Retail Suppliers Seek to Prohibit Early Termination Fees in Opt-Out Municipal Aggregations

Several retail suppliers pressed the Illinois Commerce Commission to prohibit opt-out municipal electric aggregations from imposing termination fees on customers included in the aggregation on an opt-out basis, in exceptions to a proposed first notice order on aggregation rules.

As first reported by Matters, a proposed first notice order would decline to prohibit opt-out municipal electric aggregations from imposing termination fees on customers exiting the aggregations after the initial opt-out period. The draft first notice order also declined to adopt Staff's compromise recommendation of generally allowing opt-out aggregations to apply termination fees, but requiring that aggregations provide customers with an opt-out period without a termination fee every two years.

Staff continued to advocate for its free opt-out period every two years in exceptions, citing the, "inherently different nature of opt-out aggregations."

Interstate Gas Supply, Inc. and MidAmerican Energy Company, in exceptions, sought to entirely prohibit early termination fees for opt-out aggregations.

"In the opt-out aggregation context, a customer may be switched even if the customer never saw a single piece of paper about the aggregation; never expressed a preference to be included in the aggregation; and never signed a document memorializing a conscious decision to switch the source of supply of electricity coming into the customer's home or business. In other words, a customer may be switched into an opt-out aggregation without any actual knowledge that the switch is occurring. Yet, under the Proposed Order's Proposed Rule, it appears that an Aggregation Supplier would be able to claim that such a customer should be made to pay a 'termination fee' if that customer decided that he or she wished to exit the aggregation -- even when it is an aggregation that the customer never knew he or she had joined. Compounding the problem is the fact that there is no statutory or regulatory cap on the amount of that termination fee," Interstate Gas Supply, Inc. and MidAmerican Energy Company said.

"It is one thing to 'switch' a customer who never saw a consumer notice or affirmatively chose to switch. However, it is wholly another thing to prohibit that customer from getting out of the aggregation without paying a termination fee (which fee is not limited in any way by statute or regulation). In effect, allowing a termination fee means that a customer who did nothing and had no knowledge about the aggregation is now placed in jeopardy of having legal action taken by the aggregation supplier to collect a fee about which the customer literally had zero knowledge," Interstate Gas Supply, Inc. and MidAmerican Energy Company said

Illinois contract law requires unequivocal, objectively manifested acceptance of contract, the suppliers said. "Given the law of contracts in Illinois, it seems doubtful that a court would conclude as a matter of law that a judgment for a termination fee could be entered against a person who never even knew about the aggregation, let alone never made an unequivocal, objectively manifested showing of acceptance of any 'agreement' with an aggregation supplier," Interstate Gas Supply, Inc. and MidAmerican Energy Company said.

Turning to other issues, Staff took exception to the proposed order's provision that would only make opt-out notices sent out by the aggregation supplier conform to various disclosure requirements included in the rule, but, due to jurisdiction issues, would not apply the same requirements to opt-out notices sent out by the governmental aggregator rather than the supplier.

Staff argued that this design would simply allow aggregations to avoid the disclosure requirements by having the government aggregator assume responsibility for sending out the opt-out notice. Moreover, Staff said that ensuring that all customers receive the same detailed disclosures proposed in the rule would not impermissibly regulate governmental aggregators, because the obligation would still be placed on the aggregation supplier. Specifically, if the notice from the governmental aggregator lacks disclosures normally required, it would be the duty of the aggregation supplier to supplement this notice with an additional notice containing the required disclosures, and the ICC has authority to require such compliance from suppliers, Staff said.

"It would be illogical to have some customers receive the detailed customer disclosures required by the Commission's new rules and to have other customers potentially receiving customer disclosures that are not as detailed as, or even inconsistent with, the customer disclosures required by Code Part 470," Staff said of the proposed order's dichotomy.

"In other words, the rule should not provide incentives for Aggregation Suppliers to skirt the disclosure guidelines simply by having the Governmental Aggregator send the notices. Such actions could potentially result in fewer potential municipal aggregation customers benefiting from the Commission's oversight of the Aggregation Suppliers and receiving adequate notice of the proposed changes to their electric supplier," Staff said.

Finally, the Retail Energy Supply Association proposed an additional rule to address the drop of municipal aggregation customers to default service, which in the ComEd territory triggers a 12-month minimum stay unless the customer shops within 2 months (a scenario already implicated due to several aggregations terminating service).

RESA proposed that if the aggregation supplier is required by the governmental aggregator to return retail customers in the aggregation program to default supply service, the aggregation supplier shall be required to send a disclosure notice to all affected retail customers which shall state that customers have two monthly billing periods to purchase their electricity supply from another retail supplier in order to avoid a 12-month minimum stay requirement with the electric utility.

Docket No. 12-0456