NOTICES
PENNSYLVANIA PUBLIC
UTILITY COMMISSION
Electric Distribution Company Default Service Plans—Customer Assistance Program Shopping
[53 Pa.B. 3173]
[Saturday, June 10, 2023]Public Meeting held
April 20, 2023Commissioners Present: Gladys Brown Dutrieuille, Chairperson; Stephen M. DeFrank, Vice Chairperson; Ralph V. Yanora; Kathryn L. Zerfuss; John F. Coleman, Jr.
Electric Distribution Company Default Service Plans—
Customer Assistance Program Shopping;
Docket No. M-2018-3006578
Order By the Commission:
On February 28, 2019, the Pennsylvania Public Utility Commission (Commission) issued an Order at the above-captioned docket proposing the creation of a new policy statement addressing the issue of allowing customers participating in electric distribution company (EDC) Customer Assistance Programs (CAP) to shop for electric supply under certain conditions1 and solicited comments from interested stakeholders.2 With this Order, the Commission withdraws the Proposed Policy Statement and closes this proceeding on CAP shopping, without issuing a policy statement.
Background
CAP Shopping
EDCs are required to offer universal service and energy conservation programs that are developed, maintained, and appropriately funded to ensure affordability and cost-effectiveness.3 The portfolio of universal services includes CAP, which provides lower monthly payments and arrearage forgiveness for eligible low-income customers.4
The Public Utility Code (Code) also provides for competition in the retail electric market.5 As part of the current competitive market, EDCs provide default service for those customers who have chosen not to switch to an Electric Generation Supplier (EGS).6 EDCs are required to submit default service plans (DSPs) outlining the procurement process and associated programs tied to their provision of default service.7 Over the years, many of these plans have expanded to include a variety of issues, including the manner in which customers participating in EDCs' CAPs participate in the competitive electric market.8
Although individual EDCs' CAPs differ, all EDC CAP participants are at risk of using their CAP benefits more quickly if they are paying rates higher than their EDC's price to compare (PTC). Additionally, all EDCs ultimately recover un-collectables from residential ratepayers through mechanisms such as surcharges or base rates. As such, increased un-collectables resulting from CAP participants incurring generation rates higher than the EDCs' PTCs due to shopping, can increase the rates paid by non-CAP participants.
The Commonwealth Court has held that, pursuant to the Choice Act, the Commission has the authority to place conditions under which CAP participants may shop while still receiving CAP benefits.9
[T]he Choice Act permits PUC to effectively limit competition and choice for low-income customers, provided there are no reasonable alternatives to restricting competition, so that other important policy concerns of the General Assembly, such as access, affordability, and cost-effectiveness, may be served; see 66 Pa.C.S. § 2802(9) (''Electric service is essential to the health and well-being of residents, to public safety and to orderly economic development, and electric service should be available to all customers on reasonable terms and conditions''), [see 66 Pa.C.S. § 2802](10) (''The Commonwealth must, at a minimum, continue the protections, policies and services that now assist customers who are low-income to afford electric service''), [see 66 Pa.C.S. § 2802](17) (''There are certain public purpose costs, including programs for low-income assistance. . .which have been implemented and supported by public utilities' bundled rates. The public purpose is to be promoted by continuing universal service and energy conservation policies, protections and services, and full recovery of such costs is to be permitted through a non-by-passable rate mechanism''); 66 Pa.C.S. § 2804(9) (''Programs under this paragraph shall be subject to the administrative oversight of the commission which will ensure that the programs are operated in a cost-effective manner''). As the General Assembly recognized in Section 2802 of the Choice Act, if CAP customers were given direct access to the competitive market, they would be priced out of the market because they cannot afford to pay the entirety of their bills. [ . . .] We recognize that there is a ''tension'' between competing policy concerns promoting competition and choice, and protecting access, affordability, and cost-effectiveness; however, PUC's approval of [CAP shopping restrictions] seeks to strike a balance between these concerns under the authority the General Assembly gave it through the Choice Act.RESA at 1222-1223 (internal citations omitted) (emphasis added).
