RULES AND REGULATIONS
Title 52—PUBLIC UTILITIES
PENNSYLVANIA PUBLIC UTILITY COMMISSION
[ 52 PA. CODE CH. 54 ]
[ L-2017-2628991 ]
Rulemaking Regarding Electricity Generation Customer Choice
[50 Pa.B. 3861]
[Saturday, August 1, 2020]Executive Summary
The Commission adopted this Final Rulemaking Order on February 27, 2020, to amend the customer information regulations at 52 Pa. Code §§ 54.3, 54.5, 54.7 and 54.10 providing for standards and pricing practices for retail electric services; a disclosure statement for residential and small business customers; marketing/sales activities; and the provision of notices of contract expiration or changes in terms for residential and small business customers. With this Final Rulemaking Order, the Commission enhances these rules to provide customers ample protections and the necessary information to make informed decisions when shopping in Pennsylvania's competitive retail electricity market. As such, the Commission is amending its regulations to align its electric supplier regulations with the existing natural gas supplier regulations. In addition, the Commission is prohibiting the imposition of early termination fees once a supplier provides to customers the contract options notice required by 52 Pa. Code § 54.10(2). Furthermore, the Commission is requiring suppliers to disclose how they will handle customer account information and whether a contract is assignable.
Public Meeting held
February 27, 2020Commissioners Present: Gladys Brown Dutrieuille, Chairperson; David W. Sweet, Vice Chairperson; Andrew G. Place; John F. Coleman, Jr.; Ralph V. Yanora
Rulemaking Regarding Electricity Generation Customer Choice, 52 Pa. Code Chapter 54; L-2017-2628991
Final Rulemaking Order By the Commission:
In this Final Rulemaking Order, the Pennsylvania Public Utility Commission (Commission) amends the customer information disclosure regulations at 52 Pa. Code §§ 54.3, 54.5, 54.7 and 54.10 providing for standards and pricing practices for retail electricity service; a disclosure statement for residential and small business customers; marketing/sales activities; and the provision of notices of contract expiration or changes in terms for residential and small business customers. With this Final Rulemaking Order, the Commission enhances these rules to provide customers ample protections and the necessary information to make informed decisions when shopping in Pennsylvania's competitive retail electricity market.
Background
The Pennsylvania Public Utility Code (Code) requires electric generation suppliers (EGSs) to provide adequate and accurate information to customers. Specifically, Section 2807(d)(2) requires the Commission to:
. . . establish regulations to require each electric distribution company, electricity supplier, marketer, aggregator and broker to provide adequate and accurate customer information to enable customers to make informed choices regarding the purchase of all electricity services offered by that provider. Information shall be provided to consumers in an understandable format that enables consumers to compare prices and services on a uniform basis.66 Pa.C.S. § 2807(d)(2).
Pursuant to this statutory directive, the Commission first issued Interim Requirements in 1997.1 This was followed by promulgated regulations in 1998.2 See 52 Pa. Code §§ 54.1—54.9 (relating to customer information). The regulations at 52 Pa. Code §§ 54.4—54.6 (relating to bill format for residential and small business customers; disclosure statement for residential and small business customers; and request for information about generation supply) were later amended in 2007, after receiving and incorporating comments from numerous stakeholders.3 In 2010, the Commission adopted Interim Guidelines which provided general guidance on the timing and content of advanced notifications that give customers important information about their options prior to the expiration of or a change in terms of their current contract for generation supply.4
In 2014, the Commission adopted amendments to 52 Pa. Code § 54.5 and added 52 Pa Code § 54.10.5 The Commission amended these regulations to ensure, among other things, that future EGS disclosure statements include an EGS Contract Summary of key contractual terms and conditions; additional information regarding variable-priced products, including disclosure of the price to be charged for the first billing cycle of generation service; customer access to historical information; and more specific explanation of limits on variability.
