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Regulator's Staff Concludes That Retail Supplier Residential Prices Are "Overpriced And Harmful"; Proposes Conditions On Choice

Proposals Include Supplier Rate Caps, Restricted Access To Utility Consolidated Billing

February 10, 2023

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Copyright 2010-21
Reporting by Paul Ring •

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Products from retail electric suppliers to residential customers in Connecticut are, "both overpriced and harmful to residential customers," the Office of Education, Outreach, and Enforcement (EOE) of the Connecticut Public Utilities Regulatory Authority (Authority) said in an EOE report

EOE's report comes in a PURA proceeding investigating supplier rates pursuant to Conn. Gen Stat. § 16-245(a), which states that PURA has the authority to condition an electric supplier's license and access to the systems and billing of the electric distribution companies on terms the authority determines to be just and reasonable, including, but not limited to, proof that the electric supplier's products are not overpriced or harmful to residential customers

EOE's report included the results from a consultant's report prepared for EOE (results discussed further below). In brief, the consultant's report said that during the five years analyzed (between 2017 and 2021), households paid in total $150 million more for electricity under retail supplier service than they would have if they had they purchased standard offer service. On average, between 2017 and 2021, the aggregate annual amount paid by shopping consumers in excess of the standard offer rates was $30.2 million, the consultant's report said

EOE said that the data shows that suppliers’ prices are frequently higher than standard service, causing residential customers to overpay for electric supply, and that the data, "demonstrated harm it [choice] has caused the majority of customers over multiple years."

The consultant's report recommends advocating for a legislative change to end the residential retail third-party market.

While EOE's report says that such a change would be understandable, EOE's report does not specifically propose ending all residential choice

EOE instead concludes that, "it is possible that rather than eliminating the market, the Authority may impose conditions upon it that ensure residential customers contracting with suppliers always benefit."

"As a result of the consistent overpayment by residential customers contracting with suppliers, the supplier market requires conditions to protect customers from the harm resulting from overpaying for an essential service," EOE said

"The continued overpayment for electricity supply drains customers and communities of finite financial resources and renders Connecticut’s already high electric prices unbearable. The market has demonstrated that without regulatory intervention it is unable to function in a manner that does not harm residential customers and, as a result, the Authority must impose conditions to ensure the market inures to the benefit of residential customers. Customers should be able to trust that when they engage with a market the General Assembly created solely for their benefit they will actually see that benefit and not have to be constantly vigilant for harm lurking around every corner," EOE said

EOE said that, "One possible condition the Authority could impose would be to restrict suppliers’ access to EDC billing systems (i.e., suppliers could not participate in consolidated billing) unless they charge residential customers rates equal to or less than the standard service rate."

Under this option, dual billing would still be allowed

EOE said that it appears that PURA could adopt a limit on supplier access to UCB in the current investigation proceeding without a contested case, as, "Conn Gen. Stat. § 16-245(a) specifically refers to such a condition and ... the statute does not require a hearing, and thus does not require a contested case, to implement this condition," EOE said

EOE said another condition the Authority could impose would be to restrict suppliers’ rates charged to residential customers to be equal to or less than the standard service rate (regardless of whether direct or consolidated billed).

"A variation of this condition would be that the Authority could restrict suppliers’ rates to being less than 10% above the standard service rate. Although the Authority has expressed reservations regarding VROs [voluntary renewable plans], a 10% cap would allow for the purchase of RECs to support VROs," EOE said

"The Authority also could require that suppliers file for approval of any rates greater than the standard service rate and justify charging greater than standard service in that filing. Until approved, the supplier could not charge the rate in question," EOE said

"Any of these suggested conditions would allow suppliers to continue to function and would permit the supposedly beneficial rates that REAL finds in its report to continue. Furthermore, if the Authority restricted only access to consolidated billing, suppliers would be unharmed because they would still be allowed to charge any rate they chose, and thus could recover through their rates their costs of billing. If suppliers argue such a limited condition is untenable, the Authority must consider how just or reasonable it is to continue a supplier market that cannot function unless all ratepayers subsidize its billing, payment, and collections," EOE said

"The Authority could impose any of these conditions on the entire residential market, hardship and non-hardship alike. Because of the Hardship Decision, there is no data on hardship customers contracting with suppliers after July 2020; however, this docket does contain data on low-income customers throughout the entire five years. Many of those customers who were in low-income territories in the initial years evaluated might have been designated hardship and been removed from their supplier by the latter years evaluated. Despite this, the data still showed that after the Hardship Decision low-income communities continued to be impacted by overpriced supplier prices. In the only full year of data available after the Hardship Decision, the premium paid by low-income communities increased. The data in the docket showed that suppliers were not serving low-income communities any better after the Hardship Decision than before; if anything, their situations relative to suppliers became worse," EOE said

"Based on the data in this docket the Authority could continue to impose the restriction first imposed in the Hardship Decision [i.e. hardship customers must take default service] or it could lift the restriction, impose conditions noted herein on the supplier market, and allow all customers to participate in the market regardless of their hardship designation," EOE said

"Unless the Authority caps supplier prices at the standard service rate, and imposes that cap relative to each new standard service rate, EOE advocates that the Authority not lift the restriction against hardship customers contracting with a supplier," EOE said

"[T]he Authority should impose one of the conditions recommended herein or other conditions it deems will ensure the supplier market does not harm any residential customer," EOE said

EOE said that a comparison to current default service rates would not alter its recommendations, and said that amenities associated with suppliers’ rates do not offset the overpayment

Concerning such amenities, EOE said, "Presuming the suppliers’ responses were accurate, the value of the amenities for the five years was only approximately $7.5 million. Seven and a half million dollars in amenities offsets only a fraction of $151 million in overpayment. The data shows amenities simply do not explain overpayment."

Among other things, the consultant's report states:

• On average, between 2017 and 2021, the aggregate annual amount paid by consumers in excess of the standard offer rates was $30.2 million.

• During the five years analyzed, households paid in total $150 million more for electricity than they would have had they purchased standard offer service.

• Although some bills show supplier rates below EDC rates, "far more" bills show supplier rates above EDC rates

• In 2021, 70 percent of bills included supplier rates above EDC rates, and the average overpayment associated with these bills was $19.21 per bill, almost three times as great as the average savings of $6.80 per bill for the 30 percent of bills with supplier rates below EDC rates.

• Over the entire five-year time frame, on average, approximately two-thirds of bills showed supplier rates above EDC rates and the average overpayment associated with these bills was $18.91, more than twice the average savings of $8.57 for the minority of bills with supplier rates below EDC rates.

• A detailed analysis of all 8,256,028 bills associated with contracts of terms between 12 and 36 months rendered by EDCs on behalf of suppliers between January 2017 and December 2021 (6,124,192 in Eversource territory and 2,131,836 in UI territory) shows a net overpayment for these approximate 8 million bills of approximately $56 million -- in some months some consumers saved under these contracts, but on balance, the losses vastly exceeded the savings.

Docket 18-06-02RE01


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