Proposed CAP Shopping Policy Statement
In response to evidence that CAP participants and non-CAP participants were being harmed by unrestricted CAP shopping, the Commission proposed the development of a policy statement setting forth uniform guidelines for EDCs' CAP shopping programs. The Proposed Policy Statement Order encouraged EDCs to incorporate the following provisions when designing CAP shopping programs:
1. A requirement that the CAP shopping product has a rate that is always at or below the EDCs' [Price-to-Compare (PTC)] over the duration of the contract between the EGS and the CAP participant.2. A provision that the contract between the EGS and the CAP participant contains no early termination or cancellation fees.3. A provision that, at the end of the contract, the CAP participant may re-enroll with the EGS at a product that meets the same requirements as outlined in numbers 1 and 2 above, switch to another EGS offering a product that meets those requirements, or be returned to default service.Proposed Policy Statement Order at 5.
The Proposed Policy Statement Order further directed EDCs to address the mechanics of CAP shopping in their next default service plan proceedings following the adoption of the proposed policy statement. This directive was intended to avoid impacting current, Commission-approved programs, and to allow for due process for all parties. Proposed Policy Statement Order at 6.
The Proposed Policy Statement Order was published in the Pennsylvania Bulletin on June 15, 2019. See, 49 Pa.B. 3083. Comments were due by July 30, 2019. Reply comments were due by August 14, 2019. The Commission received several comments and reply comments.10
Summary of Comments Submitted to the Proposed Policy Statement Order
Scope and Purpose: Some parties recommended that the proposed CAP Shopping Policy Statement serve only as guidance and not mandate that utilities have CAP shopping programs. DLC Reply Comments at 2, UGI Comments at 3. Other parties asserted that CAP shopping should be prohibited entirely, in the interests of protecting low-income customers from harm. CAUSE-PA/TURN Comments at 1, PPL Reply Comments at 4. There were also comments proposing that should the Commission mandate CAP shopping, then EDCs with fewer than 100,000 customers, as well as combined gas-electric utilities, be granted a waiver from having to allow CAP participant shopping. UGI Comments at 3-4.
Enforcement of CAP Shopping Rules: Parties differed on which entities should be responsible for enforcing CAP shopping rules. Certain parties argued that EDCs should be required to monitor CAP shopping enrollments and cancellations, and enforce their CAP shopping rules with safeguards to ensure that CAP participants are aware of the risks of losing their CAP benefits. CAC Comments at 3-4, CAUSE-PA/TURN Comments at 3, 7, 9—11. EDCs generally took the position that they should not be responsible for policing EGS contracts, and that EGSs should be responsible for ensuring that their contracts comply with the EDC's CAP shopping rules and educate prospective CAP shopping customers about the risks of shopping. DLC Comments at 6-7, EAP Comments at 3-4, FirstEnergy Comments at 1—5, PECO Comments at 1—4, PPL Comments at 9-10, UGI Comments at 5—7. Some commentors proposed that the Commission have primary responsibility for providing oversight and enforcement of the Commission's CAP shopping regulations. EAP Reply Comments at 2-3, RESA Comments at 16—19.
CAP Shopping Program Design:
Cost Recovery/Allocation: EDCs generally proposed that such costs be covered by EGSs. EAP Comments at 3-4, UGI Comments at 7. EGSs objected to cost recovery of CAP shopping from EGSs and proposed that such costs could be recovered by EDCs through their universal service and default service plans. RESA Comments at 15.
Pricing of EGS Rates: EDCs and consumer advocate groups supported limiting the rates that EGSs could charge CAP shopping customers to at or below the incumbent EDC's PTC. CAUSE-PA/TURN Comments at 3, 11—15; EAP Comments at 5. EGSs opined that limiting CAP shopping rates ignores the potential benefits to low-income consumers that EGSs can offer through non-basic products and services. RESA Comments at 1—8, WGL Comments at 1—3.
CAP Shopping Eligibility: Due to the vulnerability of low-income customers, EDCs and consumer advocacy groups generally opposed the proposal to automatically disqualify low-income customers from CAP participation should they chose to enter into a contract for an EGS product that does not comply with CAP shopping rules. CAUSE-PA/TURN Comments at 5—9, DLC Comments at 4-5, 7; OCA Comments at 8; UGI Comments at 9.