With a December 7, 2017 Notice of Proposed Rulemaking Order (December 2017 NOPR),6 the Commission proposed updates to 52 Pa. Code § 54.5 regarding disclosure statements for residential and small business customers to reflect the evolving competitive electric marketplace. This section of the customer information regulations requires that EGSs provide disclosure statements to residential and small business customers when those customers request an EGS to initiate service, when an EGS proposes to change the terms of service, or when service commences from a default service provider. See 52 Pa. Code § 54.5(b)(1—3). These disclosure statements must include, among other things: the generation charges; conditions of and any applicable limitations on variable prices; explanations of cancellation fees; and information regarding a customer's options upon the expiration of an agreement. See Annex A, § 54.5.
History of the Commission's Review of Its Customer Information Regulations
In September of 2010, the Commission reviewed its customer information regulations and provided Interim Guidelines, as noted previously. In its Interim Guidelines, the Commission provided general guidance on the timing and content of advanced notifications that give customers important information about their options prior to the expiration of or a change in terms of their current contract for generation supply.
Guidelines for Use of Fixed Price Labels
The Commission addressed some supplier pricing, labelling and disclosure issues in the November 2013 Final Order regarding Guidelines for Use of Fixed Price Labels for Products with a Pass-Through Clause.7 This Order, commonly referred to as the ''Fixed Means Fixed'' Order, finalized guidelines on the pricing labels used when selling electric generation service to residential customers. The Commission updated its ''electric competition dictionary,'' which is available on www.PAPowerSwitch.com. The updates provide guidance to electric generation suppliers on the appropriate use of the ''fixed-price'' label when presenting offers to potential customers.
The revised definitions included:
• Fixed Price: An all-inclusive per kWh price that will remain the same for at least three billing cycles or the term of the contract, whichever is longer.• Variable Price: An all-inclusive per kWh price that can change, by the hour, day, month, etc. according to the terms and conditions in the supplier's disclosure statement.• Introductory Price: For new customers, an all-inclusive per kWh price that will remain the same for a limited period of time between one and three billing cycles followed by a different fixed or variable per kWh price that will be in effect for the remaining billing cycles of the contract term, consistent with terms and conditions in the supplier's ''disclosure statement.''Additionally, the Commission addressed what is meant and intended by the phrase ''all-inclusive.'' The Commission reminded suppliers and consumers that to facilitate the comparison of prices on a uniform basis (i.e. apples-to-apples) the Commission developed the concept of the PTC, which is defined at 52 Pa. Code § 54.182:
PTC—Price-to-compare—A line item that appears on a retail customer's monthly bill for default service. The PTC is equal to the sum of all unbundled generation and transmission related charges to a default service customer for that month of service.While this definition specifies its use for default service, the intent is to provide a bundled price that a consumer can use to compare EGS prices. To make an ''apples-to-apples'' comparison possible, it follows that EGS prices should be similarly bundled. The Commission reiterated that the price that an EGS presents to a residential or small business customer is expected to be ''all-inclusive,'' including all of the pricing components found in the PTC for default service customers (generation, transmission where applicable, gross receipts tax, etc.).8 ''Sales tax'' is a notable exception in that it is not bundled within the PTC, but for residential consumers this is usually of no relevance since most residential accounts are exempt from this tax.9
We also emphasized the importance of disclosure and the disclosure regulations at 52 Pa. Code § 54.5 and that disclosures need to be clear, well-organized and in plain language so that consumers have the information they need to make informed decisions. Further, we reminded everyone of the regulation at 52 Pa. Code § 54.7 that requires EGSs to calculate and present to the customer the actual per kWh rate at 500, 1,000 and 2,000 usage levels. This regulation is of relevance if the supplier is using a pricing structure that varies depending upon usage (such as a declining or inclining block rate) and/or the supplier is using flat monthly charges in addition to the PTC that are sometimes referred to as monthly ''service charges'' or ''customer charges.'' This information must be presented to the customer to allow the ''apples-to-apples'' comparison discussed above.10
2014 Polar Vortex
During the winter of 2014, some retail electric customers with variable-rate contracts experienced sharp price increases resulting from price fluctuations in the wholesale and retail electricity markets. In light of this and after a review of the 2010 Interim Guidelines, the Com- mission concluded that codifying, strengthening, and augmenting the 2010 guidelines as expeditiously as possible was in the public interest.
