/ STATE OF CONNECTICUT
PUBLIC UTILITIES REGULATORY AUTHORITY
TEN FRANKLIN SQUARE
NEW BRITAIN, CT 06051
Docket No. 15-06-1515-06-15 / PURA Variable Electric Rate StudyPURA Variable Electric Rate StudySeptember 30, 2015
By the following Commissioners:
Michael A. CaronJohn W. Betkoski, III
Arthur H. House
Lead Staff: C. Winchell
Legal Advisor: K. Boucher
INTERIM DECISION
Docket No. 15-06-15 / Page 11INTERIM DECISION
I. INTRODUCTION
A. Summary
The Public Utilities Regulatory Authority herein provides interim guidance on the application of recent legislation banning licensed electric suppliers from offering or renewing residential contracts containing variable pricing.
B. Background of the Proceeding
Public Act 15-90, An Act Concerning Variable Electric Rates, was signed into law on June 23, 2015, and was subsequently amended by Section 108 of June Special Session Public Act 15-5, An Act Implementing Provisions of the State Budget for the Biennium Ending June 30, 2017, Concerning General Government, Education, Health and Human Services and Bonds of the State (collectively, “the Act”). The Act states:
Section 1.
Subsection (g) of section 16-245o of the general statutes is amended by adding subdivision (4) as follows (Effective from passage):
(NEW) (4) On and after October 1, 2015, no electric supplier shall (A) enter into a contract to charge a residential customer a variable rate for electric generation services; or (B) automatically renew or cause to be automatically renewed a contract with a residential customer and, pursuant to such contract, charge such customer a variable rate for electric generation services.
Section 2.
Section 16-245o of the general statutes is amended by adding subsections (n) and (o) as follows (Effective from passage):
(NEW) (n) As used in this section, "residential customer" means a customer who contracts with an electric supplier for generation services at residential premises for domestic purposes only.
(NEW) (o) On or before October 1, 2015, the Public Utilities Regulatory Authority shall initiate a proceeding to develop recommendations and guidance regarding (1) what type of generation services rate structure is best suited for residential customers who allow a fixed contract with an electric supplier to expire and begin paying a month-to-month rate for generation services from such supplier; and (2) what change to the generation services rate and to the terms and conditions of such service that customers may experience after the expiration of a fixed contract when such customers begin paying a month-to-month rate. The authority shall report, in accordance with the provisions of section 11-4a, the findings of such proceeding to the joint standing committee of the General Assembly having cognizance of matters relating to energy, on or before January 1, 2016.
C. Conduct of the Proceeding
On its own motion, on June 25, 2015, the Public Utilities Regulatory Authority (PURA or Authority) opened the instant proceeding. By Notice dated July 6, 2015, the Authority asked for written comments, requesting that participants address the ramifications of the Act, including month-to-month generation service rate structures, contracts, the sunsetting of residential variable rate contracts and related matters. Pursuant to a motion dated July 15, 2015, the Authority on July 16, 2015, granted all participants an extension of time to file written comments until July 31, 2015.
The Authority held a Technical Meeting on this matter on August 11, 2015, at its offices at Ten Franklin Square, New Britain, CT. During the Technical Meeting, participants offered diverse positions on the meaning and effect of the Act. Based upon the comments aired at the Technical Meeting, the Authority deemed it appropriate to issue an interim ruling in this matter to guide implementation of the Act. By Notice dated August 19, 2015, the Authority provided participants the opportunity to submit briefs and reply briefs on supplier contract changes necessary to comport with the Act. The Authority issued a Proposed Interim Decision on September 9, 2015. Participants were provided the opportunity to comment on the Proposed Interim Decision and present Oral Arguments.
D. Participants
The Authority recognized the following as participants to this proceeding: all licensed electric suppliers, the Office of Consumer Counsel, Ten Franklin Square, New Britain, CT 06051; The United Illuminating Company, P.O. Box 1564, New Haven, CT 06506-0901; Eversource, 107 Selden Street, Berlin, CT 06037; AARP CT, 21 Oak Street, Suite 104, Hartford, CT 06106; and the Commissioner of the Department of Energy and Environmental Protection, 79 Elm Street, Hartford, CT 06106.
E. Public Comment
Subsequent to the Technical Meeting, by motion dated August 17, 2015, AARP requested that the Authority hold field hearings across the state to allow for public comment on this proceeding.[1] On August 20, 2015, the Authority ruled on the motion and indicated its intent to hold a single field hearing, which has been scheduled for 6:00 p.m. on October 20, 2015 at the Legislative Office Building. The Authority also invited the public to submit written comments in the instant docket.
