Pennsylvania Bill Introduced to Auction Default Service Customers to EGSs, Make Default Service Pure Backstop

A bill backed by retail electric suppliers has been introduced into the Pennsylvania Senate to auction off default service electric customers to retail electric generation suppliers (EGS), and transition default service to a pure backstop service.

Under SB 1121, the PUC would first conduct a competitive solicitation to move all existing default service customers to EGSs for service starting June 1, 2015.

Under this auction, the EGS would pay a $100 per customer acquisition fee to the state, plus a $50 bonus to each customer, plus remit $2 per customer into a consumer education fund (this amount paid under the customer education fee could be offset by the application fee noted below). Through the acquisition fee, the auction is estimated to generate $360 million for the Commonwealth.

The retail auction price, bid by the supplier, would be a 12-month fixed rate, with no cancellation fee. At the end of 12 months, EGSs would retain customers absent an affirmative election by the customer.

Though the PUC would have authority to set specific tranche sizes, the bill contemplates that the auction shall use tranche sizes of 5% of the total default service received by residential customers and tranches of comparable load size for nonresidential customers.

In the retail auction, the PUC shall select no fewer than four successful EGSs for each EDC on the basis of the lowest electric generation price bid in a single clearing price, single day process as determined by rate class. All customers in the same rate class and service territory receiving service under the auction shall be served at the same price.

No bidder may be awarded in excess of 25% of the number of tranches to be awarded for each rate class and service territory, except that the PUC may waive this limitation if necessary to assure that all tranches are awarded.

To participate in the auction, EGSs would be required to pay an application fee that shall be the lesser of the product of the number of customers in each tranche bid multiplied by $1, or $5,000 per tranche bid. Application fees, to be used for administrative costs of the auction and customer education, shall be retained by the PUC only for tranches actually assigned, and refunded to EGSs not assigned customers.

From June 1, 2015 to May 31, 2016, customers initiating new electric service would be assigned to the winning EGSs from the auction, according to the ratio of tranches won.

Starting June 1, 2016, initiating or changing electric generation and distribution service shall be the responsibility of licensed electric generation suppliers.

Starting June 1, 2015, default service, to be called next generation default service, would become a true backstop, available to customers whose EGS fails to deliver supply or customers who otherwise do not have an EGS.

Next generation default service would only be available to a customer for 60 days. After 60 days on next generation default service, if the customer has not chosen an EGS, the customer would be assigned to an EGS under a rotating assignment process set by the PUC.

Next generation default service would be provided by an EGS or EGSs, and the price for next generation default service would be the, "projected market price for electric generation during the time that the customer receives the service, together with all direct and indirect costs and risks of providing next generation default service, including cost of capital."

A customer who is with an EGS who does not make an affirmative election at the end of their contract term would remain with that EGS on a month-to-month basis.

Supplier-consolidated billing would be permitted in all territories starting June 1, 2016, and after June 1, 2018, EDCs would be eligible to offer competitive billing services through affiliates. Starting June 1, 2016, SB 1121 would allow for the disconnection of customers at the direction of an EGS, with the physical disconnection performed by the EDC.

SB 1121 would grant the PUC authority to develop a consumer bill of rights and an EGS report card.

The bill would allow the PUC to impose an annual assessment upon EGSs, but the assessment may not exceed $5,000 per licensed entity per year.

The bill is backed by Direct Energy, Dominion Retail, IGS Energy, NRG Energy, and Wal-Mart

A website and group has been developed to support the bill, called "Energy Consumers FIRST" ironically enough, given the anti-consumer changes two of these companies (NRG, Direct) are pushing for in Texas, but that's something we need not dwell upon now: energyconsumersfirst.com