Timing: In addition to addressing the specific questions set forth, some stakeholder expressed concern about the timing of the Proposed Policy Statement Order, given that, at the time comments were due, the Commission had other open dockets related to assistance programs for low-income customers11 and was also conducting a review of the CAP Policy Statement (52 Pa. Code §§ 69.261—69.267). DLC Comments at 2-3. As such, stakeholders suggested that the Commission delay adoption of the CAP Shopping Policy Statement until after finalization of the CAP Policy Statement and other low-income initiatives. DLC Comments at 3, EAP Comments at 4-5, PECO Reply Comments at 4.
Disposition of Related Proceedings
The proceedings at Energy Affordability for Low-Income Customers, Docket No. M-2017-2587711 and Review of Universal Service and Energy Conservation Programs, Docket No. M-2017-2596907, that concluded in 2019, involved a comprehensive review of the policies, practices, and procedures of Pennsylvania's universal service and energy conservation programs, including the impact of those programs on energy affordability for low-income customers and the costs of the programs to other customers. Thereafter, the Commission approved several amendments to the CAP Policy Statement.12 The amendments to the CAP Policy Statement became effective on March 21, 2020, and are codified at 52 Pa. Code §§ 69.261—69.267.
The Commission has fully disposed of the most recent round of EDC DSPs, most of which addressed CAP shopping.13 The Commission's disposition of CAP shopping in these respective DSP proceedings is summarized below.
DLC: The Commission permitted DLC to defer implementation of CAP shopping until the Commission provided more guidance through the Policy Statement on CAP Shopping becoming final and effective. DLC stated that it would comply with the provisions of the Policy Statement on CAP shopping provided that the Commission called for CAP shopping within all EDCs' service territories.14FirstEnergy: The Commission approved the elimination of CAP shopping in the FirstEnergy Companies' service territories, effective June 1, 2023. From that date forward, FirstEnergy CAP customers will receive default service at the applicable PTC.15PPL: The Commission approved PPL's proposal to eliminate CAP shopping, as beneficial to both CAP participants and other residential customers by ensuring that (1) CAP participants do not exhaust their CAP credits more quickly by shopping at rates above the PTC and (2) other residential customers are not responsible for higher CAP shortfalls. However, PPL stated that, should the Commission's Proposed Policy Statement ultimately direct differently than what PPL proposed in its DSP, PPL will amend its DSP with respect to CAP shopping to be consistent with the Commission's guidelines.16PECO: The Commission approved PECO's proposal to defer submission of a CAP shopping proposal until 90 days after the Commission's issuance of a final, non-appealable Opinion and Order at Docket No. M-2018-3005795 approving, modifying, or rejecting PECO's proposal to redesign its CAP program from its existing Fixed Credit Option (FCO) design to a Percent of Income Payment Plan (PIPP).17On September 8, 2022, PECO filed a Petition seeking to continue deferral of CAP shopping implementation in its service territory until the Commission issues its final Policy Statement on CAP Shopping.18Discussion
The Commission's policy statements pertaining to fixed utilities are set forth at 52 Pa. Code §§ 69.1—69.3701. Unlike the statutory provisions of the Code and the Commission's regulations and orders, policy statements are non-binding recommendations that do not have the force of law. See 66 Pa.C.S. §§ 501, 703.
While the Proposed Policy Statement and related universal service proceedings were under consideration, the Commission reviewed CAP Shopping in PPL's DSP V and FirstEnergy's DSP VI proceedings based on specific record evidence presented by the parties in those cases. Accordingly, rather than considering in the abstract whether CAP shopping could provide CAP customers with opportunities to reduce their electric utility bills, the Commission was able to analyze the documented impact of CAP shopping on CAP customer and ratepayer bills, levels of EGS participation, and cost-effectiveness for two large EDCs to administer CAP shopping programs. We briefly review what was found in these proceedings below.
