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Update: Pennsylvania Commissioners Chide Retail Suppliers for Over-priced Offerings As State Retains Utility-Provided Default Service Model

February 14, 2013

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Copyright 2010-13
Reporting by Paul Ring •

UPDATE, 10:45 am 2/15: The PUC's final order has been released, and it is even worse than predicted. The PUC is not even going to implement the 90-day auctions for mass market default supply unless the legislature approves such construct. See other breaking story today for further details

See also: EPIC FAIL: Pennsylvania Won't Implement Quarterly Mass Market Default Supply Auctions Without Legislative Action

This story updated ~1pm February 14

PUC Chairman Robert F. Powelson and Vice Chairman John F. Coleman chided retail suppliers for offers "significantly" higher than wholesale prices, and for a lack of "innovative" products, as the PUC adopted an "end-state" market design that changes little in default service structure.

"Despite a large number of EGSs in the market, many EGS offers are only slightly below each EDC's Price to Compare (PTC), despite wholesale prices that are significantly lower than many current PTCs. Additionally, to date, not enough innovative product offerings have emerged that may be attractive to consumers," Powelson and Coleman said in a joint statement.

The PUC's "end-state" design retains the utility in the default supplier role, consistent with an earlier proposal.

Although a final order was not immediately available, Powelson and Coleman said that, effective June 1, 2015, "we expect default service providers (DSPs) to offer a 90-day default service product or, alternatively, a shorter-term product versus what is currently being offered to residential and small business customers." [emphasis added]

It was unclear whether this language providing for an alternative of a, "shorter-term product versus what is currently being offered to residential and small business customers," means that the PUC is even regressing from its earlier preference for sole reliance on quarterly (90 day) mass market supply contracts, and is, in fact, going to allow longer-term contracts for small customer default supply.

Commissioner James Cawley summarized the shortcomings of the PUC's order, which stopped short of transformative change, in a statement:

"[M]erely changing the default service portfolio will not address the more fundamental problems of Pennsylvania's current default service model. Any true end-state model must address directly the propensity of many electricity consumers not to make any decision at all regarding switching their energy supplier in the presence of a default service alternative. As I have noted before, this situation will persist indefinitely, even if competitive retail offerings are well below the utility default service option, regardless of whether or not this default service product is a long term or short term product. One only needs to examine the Duquesne Light Company service territory in Western Pennsylvania to drive this point home (that market has been fully open to competition since 2001, yet only 43% of residential customers have chosen an alternative supplier, even though EGS offerings are well below the price to compare)."

"Another fundamental flaw with our current utility-provided default service model is the socialization of many default service related costs which are borne by shoppers and non-shoppers alike," Cawley added.

According to Cawley, the final order does provide for a "collaborative" that is, "charged with tackling the issues around optimal models for a non-utility default service product." Given that the PUC just spent two years addressing this question, a further collaborative seems vacant.

The final order acknowledges the legislative allowances for a non-utility default service construct, Cawley said.

Link to Cawley Statement

Commissioner Pamela A. Witmer also issued a statement (click here)

Matters will have a full post-mortem once further specifics become available.

The end-state order also contains various other retail market enhancements, which are described more fully in the joint statement from Powelson and Coleman

Link to PUC news release


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