II. Positions of Parties
A. The National Energy Marketers Association
The National Energy Marketers Association (NEM) states that the Act should not be interpreted to have a retroactive effect on contracts entered into prior to October 1, 2015. According to NEM, the Act does not require and should not be interpreted to require an automatic return to Standard Service after the expiration of a fixed contract. Additionally, NEM states that the law should be interpreted to permit a fixed contract that automatically renews at a month-to-month rate. NEM also notes that the Act includes no explicit reference to additional customer notification requirements, and as a result, contracts signed on and after October 1, 2015, should reflect only changes mandated by the Act and will require no additional notifications. NEM Written Comments, pp. 24, and8.
B. The Competitive Supplier Working Group
The Competitive Supplier Working Group (Supplier Working Group)[2] maintains that the Act does not apply a variable rate prohibition to existing contracts and that contracts signed before October 1, 2015 should remain unchanged. Therefore, the Supplier Working Group requests that the Authority clarify that residential supplier contracts and related renewal provisions entered into before October 1, 2015, are not affected by Section1 of the Act. The Supplier Working Group notes that because the Act targets residential customers, suppliers can continue offering variable rates to nonresidential customers, as well as any residential contract entered into prior to October 1, 2015. Supplier Working Group Written Comments, p.3; Supplier Working Group Brief, p.1.
The Supplier Working Group believes that upon renewal of a fixed term contract signed on or after October 1, 2015, customers should be allowed full control over whether to continue with their supplier, return to Standard Service, or switch to another supplier. The Supplier Working Group states that customer options in this scenario “would include: (a) autorenewing to a fixed price product or a monthtomonth product (b) affirmatively choosing a fixed or variable product or (c) returning to the utility Standard Service.” The Supplier Working Group argues that requiring suppliers to retain customers at the same rate as the original fixed rate would result in an “indefinite price lock” and is not a viable option. Such an option would be detrimental to retail choice customers and prejudicial to suppliers. Supplier Working Group Brief, pp.711.
C. AARP CT
AARP CT (AARP) states that the plain language and intent of the Act is to “ban residential variable electric rates, period.” AARP is convinced that suppliers should not be allowed to automatically renew residential customers to a fixed term contract when a customer fails to respond to a renewal notice. A customer’s silence should not provide suppliers the opportunity to retain that customer and charge a rate that does not reflect an affirmative consent to the contractual agreement. AARP recommends that this policy be prohibited, and in lieu of automatic renewal to variable rates, suppliers could return the customer to Standard Service or offer a new contract that meets the requirements of the statute and await the customer’s response. If the policy of automatic renewal is allowed to continue, AARP recommends that suppliers charge a monthtomonth rate not to exceed the Standard Service rate, or establish a fixed monthtomonth rate for a minimum of three months. AARP Written Comments, pp. 2and3.
AARP requests that the Authority prohibit suppliers from retaining any residential customer without affirmative customer consent. AARP also believes suppliers should be prohibited from imposing cancellation or early termination fees on any monthtomonth rate. Id.
D. The United Illuminating Company
The United Illuminating Company (UI) recommends that the Authority align its decision in this docket with those of various related dockets, most notably Docket Nos. 140719, PURA Investigation into Redesign of the Residential Electric Billing Format and 140719RE01, PURA Investigation into Redesign of the Residential Electric Billing Format – Billing Format Clarifications. UI believes that responsibility for enforcing, policing, managing and implementing the Act belongs to licensed suppliers. UI Written Comments, p.3.
E. Eversource
Eversource interprets Section 1 of the Act to mean that a supplier and customer remain free to enter into a longterm variable rate contract at any time before October 1, 2015. For contracts executed after October 1, 2015, Eversource believes that an automatic return to electric distribution company (EDC) Standard Service seems to contradict the customer’s wishes, since the customer made a choice to receive service from a retail electric supplier. Eversource plans to notify customers about changes in the electric retail industry as a result of the Act. Specifically, it plans to update its website and use bill inserts and email notifications to inform customers of these changes. Eversource believes the EDCs should not be put in the position of policing the activities of the electric suppliers. Eversource Written Comments, pp.35.
