Pennsylvania ALJs Recommend Placing New Shadow Billing Chart On First Page Of Shopping Customer Bills

ALJs Would Revise Customer Referral Program So That Participants Are Dropped To Default Service At End Of Term, Absent Affirmative Choice

ALJs Endorse Less Frequent Default Service Rate Changes

September 3, 2024

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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Two Pennsylvania PUC ALJs have endorsed a contested settlement in PECO's default service proceeding that would, among other things, include a new comparison and chart of shadow-billed default service costs on shopping customer bills, and which would require customers in PECO's Standard Offer Customer Referral Program (SOP) to be dropped to default service at the end of the initial SOP term if the customer does not take any affirmative action at the end of the SOP term

The settlement, which had been first reported by EnergyChoiceMatters.com, was supported by, among other parties, PECO, the Pennsylvania Office of Consumer Advocate, and Pennsylvania Office of Small Business Advocate

See full details of the settlement here

Due to various terms of the stipulation, the settlement was opposed by the Retail Energy Supply Association (RESA) and NRG Energy

The ALJs, in a recommended decision, have proposed that the PUC adopt the non-unanimous stipulation without modification

In general, the ALJs found that RESA/NRG did not support with record evidence their opposition to various terms of the settlement, and that the adoption of contested terms as proposed in the settlement would be in the public interest

Shadow Billed SOS Costs On Utility Consolidated Bills

The ALJs would adopt without modification a provision of the settlement that would implement a monthly bill chart, to appear on the first page of utility consolidated bills, comparing the costs to shopping customers under their retail supplier versus the amount the customer would have paid under PECO's price to compare.

See an example of the settlement's proposed shadow billing comparison chart below (click image for larger example, or click here)

Among other objections, RESA had said that the shadow billing chart perpetuates the idea that default service is superior based only on an oversimplified price comparison. RESA had also called the comparison "misleading" and said that it would not provide a true apples-to-apples comparison.

The ALJs rejected the objections from retail suppliers, finding that, "There is no inherent or implicit judgment in showing the EGS [retail supplier] price a customer is paying for generation service and the additional benefits an EGS provides and default service charges for the equivalent amount of generation, nor is the billing format precluded in any way by the statutory language of Section 2807(c) of the Code[.]"

The ALJs further said that the shadow billing chart does not, "preclude an EGS from conveying the value of its product through on-bill messaging or any other communications the EGS wants to make with its customers."

However, the ALJs rejected a proposal from RESA that the PUC should direct PECO to consider providing to retail suppliers additional space on utility consolidated bills to allow retail suppliers to perform customer-specific messaging and to explain how the retail supplier's product is different from the default service rate

The ALJs also rejected RESA's proposal for a collaborative to address language and specific information and disclosures to be used in the shadow bill cost comparison

The ALJs concluded that, as proposed in the contested settlement, "PECO’s proposed bill presentment changes are vital to helping customers understand and evaluate, on an ongoing basis, whether their EGS prices are consistent with their expectations."

Standard Offer Customer Referral Program (SOP)

The ALJs propose to adopt changes to the SOP program, starting with SOP contracts executed after June 1, 2025, such that, for those SOP customers who do not make an affirmative selection at the end of the SOP term, the retail supplier must automatically transfer SOP customers to default service

The ALJs found that such drops to default service do not constitute "slamming" as argued by RESA, because the SOP program terms, at the time of enrollment, will inform customers that they will be returned to SOS absent affirmative action at the end of the term

The ALJs said that the changes to the SOP, "will encourage active customer choice while addressing record evidence presented by the OCA and TURN/CAUSE-PA witnesses regarding aggregate EGS charges over the last six years that exceeded PECO’s applicable PTC [price to compare] by more than $800 million."

The $800 million charges by retail suppliers in excess of default service, had been exclusively first reported by EnergyChoiceMatters.com, and relate to all shopping customers, not only SOP customers

"The changes to PECO’s current SOP agreed to as part of the Settlement carefully balance the interests of customers, participating EGSs, and the Commission’s guidelines in prior default service proceedings regarding standard offer customer referral programs," the ALJs said

Frequency Of SOS Rate Changes

The ALJs recommend adopting a change in the frequency of default service rate changes for residential and small commercial (under 100 kW) customers, by replacing the current 3-month fixed rates with 6-month fixed rates

The ALJs dismissed objections from retail suppliers concerning the decrease in SOS rate change frequency, noting that the PUC has adopted 6-month fixed default service rates at the six other large EDCs