In an Order adopted at its February 20, 2014 Public Meeting, the Commission reaffirmed the General Assembly's directive that EGSs provide:
''. . . adequate and accurate customer information to enable customers to make informed choices regarding the purchase of all electricity services offered by the provider. Information shall be provided to consumers in an understandable format that enables consumers to compare prices and services on a uniform basis.''11In the Variable Rate Order, the Commission expressed concern for customers receiving their electric supply service from an EGS under a contract with a monthly adjusted variable rate. As indicated supra, some of these customers experienced sharp increases in their bills during the early months of 2014, due to the demands of the winter heating season and unprecedented price spikes in the wholesale electricity market. While acknowledging that it is important for consumers to carefully review the terms of their supplier contracts, including conditions of variability, the Commission believed that EGSs had to take further steps to ensure that customers can easily find and understand information related to price, price variability, and history, as well as cancellation fees, renewal notices, and other terms and conditions.
To obtain feedback from stakeholders on the proposed changes to the regulations on customer information, the Commission issued a Secretarial Letter on March 19, 2014, alerting affected parties of the Commission's intention to promulgate a Final-Omitted Rulemaking that would amend existing regulations at 52 Pa. Code, Chapter 54, to revise disclosure statement requirements for residential and small business customers.12 This Secretarial Letter noted that while some amendments would codify, with modifications, existing contract renewal and change in terms notice requirements contained in the Interim Guidelines, other changes raise new issues that had not previously been considered. Thus, the Commission requested comments on its proposed regulations to give those entities most affected an opportunity to provide recommendations prior to the issuance of a Final-Omitted Rulemaking Order.
The Commission determined that revising the customer information regulations, 52 Pa. Code § 54.5, and adding 52 Pa. Code § 54.10 by use of a Final-Omitted rulemaking process was necessary to serve and protect the public interest. Based upon the circumstances of the situation at the time, specifically, the unusually high electric supply bills incurred by customers receiving supply service through variable-priced contracts and fluctuations in wholesale energy markets, the Commission found good cause for omitting the traditional notice and comment procedures for the revisions as they were impractical, unnecessary, and contrary to the public interest.
In response to the March 19, 2014 Secretarial Letter, twelve parties13 filed comments. In addition, Pennsylvania Senators Robert M. Tomlinson and Lisa M. Boscola sent a letter notifying the Commission that they had received numerous complaints from constituents enrolled in variable-priced contracts. In their letter, Senators Tomlinson and Boscola stated that the Commission should immediately begin revising its regulations regarding variable-priced contracts and the treatment of customers who have an expiring fixed-term contract.
After careful review and consideration of the comments, the Commission on April 3, 2014, adopted a Final-Omitted Rulemaking Order Regarding the Provisions of Notices of Contract Expiration or Changes in Terms for Residential & Small Business Customers (Final-Omitted Rulemaking).14 This Final-Omitted Rulemaking made numerous significant changes to the Chapter 54 customer information regulations, most of which were intended to provide consumers with more detailed information concerning variable priced products.
To codify the Interim Guidelines and to ensure EGS compliance with these requirements, the Commission added Section 54.10 (Notice of Contract Renewal or Change in Terms), to the customer information regulations. At the same time, the Commission augmented the notice rules by requiring that the EGS provide the new price the customer will be charged the first billing cycle following the expiration or change in terms and that the EGS provide 30 days' notice in advance of any subsequent price change.
2016 NGS Disclosure Regulation Revisions
In April 2016, as part of the Commission's continuing efforts to enhance customer protections in the competitive energy markets, the Commission revised the Chapter 62 natural gas customer information regulations.15 This rulemaking amended customer information disclosure regulations at 52 Pa. Code §§ 62.72 and 62.75 for residential and small business natural gas supply customers. Section 62.72 provides regulatory definitions while Section 62.75 discusses the disclosure statement and notice requirements of the natural gas supplier (NGS) to the customer.
