Pennsylvania Proposes to Require "Fixed" Rate to Be All-Inclusive, Proposes New "Pass-Through" Category

The Pennsylvania PUC has issued a tentative order to modify the definition of an electric fixed price product, and add a new category for products with pass-through components, due to concerns about current fixed rates with pass-throughs.

The PUC's concerns were first reported by EnergyChoiceMatters.com, see prior story for extensive discussion on pass-throughs currently seen in the market even in residential products.

In a tentative order, the PUC proposed to address these concerns by, among other things, revising the definition of "fixed price" to mean (new provisions in CAPS): "AN ALL-INCLUSIVE PRICE THAT will remain the same, for a set period of time OF AT LEAST THREE BILLING CYCLES."

As noted, the proposed changes require a fixed price to be "all-inclusive" and sets a minimum term of three billing cycles.

"The Commission would also declare as part of this proposal that a 'fixed price' means just that -- if an EGS is going to label a product as 'fixed' it cannot change during the term of the agreement, consistent with the revised definition discussed above," the PUC said.

The PUC also proposes adding a new definition, Price With Pass-Through Clause, meaning, "an all-inclusive price subject to change based on various factors as specifically described in a 'pass-through clause' in the supplier’s disclosure statement."

As examples, the "various factors" could include charges related to PUC, PJM, FERC, NERC requirements and tax changes, the PUC said. This definition would be coupled with Commission guidance making clear that the "pass-through clause" must accompany the pricing information in the disclosure statement -- in the same section and/or paragraph. This is intended to prevent the potential customer from overlooking the "pass-through clause" or having the clause buried in a following page or in fine print.

To assist consumers in understanding these clauses, suppliers should, in the "definitions" section of the disclosure, define any terms or acronyms used in the "pass-through clause," the PUC said.

Additionally, if the supplier at some point invokes the clause and passes along a price change, they must provide advanced notice to the affected customers, the PUC proposed.

"The proposal to create a new label for this product provides several benefits," the PUC said. "It will end any ambiguity as to what the label of 'fixed price' means and thus minimize confusion on the part of consumers and EGSs. With a new label such as 'Price With Pass-Through Clause' we will make available a pricing option that will hopefully serve to retain the presence of long-term products in the market -- thus providing more variety to consumers. This is a pricing option that consumers will be able to relate to -- given their experience with products using similar pricing structures, such as wireless and internet service. We invite parties to offer suggestions as to the labeling and definitions of any new product offerings for the Electric Competition Dictionary. However, we ask everyone to keep in mind that what is proposed has to be understandable to the typical residential and small commercial customer and in plain language," the PUC said.

Docket: M-2013-2362961