Connecticut DEEP Commissioner: Default Service Customers Have Done "Systemically" Less Well Than Choice Customers, Change "Imperative"

Default service electric customers in Connecticut have done systemically less well in terms of electric generation costs than customers who have exercised choice, which compels changes to the market, Daniel Esty, Commissioner of the Connecticut Department of Energy and Environmental Protection (DEEP), told the National Energy Marketers Association Connecticut Policy Leadership Roundtable.

DEEP is ultimately charged with electric market regulation under Connecticut statute, and houses the Public Utilities Regulatory Authority. A DEEP energy strategy first proposed the retail auction of Standard Service electric customers last year.

Esty said that a "core theme" of DEEP's policy is consumer choice, and that choice is "fundamental" to Gov. Malloy's vision for the energy market.

Esty noted that Standard Service customers "did systemically less well" than competitive retail supply customers in terms of generation costs over the past few years, as the default service structure lagged savings available from the retail market.

While PURA has adopted changes to make default service more market-reflective, "we can do better," in transitioning more customers into the savings available from the competitive market, Esty said.

Esty said that, from the start, the retail auction was not solely designed to provide immediate rate relief to default service customers included in the auction (though that was an obvious benefit), but an additional goal was to invigorate the broader retail market as a whole.

The retail auction, Esty said, would bring in more competitors and thereby increase downward pressure on retail rates, as more competitors vie for customers.

While the auction failed to pass the legislature last year, Esty said there is an opportunity to recast, reframe, and tighten the proposal.

Esty said that there remains value in a "robust" standard service to act as a benchmark.

The auction should give customers more flexibility to opt-out of the auction, and should allow customers to leave service under the auction, including a return to standard service, at any time without penalty, Esty said.

Esty further said that in order for the retail market to succeed, it needs to be more transparent, as customers today have no idea what the right choice is.

Esty said that "plain English" explanations, coupled with superior IT interfaces, would increase market transparency for customers.

Esty envisions customers being asked a series of questions regarding choices customers are familiar with (length of contract, how much risk they're willing to assume), and then the IT platform returning to the customer the best offers for that customer's particular answers.

Esty said that retail suppliers must exercise discipline on slamming and teaser rates, and further said that customers need clear signals about when their rate will change. Customers also need clear signals about the end of their fixed price contracts, Esty said.