The Commission noted that a principal reason for revising the NGS rules was to bring them into alignment with the analogous EGS rules that had been significantly revised in 2014 as discussed above. We believe that both customers and suppliers benefit from substantially consistent cross-industry rules. Inconsistencies between the two sets of rules can lead to customer confusion and inefficiencies for suppliers, especially for those customers who obtain both gas and electric service from the same supplier. Another important rationale for revising the natural gas rules in 2016 was the Commission's belief that concerns regarding variable rates and disclosure statements in the electric supply industry are relevant to the customer disclosure information in the natural gas industry. The Commission believes that concerns about wholesale market price spikes in the natural gas markets, similar to the electric price spikes of early 2014, cannot be dismissed.
Because of the extensive changes to the NGS disclosure rules in 2016, there are now some inconsistencies between those rules and the analogous electric disclosure rules. These differences include:
• Introductory Pricing: The NGS rules state that ''If the price is introductory, the variable pricing statement must include a statement that the price is an introductory price, the duration of the introductory period and the price for the first billing cycle after the introductory period.'' 52 Pa. Code § 62.75(c)(2)(ii). Introductory pricing is not mentioned in the EGS rules.• If prices change (such as with a variable priced product), the NGS rules require the NGS to disclose when and how a customer is informed of the price change. ''A description of when and how the customer will receive notification of price changes.'' 52 Pa. Code § 62.75(c)(2)(iv).• The NGS rules address contract assignment. ''If the contract is assignable, the NGS shall inform the customer at the time the parties enter into the contract. Prior to a contract assignment, the NGS shall provide notice to the affected customer, the affected NGDC and the Commission. The customer notice must include the name of the new NGS, the contact information for the new NGS and language informing the customer that contract terms and conditions remain unchanged.'' 52 Pa. Code § 62.75(j).• Most references to the natural gas distribution company (NGDC) were removed from the NGS disclosure statement. The EGS disclosure rules still require including some references to the electric distribution company (EDC).As noted above, the Commission recognizes the value in having the EGS and NGS disclosure rules be as consistent as possible (noting that some inherent operational differences between the two industries may make complete consistency impractical). We also acknowledge that our 2014 Final-Omitted proceeding provided a limited opportunity for parties to comment on electric customer information matters. Given the emergency conditions of 2014, the Commission had no alternative but to resort to an abbreviated process. Now we have time to more fully consider these matters again based on experience with the existing regulations. Accordingly, during an April 21, 2017 CHARGE16 conference call, the Commission's Office of Competitive Market Oversight (OCMO) invited stakeholders to submit informal comments on possible revisions to the EGS disclosure rules at 52 Pa. Code § 54.5, with the intent of using the informal comments to develop a Notice of Proposed Rulemaking (NPRM) to revise the EGS disclosure rules.
Upon careful review of the informal comments received and input from various previous proceedings, and the authority granted the Commission under Sections 501 and 1501 of the Code, 66 Pa.C.S. §§ 501 and 1501, at a December 7, 2017 Public Meeting the Commission proposed amendments to regulations at 52 Pa. Code §§ 54.3, 54.5, 54.7, and 54.10.17 The December 2017 NPRM provided for a 60-day comment period that commenced with publication in the Pennsylvania Bulletin on March 24, 2018.18
Thirteen parties filed comments, including AARP; Marion Biddle, the Consumer Advisory Council (CAC); Duquesne Light Company (Duquesne); FirstEnergy Solutions (FES); the Federal Trade Commission (FTC); Inspire Energy Holdings LLC (Inspire); Joint Comments of the Coalition for Affordable Utility Service and Energy Efficiency in Pennsylvania and the Tenant Union Representative Network and Action Alliance of Senior Citizens of Greater Philadelphia (collectively ''Low Income Advocates''); the National Energy Marketers Association (NEMA); the Office of Consumer Advocate (OCA); the Retail Energy Supply Association (RESA); Shipley Choice d/b/a Shipley Energy (Shipley); and WGL Energy Services (WGL). All of the comments are available on the Commission's website at this link to the electronic casefile:
http://www.puc.pa.gov/about_puc/consolidated_case_view.aspx?Docket=L-2017-2628991.On June 21, 2018, the Independent Regulatory Review Commission (IRRC) filed their comments. These comments are available on the PUC's website using the above referenced weblink and are also available on IRRC's website at http://www.irrc.state.pa.us/ referencing Regulation # 57-319 or IRRC # 3201.
