Fonfara Says Default Service Procurement Shouldn't Affect Connecticut Suppliers' Business Proposition

"For the [retail electric] industry to be basing its survival on whether or not we enable the procurers of Standard Service power to have various tools [such as managed portfolios] suggests that the reason you're here is solely to offer a commodity, [and] to not grow your value in other ways," Connecticut state Sen. John Fonfara said yesterday in co-chairing a hearing on SB1, the retail markets bill.

Among other things, the bill would allow the procurement of Standard Service supplies on a managed portfolio as well as long-term contracts.

"It disappoints me as a supporter of the retail market," Fonfara said of arguments from retail suppliers against a managed portfolio, adding that it's "a sad commentary" that retail suppliers only compete versus the default rate, versus offering value-added services they bring to customers.

"Long-term, the survival of the industry will be based more on brand loyalty and [the] offering of services in addition to the commodity," Fonfara said

The Retail Energy Supply Association testified that active portfolio management would require utilities to "gamble" with ratepayer funds, and would shift risks away from investors and onto ratepayers.

Hess Corporation cited the experience in New Hampshire, where the Public Service of New Hampshire managed portfolio resulted in above-market costs and significant customer migration in 2009. Hess noted that this resulted in PSNH having "stranded power" in its portfolio, which it sought to recover by increasing rates on default service customers at a time when the market price of power had actually fallen.

Discount Power said that what the utilities do is, "their business, not ours." Fonfara also noted that the current three-year Standard Service contract blending "hasn't hurt" the retail market, and doubted longer contracts would hurt either.

Connecticut Light & Power said that managed portfolio procurements create an opportunity for lower rates, but said that long-term contracting its unlikely to reduce costs given that long-term offers are priced at the gas forwards. Indeed, CL&P and United Illuminating have existing authority to enter into long-term contracts for Standard Service and have conducted several investigations of market conditions and pricing, and have yet to find a long-term contract whose terms they believe are beneficial enough to seek DPUC approval of the contract.

Regarding the various consumer protection measures of the bill, RESA noted that the bill will actually encourage door-to-door marketing, a practice many provisions in the bill seek to limit. As only noted in Matters (3/14), the bill would not start the clock on the three day rescission period until the customer receives a written contract. RESA noted that such a provision will discourage suppliers from using alternative forms of marketing, such as telesales, since there will be a delay between the contracting date and date of the rescission period start, prompting more suppliers to use door-to-door sales where the contract may be physically presented at the point of sale.