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Regulator's Staff Floats "Eliminating" Incidental Residential Account (IRA) Designation

Staff Advocates "Altering Supplier Rates" -- Force Suppliers To Serve Customers At Rate Cap, Rather Than Having Customers Dropped To Default Service

August 14, 2023

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Copyright 2010-23
Reporting by Paul Ring •

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In response to a request for comments from the Connecticut Public Utilities Regulatory Authority (Authority or PURA) concerning a determination of the "appropriate limitations" with which all customer contracts with electric suppliers, entered into on and after a determined date, must comply, PURA's Office of Education, Outreach, and Enforcement (EOE) said that it would not oppose eliminating the incidental residential accounts (IRA) designation.

IRAs are accounts associated with a business contract but which are residential accounts (meters, etc) in the EDC's billing system. Typically, IRAs are not subject to various residential-only compliance requirements, such as the display of "next cycle" rate information on bills

EOE said of IRAs, "The prototypical example is the dean’s house on a college campus; however, based on the number of IRAs currently identified, it would appear IRAs encompass far more than deans’ houses."

"Other stakeholders might disagree, but EOE would not oppose eliminating the IRA designation, or at minimum exploring a way to limit it and/or a better way to accomplish its purpose," EOE said

EOE did not expound on what elimination of the IRA designation would mean, and if the accounts would be classified as residential (as they are in the utility billing systems), or if the accounts would be re-classified to reflect they are not residential account holders. However, taken at its most literal, elimination of the IRA designation suggests that the accounts would default to being treated as residential accounts.

EOE stated further concerning IRAs, "It appears with IRAs the exception eventually could be used to overcome the rule and, following the many interrogatories recently issued by EOE in Docket No. 06-10-22 and supplier licensing dockets, it appears IRA designations have proven difficult to tract correctly."

As previously reported, PURA invited stakeholder comment in the wake of the signing of Public Act 23-102, which states (in amending Conn. Gen. Stat. § 16-262o(m)), "The authority may initiate a docket to order all customer contracts with electric suppliers, entered into on and after a determined date, to comply with appropriate limitations the authority deems necessary."

Although the subsection in which this language appears generally relates to hardship customers, as previously reported, Public Act 23-102 no longer explicitly limits the "appropriate limitations" language to applying only to any PURA order, "pursuant to this subsection."

Public Act 23-102 also enshrined in statute hardship customers' ability to select a retail supplier, provided that the supplier's rate shall be at or below the standard service rate, "for the duration of the contracts."

As previously reported, PURA had also been investigating whether to apply limits to customer choice -- or to eliminate choice entirely -- pursuant to its authority under other provisions of statue (Conn. Gen. Stat. § 16-245(a)) [see background here, relating to whether supplier rates are overpriced or harmful, and setting just and reasonable terms for supplier access to EDC systems].

EOE said in comments to PURA that the legislature's adoption (under Public Act 23-102) of a rate cap for hardship customers, equal to the standard service rate, affirms that any supplier rate above the standard service rate is "overpriced".

EOE said, "Parties cannot expect the Authority, when applying Conn. Gen. Stat. § 16-245(a), to ignore the legislature’s guidance contained in its revision to Conn. Gen. Stat. § 16- 245o(m). Conn. Gen. Stat. § 16-245(a) allows the Authority to place just and reasonable restrictions on suppliers’ residential rates and to determine if suppliers’ rates for residential customers were overpriced and harmful."

EOE said that the fact that the legislature only placed, in statute, a price cap on hardship customers does not mean lawmakers did not empower PURA to adopt the same cap for all customers. Rather, EOE said, it reflects that lawmakers deferred the issue to PURA.

EOE noted that proposals, including from EOE itself, for a rate cap on all choice customers had been released prior to Public Act 23-102, and EOE said that, if lawmakers had desired that there would be no rate cap, except for hardship customers, then such language could have been included in Public Act 23-102

EOE said, "Before the Authority finished the docket making [a] determination [or proposed rate caps for all customers, or other reforms], the legislature clarified that rates for hardship customers are overpriced and harmful if they are greater than the standard service rate. That the legislature did not codify the same rate cap in Conn. Gen. Stat. § 16-245(a) as Conn. Gen. Stat. § 16-245o(m) does not mean that the legislature did not intend for the Authority to apply the same standard to both. Instead, it means that the legislature left the determination to the Authority’s discretion in Conn. Gen. Stat. § 16-245(a) but offered it clarifying guidance in the meantime in the form of ensuring a rate cap for hardship customers. The Authority is within its right to share the opinion of the legislature that the standard service rate is the appropriate cap and apply the same cap to all residential rates. The voluminous data in Docket No. 18-06-02RE01 supports a rate cap for all residential customers, EOE’s Report recommended one, and the legislature found the same to be advisable when revising Conn. Gen. Stat. § 16-245o(m). It is unreasonable to ask the Authority to ignore all of the evidence before it and the legislature’s judgment."

