Regulator's Staff Pushing To Require Retail Suppliers To Serve Customers Below Cost, Says Can't Refuse Service To Customers Now Subject To Price Cap -- EnergyChoiceMatters.com

Regulator's Staff Pushing To Require Retail Suppliers To Serve Customers Below Cost, Says Can't Refuse Service To Customers Now Subject To Price Cap

October 19, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Office of Education, Outreach, and Enforcement (EOE) of the Connecticut PURA is seeking to require retail electric suppliers to serve hardship customers at a rate at or below the standard service rate -- regardless of whether such rate is below the supplier's actual cost to serve the customer, and with suppliers not permitted to cease service to hardship customers in such cases

As previously reported, Public Act No. 23-102 provides that hardship and other defined customers, on and after January 1, 2024, "may enroll with an electric supplier, provided all customer contracts with electric suppliers, for rates effective on and after January 1, 2024, shall be at or below the standard service rate for the duration of the contracts."

The utilities have proposed mechanisms to reject supplier enrollments of hardship customers at a rate exceeding the standard service rate, and to monitor supplier rates charged to hardship customers daily and to return customers to standard service if the supplier is charging the hardship customer a rate that is above the standard service rate.

However, EOE said that it has several "concerns" with the EDCs' proposal

EOE said, "returning the customer to standard service could ultimately harm the customer depending on the contract length and rate. For example, presume the customer entered into a 36-month contract in February for a 12 cent/kWh rate and at the time they entered into the contract the standard service rate was 14 cents/kWh. If the standard service rate decreased to 10 cents/kWh in July, the EDCs would drop the customer to standard service, which would cancel their supplier contract; however, if the standard service rate then increased the next January to 16 cents/kWh, the customer would remain on standard service, would be paying more than their contract rate, and, since market conditions change, a contract for 12 cents/kWh might no longer be available."

As previously reported, EOE favors a mechanism under which, when a customer becomes a hardship customer mid-contract, the supplier is required to still serve the customer, at a rate at or below the standard service rate. When the customer's hardship status ends, the normal contract rate would resume (the normal contract rate would also apply if it is less than the standard service rate).

EOE now further says that suppliers, "must find a way to serve hardship customers and comply with the statute."

EOE says that suppliers cannot choose to not serve hardship customers. While EOE acknowledges that dropping a hardship customer to standard service may "comply" with the specific rate provision that suppliers may not contract with hardship customers for a rate above the standard service rate, EOE argues that suppliers are still obligated to serve hardship customers

EOE said, "EOE heard in the working group suppliers mention not contracting with hardship customers. This is not an option. Conn. Gen. Stat. § 16-245r prevents suppliers from refusing service to a customer based on their hardship status."

EOE's comments filed with PURA did not include an in-depth discussion or analysis of Conn. Gen. Stat. § 16-245r

Conn. Gen. Stat. § 16-245r provides, "No electric supplier shall decline to provide electric generation services to a customer for the sole reason that the customer is located in an economically distressed geographic area or the customer qualifies for hardship status under section 16-262c." [emphasis added]

Were a supplier to refuse service to a hardship customer due to EOE's proposal that the supplier serve the customer at a potentially money-losing rate (rather than dropping the customer to default service), it would appear reasonable to conclude the supplier is not "solely" refusing service to the hardship customer due to the customer's hardship status

In any case, EOE proposes the following: "Since suppliers must find a way to serve hardship customers and comply with the statute, EOE wonders if suppliers could add a clause to all residential contracts providing that the customer would be served at the fixed rate indicated in the contract unless they received a hardship designation, at which time the customer would be charged the lesser of standard service or the contract rate. As noted, however, it would be necessary for this clause to be in all residential contracts because a customer’s hardship status could change during the contract term."

"If suppliers had contracts that permitted a customer to be charged the lesser of the fixed contract rate or the standard service rate, then the EDCs could program IT changes that perform a series of queries for each billing cycle. The first query would be whether or not a customer is hardship. If the customer is not hardship, then the query would cease and the EDC would charge the rate submitted by the supplier. If the customer is hardship, then the EDC would query if the supplier’s rate is equal to or less than the standard service rate. If it is, then the EDC would charge the supplier’s rate. If it is not, then the EDC would charge the standard service rate, but would leave the customer with the supplier, and would reimburse the supplier for only the standard service rate charged (i.e., purchase of receivables and the process of forwarding customer payments to suppliers would reflect the rate charged, not the contract rate). EOE believes this query system would permit a hardship customer to remain with a supplier while receiving a rate equal to or less than the standard service rate for the entire length of the contract, thus honoring the statute," EOE said

However, EOE's proposal which would have suppliers rates toggling between the contract rate and, if necessary, a capped rate, runs head-on into another statutory provision -- the prohibition on variable rates

EOE addresses the variable rate issues thusly: "EOE believes that suppliers may include such a [rate toggle] clause without violating the prohibition against variable rates. First, EOE believes that a contract may include conditions that allow the contract to remain legally compliant. Second, the Authority has determined in a decision that a supplier rate must be effective for at least four months to remain fixed. If necessary, the Authority could permit a rate to change in less than four months in this limited circumstance."

"EOE believes that what it proposed, though more complex, better complies with the statute. EOE notes, however, that either the EDCs’ proposal or EOE’s alternative both become easier for the EDCs to manage if all customers have a Rate Cap rather than only hardship customers. Placing a Rate Cap on only a portion of customers requires the EDCs’ systems to perform more complicated queries and monitoring. A customer may move on and off a hardship designation, which requires a constant query as to whether or not every customer of a supplier has the designation. On the other hand, that query would be removed if every customer’s rate were capped at the standard service rate, which would produce a simpler system, far easier for EDCs and suppliers to administer and for customers to understand," EOE said

Docket No. 18-06-02RE02

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