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Pennsylvania ALJs Recommend Adoption Of Proposal To Exclude From POR Program Any Plan With Rate In Excess Of Default Service
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Two Pennsylvania PUC ALJs would adopt, without modification, a non-unanimous settlement for the FirstEnergy Pennsylvania utilities' default service plan that would adopt major reforms to the retail electric market at FirstEnergy Pennsylvania, including excluding from the purchase of receivables program any product whose rate exceeds the price to compare
The ALJs issued a recommended decision (RD) which would establish FE PA's default service plan for the period June 1, 2027 through May 31, 2031 (DSP VII)
Regarding POR, the RD would provide, for all contracts entered into after June 1, 2027, that POR would be limited to products whose rate is at or below the price to compare at the time of enrollment
This limitation on POR would apply to both residential and non-residential service
Note that, unlike POR limits proposed in other states at various points, the RD would provide that a product with a rate above the PTC would be entirely excluded from POR, in contrast to conditionally allowing such product in POR but limiting the purchased receivables to an amount up to the PTC
To implement this POR limit, suppliers using POR would be required to use rate ready billing
The RD favors the settlement's restrictions on POR by citing evidence which showed that, "From 2022 through 2025, POR-related
uncollectible rates ranged between 22-56% higher than default service uncollectible rates,
and in 2025 on a per customer basis, POR-related uncollectible expenses ranged between
$23-$38, compared $8-$15 for default service uncollectible expenses."
"As such,
suppliers charging prices above the default service rate create a materially different risk
profile than suppliers charging prices at or below the default service risk," the ALJs said
The ALJs said that retail supplier objections to the POR changes, "are undercut by the basic fact that the POR is
a voluntary program that, currently, allows unrestricted access to guaranteed upfront
payment of the face value of the participating EGS’s accounts receivable."
"We find that the eligibility criteria in the proposed POR provisions are
reasonable and rationally related to documented differences in collections risks and
payment outcomes," the ALJs said
Under the RD, FE PA's existing POR clawback mechanism would be phased out over the first year of the DSP VII term
In another reform, the RD would require that, for new residential contracts entered into after June 1, 2027, the retail supplier must drop such customer to default service at the end of the fixed rate term, unless the customer makes an, "affirmative choice to remain with the EGS [retail supplier] in response to the notices required by the Commission’s regulations at 52 Pa. Code § 54.10."
The RD would find that this mandatory drop of customers to default service is not contrary to choice, and that granting a necessary rule waiver to implement the policy is appropriate
The ALJs cited a, "direct nexus between continual supplier pricing above the price to compare and higher involuntary termination rates, higher uncollectible
expenses, and rising customer complaints against EGSs [retail suppliers] in FirstEnergy’s service territory," as supporting the end of residential auto-renewals for fixed rates
"Significantly, the record
shows that the Company [FirstEnergy PA] has already pursued other alternatives to address the
demonstrated harms, including the Company’s existing POR clawback mechanism that
has been in place since 2017 and collaborative review processes and improved customer
education efforts undertaken following approval of FirstEnergy’s DSP in 2022," the ALJs said
"[W]e do not find the proposal to be inconsistent with anti-slamming or switching protections," the ALJs said
"[W]e do not find that the change to automatic renewal protocols would limit
customer choice. Changing the result of inaction at the end of fixed-term contracts is
intended to impact the competitive market and would return customers to default service
rather than renew their contracts with suppliers. We do not find that 'anti-competitive,'
as it would require customers to opt in to a contract with a supplier rather than being
required to opt out of a contract renewal," the ALJs said
Proponents of the various retail market reforms, "have established actual harm, with substantial record evidence," the ALJs said
"[W]e find it compelling that FirstEnergy’s residential
shopping customers paid $888 million in aggregate net costs above the PTC since 2017,
based on shopping data over a 100-month period," the ALJs said
"We disagree with the supplier
intervenors that comparison to the PTC is not a meaningful or objective benchmark,
because it is designed to be the least cost over time, rather than the lowest price. Based
on that benchmark, the record developed in this proceeding documents that many
customers who remain with suppliers following automatic renewals are paying
significantly more than they would have paid under default service. Moreover, the
evidence shows that confirmed low income shopping customers were charged
disproportionately higher rates above the PTC compared to confirmed residential
shopping customers in the aggregate," the ALJs said
Additionally, the RD would require, for all residential variable-priced, month-to-month plans, that retail suppliers must obtain affirmative consent from the customer on a quarterly basis in order to continue service to such customer. Retail suppliers would be required to provide an attestation of receipt of such affirmative customer consent
The RD would not revive FE PA's existing customer referral program (CRP) which is scheduled to end on May 31, 2027
Regarding the CRP, the RD states, "It is not in the public interest to put customers at demonstrated risk by
putting the current program back in place, when there is no reasonable assurance that the
design issues can or will be reformed to address that risk".
