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Recommended Decision Would Require That Standard Offer (SOP) Customer Referral Customers Be Dropped To Default Service At End Of SOP Term With Retail Supplier, At PPL

ALJ Would Terminate SOP Shopping Program For CAP Customers, Not Allow CAP Customers To Take Service From A Retail Supplier

October 15, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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A Pennsylvania ALJ has issued a recommended decision in PPL Electric's default service proceeding for the period June 1, 2021, through May 31, 2025

In brief, the ALJ would order that:

• PPL Electric’s customers shall be returned to default service at the end of their Standard Offer Program (SOP) contracts unless the customers affirmatively elect to continue service with the EGS (retail supplier) or chose another EGS.

• PPL Electric's Customer Assistance Program (CAP) Standard Offer Program (CAP-SOP) shall be ended, and CAP customers shall be required to receive default service at the Price to Compare. The PUC previously prohibited CAP customers from shopping outside of the CAP-SOP; thus the recommended decision would prohibit customers from being served by an EGS if they are receiving CAP benefits

The ALJ would adopt a non-contested partial settlement regarding other terms of default service, such as procurement and pricing (see details on the non-contested settlement here)

Additionally, with respect to the modified SOP program, the ALJ would find that PPL Electric is not required to provide an Electric Generation Supplier with the telephone numbers and e-mail addresses (if available) of Standard Offer Program customers to the Electric Generation Supplier serving the customer.

The ALJ would find that Electric Generation Suppliers are required to commit to a semi-annual Standard Offer Program enrollment, which would correspond to PPL Electric Utilities Corporation’s semi-annual Price To Compare price change.

In discussing the recommendations related to the SOP and drop of SOP customers to default service at the end of the term, the ALJ stated, "I find 20% of the customers are still on roll over contracts, and are paying excessively high rates, four months after the end of their SOP contract, and another 22% are on roll over contracts 1-3 months after their SOP contract expired."

"More than 50% of the customers who switch between one and four months after their SOP contract expired are paying rates 25% or more above the PTC during those intervening months. Nearly all (93%) residential customers who remained with their SOP EGS after the conclusion of their contract were paying at or above the PTC in the first month after their SOP contract expired, and over 50% of those customers were paying at least 25% over the PTC. Even four months later, most of these customers continued with their SOP Supplier at a non-SOP rate, and the vast majority continued to be paying rates 10% or more above the PTC," the ALJ said

"I recommend PPL Electric be given leave to end CAP SOP as it is unreasonable to require the default service provider to sponsor a program that provides an initial 7% discount under the PTC, but then allows the vulnerable CAP customers to roll over into a contract with a 50% increase above the PTC, for months after the SOP contract expired. PPL St. No. 4-R, p. 14. While there is evidence that customers receive notices from their EGS prior to the end of their contract term, it is apparent from the credible testimony of PPL Electric’s witness Schmidt that these notices are being missed or misunderstood. PPL Electric St. No. 4-R, p. 6," the ALJ said

"I am unpersuaded by the EGS Parties’ and Starion’s arguments that the current structure of the SOP is 'well designed,' 'successful,' and is providing a 'fair opportunity' for shopping. EGS Parties MB, p. 4; Starion MB pp. 1, 2, 12. PPL is handling numerous complaints from thousands of customers unknowingly being rolled into new contracts with rates well above the PTC, and this is substantial evidence that the program is not well-designed or successful," the ALJ said

"The PTC is an appropriate measure of whether the current SOP design is successful. I am not persuaded by the EGS Parties’ argument that the PTC is not an appropriate benchmark to measure the effect of shopping on customers’ bills. EGS MB pp 7-8. They argue that the PTC is incorrectly determined and therefore cannot form a proper basis to assess whether changes should be made to the rules related to what happens to customers at the end of their SOP contract term. The EGS Parties’ contention is factually unsupported and without merit," the ALJ said