Impact on CAP Participants and Ratepayers
PPL DSP V
In the PPL DSP V proceeding, PPL proposed to eliminate its CAP Standard Offer Program (CAP SOP) and return all CAP customers to default service. PPL's CAP SOP was established in PPL's DSP IV proceeding19 to mitigate the impacts of shopping by CAP customers by requiring all CAP customers who wish to shop to do so through the CAP SOP. EGSs that chose to participate in the CAP SOP were required to serve customers at a 7% discount off the PTC at the time of enrollment. However, the shopping rate could exceed the PTC if the PTC dropped by more than 7% during the term of the CAP SOP contract. CAP SOP customers also had the right to terminate the contract without payment of termination fees. The Commission approved the CAP SOP, and the Commonwealth Court affirmed the Commission's decision on appeal in RESA. The CAP SOP was implemented on June 1, 2017, and remained in effect through May 31, 2021. PPL DSP V Order at 103-104.
Evidence presented in the PPL DSP VI proceeding demonstrated that, despite its built-in protections, the CAP SOP program resulted in both CAP participants and other residential customers suffering harm. Evidence presented by PPL demonstrated that as of January 2020, 7,975 of PPL's CAP participants were shopping with an EGS outside of CAP SOP because they entered CAP with a pre-existing contract, and that 62% of these customers were paying rates more than the PTC. As such, while PPL's CAP SOP could protect CAP participants from in-program shopping, it did not protect customers that were shopping before entering CAP from paying more than the PTC. Further, PPL presented evidence that CAP participants paying more than the PTC were likely to shorten the duration of their CAP credits, resulting in residential customers paying higher subsidies into PPL CAP due to rates above the PTC. Specifically, PPL presented evidence that CAP participants' shopping resulted in additional costs to other residential customers of $4.3 million and $2.9 million in 2018 and 2019, respectively. PPL DSP V Order at 125-126.
FirstEnergy DSP VI
Similarly, certain parties in the FirstEnergy DSP VI proceeding, reached a Partial Settlement proposing to prohibit CAP customers from shopping. In FirstEnergy's previous DSP V proceeding, the Commission, after reviewing data that showed CAP participants who shopped were charged $18.3 million more than the default service price over a 5-year period, and accordingly, approved comprehensive CAP shopping rules that restricted the ability of CAP customers to contract for supplier prices in excess of the PTC.20 However, under those rules, customers that entered FirstEnergy's CAP with pre-existing, fixed-duration EGS contracts at prices above the PTC were permitted to remain with that supplier until the end of the contract term or, in the case of pre-existing month-to-month contracts, for 120 days after CAP enrollment. FirstEnergy DSP VI RD at 89.
Evidence presented in the FirstEnergy DSP VI proceeding demonstrated that since June 2019, when FirstEnergy's CAP shopping rules were implemented, CAP shopping customers across the four FirstEnergy Companies paid $4,022,308.41 more than the applicable PTC. When broken down in per customer terms, CAP shopping customers paid on average between $520.62 (Penelec) and $1,316.46 (MetEd) more than the applicable default service price from July 2019 to December 2021. These high prices increased rates of payment troubled CAP participants, involuntary terminations, and uncollectible expenses recovered from all residential ratepayers. In 2021, two years after FirstEnergy implemented its CAP shopping rules, the average write-off balance for CAP shopping accounts was $1,876.11, compared to $1,038.69 for CAP default service accounts. In that same year, 9.4% of CAP shopping customers were payment troubled, while just 1.8% of CAP default service customers were payment troubled; and 29.5% of CAP shopping customers were involuntarily terminated, compared to 8.8% for CAP default service customers. FirstEnergy DSP VI RD at 87-88.
The data presented in the PPL DSP V and FirstEnergy DSP VI proceedings demonstrate that in those two EDC service territories, even with restrictions, CAP shopping harmed both CAP participants and other residential ratepayers due to CAP participants paying more for generation than the PTC.
Low EGS Participation in CAP Shopping
PPL suffered difficulty in administering the CAP SOP due to a lack of EGS participation. PPL presented testimony in its DSP V proceeding that EGS participation was minimal and the EGSs that did participate only did so for a short time. From June 2017 through November 2017, two EGSs participated in the CAP SOP; from December 2017 through May 2018, one EGS participated in the CAP SOP; from June 1, 2018 through February 29, 2020, no EGSs participated in the CAP SOP; and beginning March 1, 2020, one EGS began participating in the CAP SOP. PPL DSP V Order at 125-126.