F. Ambit Energy
Ambit Energy (Ambit) supports the Written Comments submitted by NEM and the Supplier Working Group, but also submitted standalone comments. Ambit states that contracts renewed after October 1, 2015 should not require that suppliers maintain the original rate or price. According to Ambit, this policy would inhibit proper functioning of the competitive marketplace and severely limit a supplier’s ability to price independently, based on market conditions and wholesale prices. Instead, Ambit believes that such contracts should be renewed at current market rates at the time of expiration, on a monthtomonth basis, for a term equaling the length of the initial term. Additionally, Ambit suggests that no cancellation or switching fees should be allowed. Ambit Written Comments, p.2.
Ambit also believes that customers should not be returned to Standard Service at the expiration of their contract term. Ambit states that automatically moving a customer to Standard Service would nullify customer choice. Ambit believes customers choose a retail electric generation provider with the intent that they remain with the supplier until they decide otherwise. Id.
G. The Office of Consumer Counsel
The Office of Consumer Counsel (OCC) believes that the intent of the Act is to ban variable rates in residential contracts effective October 1, 2015, and that variable rates include prices that that are subject to change in each billing cycle, commonly referred to as monthtomonth rates. OCC acknowledges that Section 2 of the Act creates some confusion in this regard. According to OCC, this specific provision directs that the Authority provide recommendations and guidance about month-to-month rates in its report to the General Assembly due January 1, 2016. However, OCC maintains that the Section 1 ban on residential variable rates eliminates rates that vary monthly as an option for contracts entered into after October 1, 2015. OCC Brief, pp.36.
OCC argues that comments by the Supplier Working Group support an interpretation that the General Assembly banned rates that vary from one cycle to the next. OCC cites the Supplier Working Group’s July 31, 2015 Written Comments which state that under the new law, “the only required change to new supplier contracts (i.e., contracts entered into on or after October 1, 2015) would be to ensure that those contracts do not contain terms pursuant to which customers would be required to pay a variable price either at the outset or upon renewal.”[3] The alternative for suppliers in the postOctober 1, 2015 residential market is to renew the customer into a new fixed rate, pursuant to all previously established rules governing such contracts. Id.; OCC Reply Brief, p.2.
H. The Office of the Attorney General
The Office of the Attorney General (AG) believes that any contract renewed after October 1, regardless of whether it was signed before or after that date, is affected by the Act. Further, the AG advocates that all variable pricing is banned after October 1, 2015. The AG goes on to assert that changing existing contracts between residential customers and licensed electric suppliers to eliminate variable pricing after October 1, 2015 is not a substantial impairment or a violation of the Contracts Clause of the United States Constitution. AG Letter in Lieu of Reply Brief, pp. 2-3.
III. AUTHORITY ANALYSIS
A. Background on the Current Retail Electric Market
The electric retail market has gone through substantial change since its inception. Because of New England’s reliance on gas-fired generation, natural gas typically drives the price for wholesale electricity in the region.[4] As a result of the “Polar Vortex” in the winter of 2013-2014, New England experienced sharp increases in wholesale electric prices,[5] some of which were passed on to retail customers in the form of higher-than-expected monthly variable rates. The Polar Vortex exacerbated an emerging problem in the retail choice market: customers surprised by dramatic variable rate product fluctuations in response to spikes in the wholesale market. Many retail choice customers have since left the market and returned to, and remain on, EDC Standard Service.
On its own initiative and in response to legislative directives, the Authority has since implemented additional consumer protections to enable all retail choice customers (particularly residential customers) to make timely and informed decisions about their preferred supplier of generation service. Among those protections is a ban on DailyVariable and Weekly-Variable pricing.[6] Customers now receive substantive notice 30-60 days prior to the expiration of their fixed price term, along with information about available pricing options as contracts near term sunset.[7] Most recently, new information has been added to the first page of monthly residential electric bills issued by Eversource and UI including the current Standard Service rate and the rate a customer is being charged by his generation service supplier.[8] The Authority has also revised the Rate Board, and continues to change its website to better inform and assist all retail choice customers.[9] The Authority has opened several dockets including Docket Nos. 13-07-18RE01, PURA Establishment of Rules for Electric Suppliers and Electric Distribution Companies Concerning Operations and Marketing in the Electric Retail Market – Reconsideration of Limited Issues, and 14-07-20RE01, PURA Development and Implementation of Marketing Standards and Sales Practices by Electric Suppliers - Revised Standards, to set clear expectations and guidelines for the retail choice market.