public Utilities Article (2021 Laws of Md. Ch. 637.), here

As previously reported, Section 4-308 provides that:

"1) Beginning July 1, 2023, unless the Commission has approved the supply offer in accordance with subsection (a) of this section, a third-party retail supplier may not offer to:

"(i) provide electricity or gas to households in the State that have received energy assistance during the previous fiscal year;

"(ii) renew a contract to provide electricity or gas to households in the State that are enrolled in an energy assistance program; or

"(iii) charge a termination fee to households in the State that have received energy assistance during the previous fiscal year.

"(2) An approved supply offer from a third-party retail supplier shall include a commitment, for the entirety of the term of the supply offer, to charging at or below the standard offer service rate or gas commodity rate for customers receiving energy assistance. "

Staff does not believe a formal rulemaking is needed, but did provide draft rule language to the extent the Commission disagrees

Staff stated that, "It is Staff’s view that the language of Chapter 637 is clear."

Staff opposed a proposal from OPC which would preclude the continuation of existing retail supplier contracts with energy assistance customers

Staff said that such proposal, "appears to violate the Constitutional prohibition against the impairment of contracts."

"The Commission should not attempt to truncate the duration of existing contracts, although it could preclude their renewal," Staff said

Staff said that, should the Commission believe that a rulemaking is appropriate, "Staff believes it may be helpful to clarify the provision of Chapter 637 that states '[a]n approved supply offer from a third–party retail supplier shall include a commitment, for the entirety of the term of the supply offer'."

"In particular, Staff would ask the Commission to consider whether regulations are needed to explicitly state that the rate must be at or below the SOS or supply service rate each month of the contract term," Staff said

Though not discussed in Staff's narrative comments, Staff's proposed rules indicate Staff agrees with OPC's concern about the statute's emphasis on prohibiting service to a customer receiving energy assistance in the prior "fiscal year", which would exclude customers who become energy assistance recipients after the start of a new fiscal year

Staff's proposed rules would explicitly prohibit service to customers currently on energy assistance outside of an approved plan

Staff's proposed rules provide that a utility shall drop a customer from its current supplier, "when, on and after July 1, 2023, the customer is known to be receiving energy assistance or to have received energy assistance in the previous fiscal year, at the expiration of the customer’s existing contract, unless the customer’s supplier can demonstrate that the customer is being served pursuant to a supply offer approved by the Commission."

Staff further proposes rule language stating that, "On and after July 1, 2023, a supplier may only provide electricity to an energy assistance household pursuant to a contract that has been approved by the Commission and that guarantees a rate that is at or below the standard offer service price for the entirety of the contract term."

Staff further observed the following regarding the requirement that the rate be lower than SOS: "Another difficulty for successful supplier participation is the variableness of default utility rates, especially for gas commodity. As required by the law, any supplier approved to make low income offers, must provide service at or below the rate of the default price of the commodity being provided. Today, for electricity, residential SOS rates change every six months, with prices that are based on rolling two year contracts. Suppliers who participate in the electric program will need at a minimum to include contract language that permits them to modify their rates if they engage in contracts that overlap a change in SOS."

"This issue may be even more burdensome for gas suppliers and will require COMAR waivers. Today Baltimore Gas and Electric Company ('BGE') and Washington Gas Light Company ('WGL') update their natural gas prices monthly at the beginning of the month. Staff notes that there is little forewarning of the change in rates. Additionally, BGE and WGL each have a different method for setting their commodity rates, and each company engages in different procurement practices. This means the suppliers will have little to no insight as to what prices they may need to adhere to when offering contracts to energy assistance households. Also due to the monthly variability of the default gas commodity price, variable contracts are likely the only viable option for suppliers to reliably meet the requirements that supplier offers must be below the default commodity price. This would likely require a waiver of COMAR, as suppliers are required to give customers 12 days advance notice before changing their rates under a variable contract. This is appropriate as gas suppliers currently are held to stricter notice requirements than gas utilities for changing their rates, and given that any change in the gas commodity rate must be at or below the rate for default service in the service territory," Staff said

Staff also said, "In the alternative the Commission could consider interpreting 'at or below the ...gas commodity rate...' as the average rate for gas commodity for the applicable gas utility for one year since gas contracts are more usually fixed price and fixed term."

Staff recommends that the Commission issue a notice to all licensed suppliers explaining the requirements of Chapter 637 together with a copy of the Bill itself.

"Staff further suggests that the notice make clear that any supplier in violation of the provisions of PUA § 4-308 may be subject to a civil penalty of up to $10,000 per day, per violation; revocation or suspension of the supplier’s license, or other lesser penalties as appropriate such as denial of participation in utility purchase of receivables or various types of monthly reporting," Staff said

PC 55

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