Summary of Comments and Discussion
Independent Regulatory Review Commission Comments
IRRC commends the Commission for proposing amendments to address early termination fees (ETFs) and for encouraging affected parties to offer their perspectives relating to any possible unintended consequences. In addition to eliminating ETFs after the initial notice, IRRC has two suggestions. First, IRRC notes that under existing § 57.173(1), the customer can specify a future date for the switch to a new supplier, but that in practice, customers and their new suppliers do not appear to be specifying a future date for the switch. IRRC posits that instead, the switch request is immediately processed, creating problems for both the customer and current supplier. IRRC asks whether prospective suppliers should be required to better inform customers of the option to specify a future date to align a switch with the end of the customer's current contract. Second, IRRC notes that commentators suggested that notices closer to the expiration date may more reasonably limit the economic impact on suppliers while still protecting the consumer. IRRC asks the Commission to consider whether, consistent with its statutory authority, the regulation can better balance the interests of both the suppliers and consumers by amending the customer notice process. IRRC at 1.
Also concerning § 54.3(1)(ii), IRRC notes that the terminology used in customer communications is to use the terms in accordance with the glossary posted at www.PaPowerswitch.com or other successor media platform as determined by the Commission. IRRC states that the regulation should specify how the reader can determine whether the Commission has opted to use another successor media platform. IRRC also asks whether the term ''product'' used in § 54.5(c) and (14)(i) should be defined. IRRC further asks whether the requirements in §§ 54.5(c)(3)(ii)(A) and (c)(11) relating to price variability are duplicative and whether they should be combined into one requirement. IRRC at 2.
IRRC points out that the expected date of delivery of the final regulation is January 2020. Given the current and ongoing problems the PUC describes in its rationale for the revised rules, IRRC encourages the PUC to work toward filing the final regulation sooner, if possible. Finally, IRRC notes that economic and fiscal impacts of the regulation must be considered in their determination of whether a regulation is in the public interest. 71 P.S. § 745.5(a)(4) and (10), and § 745.5b(b)(1). IRRC indicates the responses submitted with the proposed regulation to the Regulatory Analysis Form (RAF) Questions (19), (23) and (23a) are not sufficient to determine whether the regulation is in the public interest relating to the criterion of economic impact. IRRC points out that these RAF questions ask for specific cost estimates and clarifies that even if costs or savings are estimated to be zero, the responses should reflect that rather than state the required cost data is ''Not Applicable.'' In addition, because commentators have stated there are impacts on pricing relating to elimination of ETFs toward the end of the contract period, IRRC asks the PUC to review its responses to these RAF questions and provide the best estimates of costs in the RAF submitted with the final regulation. This will allow IRRC to determine whether the final regulation is in the public interest, as required by the Regulatory Review Act. IRRC at 2.
As explained more completely in this Order, the Commission revised the proposed rules to address the concerns raised by the Independent Regulatory Review Commission (IRRC). The Commission revised the proposed rule to a more reasonable and still consumer-friendly alternative by revising the date the ETF exclusion period begins. We had proposed starting the exclusion period from the date of the initial notice—approximately 60 days from the end of the contract. Instead, the exclusion period will start on the date that the second (options) notice is sent to the customer. This second (options) notice is issued no later than 30 days prior to the expiration of the contract. This will in effect create an ETF-exclusion period of approximately 30 days; compared to a 60-day period originally proposed. One of our primary motives for this change is the fact that a customer has no control over the precise date of a supplier switch. While some of the commentators, including the FTC and IRRC, have interesting suggestions addressing this matter via the supplier switching rules and procedures, we find that those matters lie outside of the current rulemaking and that the approach adopted in this final rulemaking is more reasonable and balanced.
