Maine Draft Would Require Removal of Contract Extension Language from BHE Pilot Relying on Retail Supplier

A report from two Maine hearing examiners would direct Bangor Hydro-Electric to remove certain language regarding the extension of a contract between a customer and the BHE-selected retail supplier offering dynamic pricing, but otherwise endorses the BHE dynamic rate trial which will be conducted through a competitive supplier (2010-14).

Under the BHE trial, BHE solicited interest from competitive electricity providers to provide dynamic rates to 100 small volume customers. Freedom Energy Logistics was selected.

Competitive Energy Services protested the pilot on several grounds, including arguments that the pilot violates certain statutes governing the role of the utility in the market, and other provisions against rate discrimination.

The hearing examiners first concluded that the pilot does not cause BHE to be a competitive electricity provider. Competitive Energy Services argued that since BHE will be soliciting, recruiting, and enrolling customers in contracts offered by a third-party supplier, BHE is functioning as a broker, a subset of the competitive electricity provider definition in statute. Competitive Energy Services noted that BHE is prohibited by law from acting as a competitive electricity provider (CEP).

However, the hearing examiners said that, "given the scope and purpose of the proposed short-term rate trial, BHE's actions as an intermediary are a related function of its status and responsibilities as a T&D utility and not as a CEP."

"The Rate Trial will end after nine months and is limited to 100 participants. The purpose of BHE's actions is to 'test the dynamic price process, to ensure that when Bangor Hydro begins to deliver dynamic price service to all of its customers, it is able to do so effectively, efficiently and successfully,' not to enter the competitive electricity market," the hearing examiners said.

"BHE's proposed activities within the limited scope and purpose of the short-term rate trial are not the kind of marketing activities in which the Legislature or the Commission sought to restrict T&D utilities participation," the examiners added.

The hearing examiners further rejected Competitive Energy Services' claim that the short-term rate trial would cause BHE to violate the no-discrimination code of conduct. Competitive Energy Services argued that the pilot impermissibly provides certain services and benefits to a single competitive supplier.

"We agree with BHE that CEPs were given an opportunity to participate in the selection of an electricity provider for the short-term rate trial. Moreover, we find that the purpose of the rate trial -- to test BHE's processes to ensure that its systems will be capable of administering dynamic pricing offered through CEPs -- would be frustrated by having several CEPs participate," the hearing examiners said.

The hearing examiners further said that the "No Losers" guarantee (a hold harmless provision under which the customer is not exposed to costs under dynamic pricing in excess of what the otherwise applicable Standard Offer cost would be) available to pilot customers does not represent "undue" discrimination among BHE customers because the provision is needed to incent customers to volunteer for the pilot, which is necessary to test the dynamic pricing system. Rate discrimination is not unlawful if there is a legitimate basis for the different treatment, the examiners noted.

The hearing examiners did direct that one part of the dynamic pricing pilot should be changed.

The pilot's Customer Terms of Service states: "Duration -- this contract is for the duration of the Program as approved by the MPUC in Docket 2010-14. This contract may be extended if offered by Supplier beyond the end of the Program and agreed to by Customer. Any contract extensions will not include the No Losers Guarantee."

"This term is inconsistent with our determination that the rate trial is limited and will end after nine months," the hearing examiners said.

"This term appears to give FEL an unfair market advantage over other CEPs by allowing for a contract renewal as part of the Customer Terms of Service for the rate trial. Accordingly, the contract extension provision should be removed from the customer terms of service," the hearing examiners directed.