The results of PPL's CAP SOP demonstrates that EGSs are reluctant to participate in CAP shopping programs that limit the rates they charge to at or below the PTC. As such, an EDC's programming costs to administer a CAP shopping program, which are ultimately borne by other residential ratepayers, may be inefficiently spent on a program that, due to the need to protect CAP participants and ratepayers from harm, lacks design elements that would incentivize EGS participation.
No Reasonable Alternatives
In the PPL DSP V proceeding, the Commission found that no other parties presented reasonable alternatives to PPL's proposal to eliminate the CAP SOP and return all CAP participants to default service at the PTC rate. PPL DSP V Order at 125. Specifically, the Commission found that none of the parties provided alternative proposals that were supported by substantial evidence showing that they were reasonable and workable, particularly given the difficulties PPL experienced with the CAP SOP. PPL DSP V Order at 126.
Conclusion
Given the outcomes of CAP shopping in the service territories of PPL and FirstEnergy, we find that issuing a policy statement on CAP shopping guidelines is not warranted at this time. Accordingly, we will withdraw the Proposed Policy Statement, discontinue this proceeding, and close the docket. However, EDCs and other parties are still free to propose CAP shopping in the EDCs' respective DSP proceedings. Such proposals will be subject to review on a case-by-case basis by interested stakeholders and the Commission. Therefore,
It is Ordered That:
1. The Proposed Customer Assistance Program Shopping Policy Statement issued at this docket on February 28, 2019 is withdrawn.
2. The proceedings at Docket No. M-2018-3006578 be discontinued.
3. Docket M-2018-3006578 be marked closed.
ROSEMARY CHIAVETTA,
SecretaryORDER ADOPTED: April 20, 2023
ORDER ENTERED: April 20, 2023
[Pa.B. Doc. No. 23-781. Filed for public inspection June 10, 2023, 9:00 a.m.] _______
1 This is commonly referred to as CAP shopping.
2 Electric Distribution Company Default Service Plans—Customer Assistance Program Shopping, Docket No. M-2018-3006578 (Order entered February 28, 2019) (Proposed Policy Statement Order).
3 66 Pa.C.S. §§ 2802(10) (relating to declaration of policy), 2804(9) (relating to standards for restructuring of electric industry).
4 For the purposes of this policy statement, low-income customers are households that are at or below 15017f the Federal Poverty Income Guidelines (FPIG). See U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs—https://aspe.hhs.gov/poverty-guidelines.
5 Electricity Generation Customer Choice and Competition Act, 66 Pa.C.S. §§ 2801—2815 (relating to restructuring of electric utility industry) (Choice Act).
6 See 66 Pa.C.S. § 2807(e) (relating to obligation to serve). See also, 52 Pa. Code §§ 54.182—54.190 (relating to default service).
7 See 66 Pa.C.S. § 2807(e)(6) (relating to obligation to serve). See also, 52 Pa. Code § 54.185 (relating to default service programs and periods of service).
8 See Petition of PECO Energy Company for Approval of its Default Service Program for the Period from June 1, 2017 through May 31, 2021, et al., Docket Nos. P-2016-2534980, et al. (PECO DSP IV); Petition of Duquesne Light Company for Approval of a Default Service Plan for the Period June 1, 2016 to May 31, 2021, Docket No. P-2016-254310. Joint Petition of Metropolitan Edison Company, Pennsylvania Electric Company, Pennsylvania Power Company, and West Penn Power Company for Approval of their Default Service Programs for the Period Beginning June 1, 2019 through May 31, 2023, Docket Nos. P-2017-2637855, et al.; Petition of PPL Electric Utilities Corporation for Approval of a Default Service Program and Procurement Plan for the Period of June 1, 2017 through May 31, 2021, Docket No. P-2016-2526627.
