Pa. House Committee Reports Out Resolution Blocking New Retail Natural Gas Rules

The Pennsylvania House Consumer Affairs Committee has reported out of committee HR 505, a concurrent resolution disapproving the PUC's regulation on natural gas distribution companies and the promotion of competitive retail markets.

Specifically, the concurrent resolution is aimed at the PUC's rules to be adopted under Docket L-2008-2069114 relating to the natural gas Price to Compare, assignment of Supplier of Last Resort costs, Purchase of Receivables programs, and capacity release (see 6/24)

If ultimately approved by lawmakers, HR 505 would prevent the PUC's rules from being published in the PA Bulletin and taking effect.

To briefly recap, the PUC's final regulations establish the bypassable Price to Compare (PTC) for natural gas service as including (1) the natural gas supply charge determined in the distribution company's Section 1307(f) proceeding, including the reconciliation for over and under collections (e-factor); (2) the Gas Procurement Charge; and (3) the Merchant Function Charge.

The Gas Procurement Charge shall consist of natural gas supply service, acquisition, and management costs, including natural gas supply bidding, contracting, hedging, credit, risk management costs, and working capital; as well administrative, legal, regulatory, and general expenses related to those natural gas procurement activities, excluding those related to the administration of firm storage and transportation capacity.

The Merchant Function Charge shall reflect the uncollectibles related to commodity supply, which shall be removed from base rates

Notably, the bypassable procurement costs are to include costs related to the Supplier of Last Resort (SOLR) function.

The Independent Regulatory Review Commission previously disapproved the regulations citing, in part, the allocation of SOLR costs solely to non-shopping customers, stating that, by statute, the SOLR must serve customers whose natural gas supplier has failed to deliver its requirements, and thus the SOLR must incur costs to stand ready to perform this function.

"By including SOLR costs in the PTC, non-shopping customers will incur the cost of the SOLR. However, the PUC is establishing that the class of customers who shop and use the alternative services of the NGS [natural gas supplier] will not be subject to the PTC costs and, therefore, would not share in the unique cost burden of the SOLR. Again, 66 Pa.C.S.A. § 2207(a)(2) specifies SOLR is for the services of both shopping and non-shopping customers, and it further provides that there will be only one SOLR designated for these services. Also, the statute at 66 Pa.C.S.A. § 2203(5) protects against cross-subsidization. As such, based on the statute, we find that the intent of the PUC to include SOLR costs in the PTC is contrary to the statute both at 66 Pa.C.S.A. § 2207(a) and § 2203(5)," the IRRC said.

The IRRC also said that the PUC's regulations failed to meet the statutory requirement that pricing information be provided to customers in an understandable format. The IRRC expressed concern that use of the Price to Compare may lead customers to erroneously think that, by switching, they will not incur distribution costs.

The IRRC further said that it is not clear what information or protection consumers would receive or could consider after the customer signs up with a retail supplier relating to the ability of the supplier to change the price.