The ALJs would adopt FE PA's proposal to remove NITS from the load following full requirements product.
NITS and DOE charges would remain part of the bypassable price to compare, but FE PA would assume responsibility for such charges for default service customers only.
This treatment, while in use at other PA EDCs, contrasts with the current treatment of other non-market based PJM charges at FE PA, where FE PA assumes the cost for all delivery customers, with nonbypassable recovery (and with the cost not in the PTC)
Addressing retail supplier objections to the change in how NITS is treated, the ALJs said that statute and PUC rules, "do not require the Commission
to structure default service products in a manner that guarantees suppliers compensation
for assuming every category of market uncertainty".
"FirstEnergy’s NITS bypass proposal advances ...statutory objectives by
preventing customers from paying unnecessary risk premiums associated with embedding
volatile and difficult-to-predict transmission costs into FPFR [full requirements] products," the ALJs said
The ALJs would also adopt continued use of a capacity proxy price framework in the FE PA default service plan, without changes sought by retail suppliers
Similar to PUC action at other EDCs, the ALJs would adopt without change the settlement's terms governing "no load" customer generators, and their classification into a default service class
To classify a customer into a default service group, FE PA under the RD would classify default service customers with a peak demand of 100 kW or above, or alternatively a maximum registered peak load ('MRPL') of 100 kW or above, as industrial customers, subject to hourly priced default service
However, customer-generators online prior to June 1, 2027 will be exempt from the MRPL rule until June 1, 2029
Non-Contested Default Service Issues
The RD's default service plan would continue the current customer classification breaks, except for the change how no-load customer-generators are classified into a default service grouping, as described above
For residential and commercial customers, FE PA would rely exclusively on fixed price "full requirements" contracts for default service, except that wholesale suppliers would not be responsible for NITS or PJM charges associated with United States Department of Energy (DOE) emergency orders pursuant to Section 202(c) of the Federal Power Act.
For residential default service, 10% of the portfolio would be served under a 5-year full requirements contract. 45% of residential SOS would be served under laddered 12-month contracts, and 45% of residential SOS would be served under laddered 24-month contracts
Residential (and commercial) PTCs would change every 6 months
However, for residential default service, FE PA would amortize the cumulative reconciliation balance for the residential PTC Rider identified at the conclusion of each 12- month reconciliation period over the subsequent 12-month period through the E-Factor (reconciliation) mechanism)
Commercial service would continue to use a 6-month reconciliation for default service
For commercial SOS, 60% of the portfolio will be 12-month contracts, and 40% will be 24-month contracts
Each of the residential and commercial full requirements products will be procured through semi-annual auctions in February and September of each year, with the exception that, for the first auction year of the DSP term, FE PA will hold auctions in January 2027, April 2027, and October 2027
P-2026-3060298
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Proposed Order Would Mandate That Shopping Customers Return To Default Service At End Of Fixed Price Term, Unless Customer Chooses To Continue With Retail Supplier
Recommended Decision Would Require Quarterly Affirmative Consent For Variable Rate Plans
August 24, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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