United States: The PaPUC Takes Steps To Boost Competition In Pennsylvania’s Retail Electric Market

Energy

The Pennsylvania Public Utilities Commission ("PaPUC" or "Commission") issued an order adopting an intermediate work plan ("Intermediate Plan") on March 1, 2012, that sets forth various requirements and programs that are designed to increase the short-term customer participation in Pennsylvania's competitive retail electricity market. Specifically, the Intermediate Plan establishes new consumer education efforts and requires electric distribution companies ("EDCs") to implement two customer referral programs and a retail opt-in auction. The Intermediate Plan is part of the Commission's effort to increase competition in the state's retail electric market after the Commission found that the market lacked the robust competition envisioned when Pennsylvania's Electricity Generation Customer Choice and Competition Act was enacted.

Consumer Education

The Commission seeks to enhance consumer education efforts with respect to Pennsylvania's competitive retail electricity market with the understanding that consumers with increased knowledge are more likely to explore competitive offerings. The Intermediate Plan directs EDCs to distribute, in May 2012, flyer to all residential and small business customers that contains information about the PaPUC's electric competition website, a PAPowerSwitch.com , and how to shop for an electric generation supplier ("EGS"). Furthermore, EDCs must send, in October 2012, all residential and small business customers a letter encouraging customers to shop for an EGS, directing customers to PAPowerSwitch.com, and reminding customers that they will receive safe and reliability electric service regardless of their supplier. These newly required consumer mailings coincide with a prior order where the Commission reinstates an annual mailing in which EDCs are required to distribute a postcard to their residential and small business customers that is signed by all of the PaPUC Commissioners and encourages consumers to shop for an EGS.

Customer Referral Programs

New/Moving Customer Referral Program

The Intermediate Plan requires that EDCs implement a New/Moving Customer Referral Program. Under this program, when a residential or small business customer calls the EDC to initiate new service or move service within that EDC's service area, the EDC must present information about competitive suppliers to that customer over the telephone. By only requiring EDCs to present such information to new or moving customers that call the EDC, and not every customer that calls, the PaPUC is reducing potential implementation problems that were previously expressed by EDCs. EDCs are obligated to provide general information about the state's electric retail market and direct customers to PAPowerswitch.com, but will not be required to provide specific information about EGS product offerings. The PaPUC expects this program will impose minimal costs on the EDC and the EDC is permitted to recover those costs through the normal EDC call center cost recovery mechanism. This program will likely be merged or consolidated with the Standard Offer Customer Referral Program, discussed below, when EDCs implement their next default service plans in June 2013.

Standard Offer Customer Referral Program

To entice more customers to select competitive supply service, the Intermediate Plan requires each EDC which has not yet filed its default service plan to include a Standard Offer Customer Referral Program in the plan. The PaPUC sets forth the following guidelines and requirements to assist the EDCs in developing their Standard Offer Customer Referral Program. Program participation should be voluntary for customers and EGSs. Participating customers may select service from a participating EGS or may chose a random assignment. EDCs should inform their default service customers about the program when customers contact the EDC call center (other than calls for emergencies, terminations and the like). The standard offer should be a fixed-price basis that is 7% lower than the applicable EDC's default service price-to-compare (from date the offer is made). The standard offer and corresponding contract terms must be uniform within an EDC's service territory and be offered for a period of four to twelve months. EDCs cannot assess a termination fee or penalty on customers that leave the program early. When the standard offer contract has expired, the customer should remain with the EGS on a month-to-month basis, provided the customer has not made an affirmative decision to switch back to EDC default service or switch to another EGS. Participating EGSs will be responsible for the costs of maintaining the referral program, although the Commission agrees that PECO's proposal to recover costs through the discount on the POR is also an acceptable recovery mechanism.

Retail Opt-In Auction

The Implementation Plan requires that EDCs implement a Retail Opt-In Auction. The EGSs will voluntarily bid into the auction to provide retail service to customers that have volunteered to participate within a specific EDC's service area, for a period of six months commencing on or after June 1, 2013. The Commission sees this auction as a method of increasing customer participation in the electric retail market while minimizing the cost of new customer acquisition to competitive suppliers. At this time, the auction will only include residential customers. While shopping residential customers may participate in the auction, all marketing and consumer education efforts will be focused on residential default service customers. No more than 50% of each EDC's residential default service customers may participate in that EDC's respective auction. Furthermore, to maintain EGS diversity, no supplier may provide service to more than 50% of participating customers. To encourage customer participation in the auction, EGSs will offer a fixed-price contract that is at least 5% lower than the EDC's default price-to-compare (as of the auction date) and provides the customer with a $50 bonus payment that will be paid after the third billing cycle. EDCs may not impose termination fees or penalties for customers who wish to purchase electricity from another EGS or return to the EDC's default service within the six-month period, although customers terminating prior to the third billing cycle will not receive the bonus payment. At the end of the six-month period, customers will be notified on two separate occasions that the program period, and corresponding fixed-price product, is ending. The customer will remain with that EGS on a month-to-month basis, unless they affirmatively chose another supplier or return to the EDC's default service. The EGS can impose new terms and conditions on the customer once the initial six-month period has ended provided the EGS notifies the customer of the new contract and the new contract does not impose a termination fee or penalty. The Intermediate Plan requires that each EDC file a report with the Commission after the auction and upon the expiration of the six-month service period containing information regarding customer participation, customer feedback, program costs and EGS participation.

Open Issues

The Commission decided to postpone issuing any rules in the Intermediate Plan with respect to three issues. The first open issue is the acceleration of the supplier switching timeframe. The PaPUC issued a proposal regarding accelerating the switching timeframe in its Tentative Order, but the PaPUC is still reviewing stakeholder comments on that proposal and intends to resolve the issue at a later point. The second open issue is the ability of EGSs access to specific customer bills when trouble-shooting billing issues. The Commission directs the PaPUC's Office of Competitive Market Oversight ("OCMO") to initiate a working group to determine whether an EGS should be permitted to obtain a copy of a customer bill from the EDC so that the EGS can promptly respond to a customer billing concern. The last open issue is requiring an EGS to post credit instruments when that EGS does not meet creditworthiness standards. The Commission directs the OCMO to form a Risk Assessment Working Group to examine whether the credit instruments that an EGS must post when it does not meet the creditworthiness standards accurately reflect the nature of the risk that EDCs face in having to provide adequate coverage for market exposure and other fees in the event of an EGS default.

Observations

The Intermediate Plan only addresses short-term issues regarding competition in Pennsylvania's retail electric market. The PaPUC intends on implementing long-term improvements that will create the robust competitive market conceived by the legislature when it created the competitive market. The PaPUC is holding an en banc hearing on March 21, 2012 to provide stakeholders an opportunity to highlight or summarize their positions on key issues that the Long-Range Work Plan will address, including three PaPUC-proposed End State Default Service Models.

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