9 See, Retail Energy Supply Ass'n. v. Pa. Pub. Util. Comm'n, 185 A.3d 1206 (Pa. Cmwlth. 2018) (RESA).
10 The Commission received comments from the following EDCs: Metropolitan-Edison Company, Pennsylvania Electric Company, Pennsylvania Power Company, and West Penn Power Company (collectively, FirstEnergy); Duquesne Light Company (DLC); PPL Electric Utilities Corporation (PPL); UGI Utilities, Inc.—Electric Division (UGI); and PECO Energy Company (PECO), as well as from the Energy Association of PA (EAP). The Commission also received comments from electric generation suppliers (EGSs), represented by the Retail Energy Supply Association (RESA), and individually from WGL Energy Services, Inc. (WGL). In addition, the Commission received comments from the Office of Consumer Advocate (OCA), the joint comments of the Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania (CAUSE-PA) and the Tenant Union Representative Network and Action Alliance of Senior Citizens of Greater Philadelphia (TURN et al.) (collectively, CAUSE-PA/TURN.); and the Consumer Advisory Council (CAC). Reply comments were filed by DLC, PPL, UGI, PECO, EAP, RESA, WGL, OCA, and CAUSE-PA/TURN.
11 Energy Affordability for Low-Income Customers, Docket No. M-2017-2587711, and Review of Universal Service and Energy Conservation Programs, Docket No. M-2017-2596907.
12 2019 Amendments to Policy Statement on Customer Assistance Program, 52 Pa. Code § 69.261—69.267, Docket No. M-2019-3012599 (Final Policy Statement and Order entered November 5, 2019).
13 CAP shopping was not addressed in UGI Electric's most recent DSP. Petition of UGI Utilities, Inc.—Electric Division for Approval of a Default Service Plan for the Period of June 1, 2021 through May 31, 2025, Docket No. P-2020-3019907 (Opinion and Order entered January 14, 2021).
14 Petition of Duquesne Light Company for Approval of its Default Service Plan for the Period from June 1, 2021 through May 31, 2025, Docket No. P-2020-3019522 (Opinion and Order entered January 14, 2021), at 96-97.
15 Petition of Metropolitan Edison Company for Approval of Its Default Service Plan for the Period From June 1, 2023 through May 31, 2027, Docket No. P-2021-3030012; Petition of Pennsylvania Electric Company for Approval of Its Default Service Plan for the Period From June 1, 2023 through May 31, 2027, Docket No. P-2021-3030013; Petition of Pennsylvania Power Company for Approval of Its Default Service Plan for the Period From June 1, 2023 through May 31, 2027, Docket No. P-2021-3030014; Petition of West Penn Power Company for Approval of Its Default Service Plan for the Period From June 1, 2023 through May 31, 2027 (FirstEnergy DSP VI), Docket No. P-2021-3030021 (Opinion and Order adopting the ALJ's June 29, 2022 Recommended Decision (FirstEnergy DSP VI RD) entered August 4, 2022).
16 Petition of PPL Electric Utilities Corporation for Approval of Its Default Service Plan For the Period June 1, 2021 Through May 31, 2025 (PPL DSP V), Docket No. P-2020-3019356 (Opinion and Order entered December 17, 2020) (PPL DSP V Order), at 114-115, 129-130.
17 PECO Energy Company Universal Service and Energy Conservation Plan for 2019—2024 Submitted in Compliance with 52 Pa. Code §§ 54.74 and 62.4., Docket No. M-2018-3005795 (Opinion and Order entered June 16, 2022), at 19—41, 103—107.
18 PECO's Petition was docketed at P-2022-3035092. Petitions to Intervene and Answers in support of PECO's Petition were filed on September 28, 2022, by the OCA, the CAUSE-PA, and TURN.
19 See Petition of PPL Electric Utilities Corporation For Approval of a Default Service Program and Procurement Plan for the Period June 1, 2017 Through May 31, 2021, Docket No. P-2016-2526627 (Order entered October 27, 2016) (PPL DSP IV Order) at 53—55.
20 See Joint Petition of Metro. Edison Co., Pa. Elec. Co., Pa. Power Co., and West Penn Power Co. for Approval of Their Default Serv. Programs for the Period Beginning June 1, 2019 through May 31, 2023, Docket Nos. P-2017-2637855 et al. (Opinion and Order entered Sept. 4, 2018) (September 2018 Order). In the September 2018 Order, the Commission approved a partial settlement of the Companies' DSP V proceeding (DSP V Settlement) and resolved the remaining contested issues, including shopping by customers enrolled in each Company's CAP. On February 28, 2019, the Commission entered a Final Order (''February 2019 Order'' and together with the September 2018 Order, the ''DSP V Orders'') adopting rules and procedures for the CAP shopping programs approved in the September 2018 Order.
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