EOE stated, "If the legislature had not wanted the same cap on all residential rates, it could have revised Conn. Gen. Stat. § 16-245(a) at the same time it revised Conn. Gen. Stat. § 16-245o(m) to prevent the Authority from imposing a rate cap on all residential customers. It did not. Presumably, the legislature was aware the Authority had a docket open to examine all residential rates under Conn. Gen. Stat. § 16-245(a), was aware that the Authority would consider the rate cap the legislature applied in Conn. Gen. Stat. § 16-245o(m), and meant for the revisions in Conn. Gen. Stat. § 16-245o(m) to guide the Authority in this docket. One can view the revisions in Conn. Gen. Stat. § 16-245o(m) as the legislature removing the Authority’s discretion relative to hardship customers’ rates, allowing the Authority some discretion relative to the remaining residential customers’ rates, but highlighting the most logical path for the Authority to take. In this case, the most logical path is the one already recommended and considered in Docket No. 18-06-02RE01."

PURA had also invited comment on the costs of any EDC system changes to implement supplier rate caps or similar measures

In discussing such technical issues, EOE said that, when a supplier contract exceeds a new EDC standard service rate (the new cap), the supplier should be required to serve the customer at the lower, capped rate, rather than having the customer dropped to SOS

Further, EOE said that, when a rate cap is applied to a customer (replacing the contract rate with the lower EDC rate), but then the EDC rate increases above the original contract rate (which the supplier was prohibited from charging during the period the EDC rate was lower), then the supplier should be obligated to continue serving the customer, with the price now at the original contract rate, for the duration of the term

EOE said, "[T]he Authority must determine what occurs if suppliers submit a rate greater than standard service for a customer that is subject to a price cap. EOE advocates that the EDCs’ systems leave the customer with the supplier but lower the rate submitted by the supplier to the standard service rate."

EOE said, "EOE believes placing customers in a revolving door of contracting with a supplier and returning to standard service would produce a negative customer experience (and immense customer confusion). Everything that is designed in this docket should attempt to have the least impact and greatest benefit possible on the customer. EOE believes building a price ceiling at the standard service rate into the EDCs’ billing systems and altering supplier rates to be within that price ceiling produces the least customer impact."

EOE said, "This docket also must consider the interaction of a long-term supplier contract and the standard service rate. For example, if the 36-month contract rate is 15 cents and the standard service rate is 18 cents when the contract starts, then the contract rate prevails. If the standard service later lowers to 12 cents, then presumably the standard service rate prevails; however, it is unclear what happens if the next standard service change increases the standard service rate to 16 cents. Presumably the contract rate applies again[.]"

The the Retail Energy Advancement League (REAL) submitted comments to PURA arguing that, per PURA's cite to the amended Conn. Gen. Stat. § 16-262o(m) in issuing a notice of the proceeding and request for comments, "the scope of this proceeding to be to determine any appropriate limitations on electric supplier contracts with hardship customers required for electric suppliers to serve such customers at or below standard service rates starting on January 1, 2024," and thus the scope is not the broader market-wide review of choice.

In addition to citing its previously reported data showing the benefits of electric choice, REAL noted that savings have continued in 2023

REAL said, "For instance, the Office of Consumer Counsel’s most recent Fact Sheet shows that in June 2023, nine out of ten residential supplier customers paid less than standard service with an aggregate savings of over $20 million. From July 2022 to June 2023, residential customers saved, in the aggregate, over $100 million."

Concerning the price cap for hardship customers, REAL made note of timing issues, both in terms of Standard Service pricing terms (Jan-Jun & Jul-Dec) and with respect to the length of a supplier contract

REAL said, "The appropriate limitations the Authority may place on hardship contracts through this proceeding should recognize the market dynamics that do not squarely align supplier offers with the six-month timing of standard service rates (beginning January and July) when taking into account how to manage the price cap on supplier hardship products."

REAL said, "REAL encourages the Authority to develop processes and requirements through this proceeding that allow for supplier products to hardship customers that are both longer in duration than the known standard service rates and that allow for the price to, at times, trend above standard service rates as long as savings are achieved over the duration of the contract. REAL believes this is where the highest savings can be achieved for customers, as shown in the REAL Report. To require suppliers to provide products that must always be below standard service rates and/or are only for short durations to track standard service periods would severely limit suppliers’ ability to provide customers with the most advantageous prices through long-term hedging strategies to reduce inflation and uncertainty that the rest of the residential market has realized."

REAL cited, "the importance of allowing savings to be achieved over the duration of the contract and not necessarily at the moment of enrollment."

In terms of identifying hardship customers, REAL said, "If suppliers need to advertise a 'hardship' product on its website, non-hardship customers may try to improperly enroll. Sorting out the correct price of a non-hardship customer that tries to enroll on a hardship product online may cause customer frustration and delays in service that can be avoided if suppliers were not required to have their hardship products below standard service rates each and every standard service period."

Docket 18-06-02RE02


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