PECO Files Revised Opt-In Retail Supply Program; Design May Leave Program Undersubscribed Despite Unfilled Demand

PECO has filed with the Pennsylvania PUC a revised retail opt-in program, which takes the place of a previously proposed retail auction, and, as Matters understands the new proposal, the opt-in program may leave customers desiring to take service under the program unable to participate, even though an overall participation cap has not been met, due to the participation caps applied to individual retail suppliers.

First, some background on the revised filing, which is PECO's revised proposal and not a consensus proposal from stakeholders. Under the opt-in program, all residential and small commercial (under 25 kW) default service customers will be sent a letter from PECO to opt-into a retail supply program. Pricing under the opt-in program shall be a uniform 5% discount off the PECO June 1, 2013 Price to Compare, followed by an eight-month fixed price term, with such pricing determined by the individual supplier (but whose terms are subject to PUC review). A $50 customer bonus payment must also be provided by the supplier.

Default service customers would be randomly assigned to receive an opt-in offer from a specific supplier. A retail supplier may designate a maximum number of customers (by class) it wishes to receive its offer, but otherwise customers shall be allocated on a random and equal basis.

PECO will mail, at the opt-in supplier's expense, a standardized offer letter and prepaid return envelope to the allocated eligible customers for each opt-in supplier. Customers wishing to take the offer must enroll through the supplier, with the supplier required to offer the customers three ways to enroll: (1) via a response post card from the customer, included in PECO's offer mailing, (2) through calls on a toll-free phone number provided by the opt-in supplier; and (3) through a website provided by the opt-in supplier.

The opt-in program shall cap customer participation at 50% of eligible customers in a particular rate class.

PECO has proposed to implement this cap by limiting each opt-in supplier to enrolling a number of customers up to 50% of the number of customers allocated to the opt-in supplier in a particular rate class under the program.

This mechanism introduces the possibility that certain suppliers may reach their 50% participation cap, with any customers above this number desiring opt-in service rejected from enrolling with that supplier, while other suppliers may not reach their 50% participation cap, meaning there would be additional "space" in the program which has gone unfilled, even though customers allocated to another supplier are being denied opt-in service.

Matters would note that this approach is in contrast to the revised opt-in program proposal at the FirstEnergy utilities, where although each supplier is similarly assigned an equal and random number of default service customers who receive the supplier's offer (apart from any supplier-selected maximums), the participation cap is applied on a customer-wide basis, and the ability to enroll is determined on a first-come, first-served basis. In other words, the FirstEnergy EDCs' program does not cap each individual supplier's customer participation in the program (after the initial random allocation of customers), so customers will be able to take opt-in service so long as the overall program cap has not been hit, regardless of how many customers their assigned supplier has enrolled.

See prior story for greater detail on FirstEnergy EDCs' program

PECO's program may also differ from the FirstEnergy EDCs' program due to PECO's inclusion of the following language: "If PECO receives a request to enroll by a shopping customer who becomes aware of the offer, PECO will notify the Opt-In Supplier of the customer's request. PECO will enable the customer to select from participating Opt-In Suppliers if the customer does not specify a particular Opt-In Supplier during the inquiry." [emphasis added].

It is unclear from PECO's language whether there is any qualification on how customers become "aware" of the offer. Literally, however, any customer who becomes aware of the offer, including long-time shopping customers seeing news reports of the opt-in offers, could call PECO and demand service under the opt-in program terms.

In contrast, at the FirstEnergy EDCs, certain shopping customers are allowed to participate in the opt-in program. However, the only shopping customers allowed to participate are those who received a specific supplier offer letter from the utility (this situation may arise if the customer was a default service customer at the time that the mailing was prepared but in the interim completed an enrollment to retail supply).

Also unclear is how PECO's participation cap will be affected, if at all, by shopping customers' participation in the opt-in program. Specifically, the participation caps included in the program only refer to "eligible customers," and eligible customers are defined as, "one hundred percent (100%) of its [PECO's] non-shopping default service residential customers, exclusive of Customer Assistance Program ('CAP') customers and ... one hundred percent (100%) of its non-shopping default service small commercial customers with annual peak loads less than 25 kW." Given such, it would appear the enrollment of shopping customers in the program would not impact the overall cap, but this is not how the PUC has previously interpreted the cap.

Regarding program costs, each opt-in supplier shall be responsible for the product of: (1) a PECO-provided Not-To-Exceed Cost per allocated customer or actual cost per allocated customer (whichever is smaller); and (2) the number of eligible customers allocated to that opt-in supplier.

PECO shall invoice each opt-in supplier within thirty days of the opt-in supplier's receipt of its allocated customer list, with the amount due payable within thirty days of the date of the invoice.

If an opt-in supplier fails to make the required payment, PECO may reduce the amount due to that opt-in supplier from that opt-in supplier's next Purchase of Receivable payment by the opt-in program amount due (but not from amounts that are subject to a bona fide POR payment dispute).

However, any remaining costs of the opt-in program that are not collected from opt-in suppliers shall be recovered through PECO's POR discount, meaning costs could be allocated to retail suppliers not participating in the program. PECO stressed that the addition of the two steps described above, "should reduce if not entirely eliminate the risk that any Opt-In Program costs will be recovered from non-participating EGSs through the POR discount."

Currently, PECO anticipates that the total "per customer" cost of randomly allocating a default service customer to an opt-in supplier and printing and mailing that supplier's offer to the customer will be approximately one dollar (US $1.00). Based on collaborative discussions however, PECO has agreed to provide a "Not To Exceed" per customer cost to EGSs that have applied to participate in the opt-in program prior to the assignment of customers. EGSs who do not wish to participate can notify PECO within five days of receiving the "Not To Exceed" cost and withdraw without paying any per customer charges.

Other terms of the program, which are consistent with prior PUC direction, include that each opt-in customer shall have the option to return to PECO default service or to switch to another EGS, or to the opt-in supplier under a different offer, at any time and without incurring switching fees or other penalties.

Each opt-in supplier must file the terms and conditions of its eight-month product for PUC approval at least 45 days before the offer is extended to customers.

Under PECO's proposal, it would send the initial opt-in offer letters to customers April 1-15, 2013. A 30-day opt-in period would be provided, and the deadline for the submission of enrollments by suppliers would be May 20.

Separately from the opt-in program, PECO has proposed retaining its proposed 0.3% discount to purchased receivables to recover costs of the ongoing Standard Offer customer referral program. "PECO maintains its original proposal to recover the initial and on-going costs of the Standard Offer Program through its proposed POR discount of 0.3% since the Standard Offer Program will be available to all EGSs."

Docket No. P-2012-2283641