"The EGS Parties failed to submit any evidence that PPL Electric’s PTC is incorrectly calculated. While offering general assertions, in rebuttal testimony, that portions of PPL Electric’s distribution costs, such as facilities, salaries, billing and collections, should be allocated to the PTC, the EGS Parties provided no facts regarding what portion of distribution costs are to be allocated to the PTC, or any basis for such allocation. EGS St. No. 1-R, p. 5. EGS Parties Witness Mr. Kallaher specifically stated that this DSP proceeding was not an appropriate proceeding to examine the 'true' cost of default service. EGS Parties St. No. 1-R, p. 6. Moreover, the Commission has recently rejected a very similar proposal to allocate these categories of distribution costs to the PTC. See Pa. Pub. Util. Comm’n v. PECO Energy Company – Electric Division, Docket No. R- 2018-3000164, p. 74 (Opinion and Order entered December 20, 2018). This decision was recently affirmed by the Commonwealth Court in the case of NRG Energy, Inc. v. Pa. Pub. Util. Comm’n, 233 A.3d 936 (Pa. Cmwlth. 2020)," the ALJ said

"The SOP is not a mandated program under the Electricity Generation Customer Choice and Competition Act ('Competition Act'), 66 Pa. C.S. §§ 2801-2812. Therefore, the Commission has the jurisdictional authority to change, or even eliminate, the SOP at any time," the ALJ said

"The SOP will remain a voluntary program after PPL Electric’s modifications are made, and EGSs will continue to be able to offer other products outside the SOP. EGS notices to customers at the end of the SOP may continue to offer any price the EGS desires to offer. The only difference is that if a customer does not make an affirmative shopping decision, then they will be returned to default service. There is no bar to EGSs continuing to offer those prices in the future. PPL Electric’s proposal does not constitute regulation of EGS pricing or slamming, which generally occurs when a customer’s EGS is switched without authorization," the ALJ said

"PPL Electric’s proposals seek to address the concern that a meaningful number of SOP customers are not making affirmative shopping decisions, and as a result are passively rolling onto contracts with substantial rate increases. These customers blame PPL Electric for the outcome, and are potentially discouraged from further shopping by the result. PPL Electric’s proposals are designed to avoid these negative outcomes, and to encourage active shopping, for the long-term benefit of the competitive market," the ALJ said

"CAP is a voluntary assistance program. Any customer may shop for electric supply; however, they may not do so while receiving CAP benefits. If a CAP customer wishes to shop for any reason, the customer may do so after leaving CAP. Therefore, PPL Electric is not prohibiting any customer from shopping, but is instead proposing to place conditions on a customer’s eligibility to receive CAP benefits," the ALJ said

"I have weighed PPL Electric’s reasons for restricting CAP customers from shopping versus the arguments of EGS Parties and Starion, and find that PPL’s proposal, which is supported by unrefuted statistical evidence regarding its CAP SOP, is consistent with the Choice Act’s requirement that the Commission administer these programs in a manner that is cost-effective for both the CAP participants and the non-CAP participants who share the financial consequences of the CAP participants’ EGS choice. The preponderance of evidence shows significant financial harms result to both CAP customers and all Residential customers when CAP customers shop," the ALJ said

"In 2018, 68% of CAP shopping customers were paying more than the PTC. In 2019, 62% of CAP shopping customers were paying more than the PTC. PPL Electric Statement No. 3, p. 11, Table 3. When CAP customers shop at rates above the PTC, they exceed their maximum CAP credit amount at a faster pace, which results in the CAP customer losing the benefit of the program more quickly. PPL Electric Statement No. 3, p. 4. CAP customers shopping at rates above the PTC also creates a higher CAP shortfall amount, thereby increasing the amount other Residential customers must pay to cover the CAP shortfall. PPL Electric Statement No. 3, p. 5. CAP customers who were shopping caused other Residential customers to pay an additional $4.3 million in costs in 2018 and an additional $2.9 million in costs in 2019 that would not have been paid had those customers not shopped. PPL Electric Statement No. 3, p. 12, Table 4. This is not cost-effective," the ALJ said

"I recommend the Commission approve PPL Electric’s proposal to eliminate these additional costs associated with CAP shopping by requiring that CAP customers receive default service at the PTC," the ALJ said

Docket P-2020-3019356

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