Moreover, the ALJs noted that 99% of PECO's residential SOS supplies will be procured through various 12- and 24-month full requirements contracts all of whose end dates will align with the June 1 and December 1 default service rate change dates, with no contracts ending on September 1 or March 1 (the other current dates for SOS rate changes under the current quarterly rate change design)

"Since the contracts will change semi-annually, there is no reason to adjust rates quarterly. PECO will rely upon the spot market for up to 1% of supply. As OCA pointed out, PECO’s agreement to procure more solar energy, capacity and solar AECs through ten-year, fixed price purchase agreements may result in an offset against the spot purchases for the residential class," the ALJs noted

Use Of Term "Price To Compare"

In the proceeding, RESA had proposed a statewide investigation into default service messaging, with RESA proposing to cease the use of the term "Price to Compare", with the PTC term instead replaced by the term, "default service rate"

The ALJs found that RESA did not meet its burden to support the proposal, and agreed with other parties that the issue should not be addressed in a single utility's default service proceeding

CAP Customer Issues, Ban On Termination Fees

While this provision of the non-unanimous settlement was not contested, the settlement, as recommended for approval by the ALJs, does provide that, commencing with all residential retail supplier contracts executed after June 1, 2025, retail suppliers will not be permitted to charge early termination or other fees to any shopping customer that is transitioning into PECO’s Customer Assistance Program (CAP).

CAP customers may not be served by a retail supplier

The settlement provides that, when a shopping customer enrolls in CAP, PECO shall, "assist the CAP applicant with removal of the generation supplier in order to return to default service[.]"

Furthermore, settling parties agree that, in the next default service proceeding, PECO shall propose that, for a shopping customer who submits an application to participate in CAP, the submission of the CAP application shall serve as authorization by the customer for PECO to return the CAP applicant to default service

Capacity Proxy Price

The ALJs recommend use of a capacity proxy price in default service procurements if the PJM capacity rate is unknown at the time of the SOS auction, as proposed in the settlement

The ALJs noted that the PUC has approved capacity proxy prices on several occasions previously, and rejected assertions from RESA that a capacity proxy price is competitively unfair to retail suppliers

RESA had argued that the capacity proxy price insulates SOS suppliers from risk while not affording the same consideration to retail suppliers, leaving retail suppliers with a decision of either: ceasing forward service due to uncertainty, or offering retail contracts that may be under- or over-priced once the capacity costs are known

However, the ALJs said, "We find that RESA’s argument is undercut by the differences between the business models and contractual obligations of EGSs and wholesale default service suppliers, as well as EGSs flexibility to formulate and adjust competitive offers to address issues arising from delays in PJM capacity auctions."

Long-Term SOS Solar Contract

The ALJs rejected concerns from RESA concerning a long-term solar procurement by PECO for default service customers

RESA had raised competitive concerns with long-term contracts for AEPS compliance, noting that retail suppliers do not have guaranteed customers over which to recover costs. RESA cited a mechanism previously in place at two of the FirstEnergy Pennsylvania EDCs in which a long-term solar AEC contract was used to procure AECs for both default service and shopping customers, with costs recovered on a nonbypassable basis

The ALJs repudiated a mechanism that would relieve retail suppliers of any AEPS responsibility

"The resulting environment would eradicate competitive discipline, reward the underperformers in the marketplace, and disincentivize EGSs from creating innovative products and solutions to manage their load and associated risks for their customers," the ALJs said

Other Issues

Under the stipulation recommended for adoption, to supply residential non-shopping customers, PECO will continue to procure a mix of one-year (approximately 38%) and two-year (approximately 61%) fixed-price full requirements (FPFR) contracts, with six months spacing between the start of contract delivery periods.

The remaining 1% of residential default service would be supplied by PJM spot market purchases, with these spot purchases offset by a new long-term solar procurement described below

The non-unanimous settlement provides that, for residential default service, PECO shall enter 10-year solar PPAs, in an amount up to 25 MW (DC), for one or more new Pennsylvania solar projects

Small commercial default service (100 kW and under) would continue to be supplied by equal shares of one-year and two-year FPFR products, procured approximately two months prior to delivery

Large C&I customers would continue to receive hourly pricing

The ALJs would deny RESA's proposal that PECO be directed to collaboratively work with retail suppliers on any future CIS upgrades, including specific reporting and staffing requirements

The ALJs said that the prior CIS implementation issues cited by RESA have been resolved, while finding that speculation about any future CIS issues does not provide grounds for RESA's sought relief

Docket Number P-2024-3046008

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