We agree with OCA and Duquesne that the customer must rely on the supplier to submit the drop/add request to the EDC. Significantly, the supplier submitting the request would be a new supplier that has no knowledge of the terms and conditions of the customer's current supply contract and would have no business reason to act to protect the customer from any potential ETF. Once the supplier submits the request the EDC must complete the switch within three business days. See 52 Pa. Code § 57.174 (relating to the time frame requirement). Again, the actions of these two entities, the new supplier and the EDC, are beyond the customer's control and their interests do not necessarily align with that of the customers.
While the regulations do permit an EGS to submit a drop/add request on a date specified by the customer,19 the customer still has no actual control over whether the request is submitted on the date requested. This process assumes that residential and small commercial customers know the utility business practices and regulations enough to precisely know when to have the new supplier submit the request, especially when their time and energy is consumed with daily life activities or with running a small business.
While an EGS may be subject to financial risk if a customer switches to another EGS or default service before the end of a contract, we find that the customer is also subject to financial risk based on the actions of the supplier if a switch does not occur on the date requested. If the supplier submits the request early, the customer is subject to the ETF which, as pointed out by the OCA and Low Income Advocates, can be significant. If the supplier submits the request late, the customer may be subject to a higher price than the price offered by the new supplier or default service. We also find it significant that the customer has no real recourse against a supplier that does not submit the request on the date specified by the customer. We find that suppliers are sophisticated enough to be able to hedge against any potential losses that may occur due to a customer leaving a contract less than 30 days before it ends and should be the ones that bear that risk, not the residential or small business customer.
Regarding IRRC's suggestion that the regulation should specify how the reader can determine whether the Commission has opted to use another successor media platform, we decline to codify in the regulation how the Commission will make such a determination or what other types of media platforms will be available in the future as such information or methods are unknown at this time. With that said, we note that as with the current www.PaPowerswitch.com, the Commission will use all appropriate methods and media available at the time of the change to inform customers.
We agree with IRRC that the term ''product'' used in these regulations may be ambiguous. Initially, we note that the purpose of this subchapter ''is to require that electricity providers enable customers to make informed choices regarding the purchase of electricity services. . . . '' 52 Pa. Code § 54.1(a). Furthermore, as we have consistently stated, the information provided must be in a form to permit customers to make an apples-to-apples comparison of all offers for retail electric service. We recognize that some suppliers may also offer other services or value-added products with the basic generation service. While these other products and services may induce consumers to choose that supplier, in the end, the consumer must know what they are purchasing and what the cost of all the products and services are. We also agree with the OCA that tangible products and services that can be provided in a manner that is distinct and separate from generation service, their costs or charges are to be disclosed separately. Accordingly, we have replaced the term ''product'' with the term ''offer'' or removed it to eliminate any potential confusion. Rather than attempting to develop a definition for product that encompasses all current and potential future product offerings, the Commission finds that simply referring to whatever the EGS is offering avoids any need for interpretation and avoids confusion.
Regarding IRRC's question asking if the provisions of § 54.5(c)(3)(ii)(A) are duplicative of the requirements at subsection (c)(11). We do not view these two requirements as duplicative. Subsection (c)(3) addresses the content—what must be disclosed. Subsection (c)(11) concerns formatting—that this information must be in a larger font size.
Regarding IRRC's request that we provide cost data, based on the best available data, the Commission believes that costs associated with the amendments to these rules are minimal and transitory. This is based on the comments provided indicating that EGSs can adjust their risk management practices to avoid or minimize any potential risk when developing new offers. In addition, at the suggestion of RESA, the Commission agreed to delay the effective date of the rules by 60 days to give suppliers time to revise their contracts and disclosure statements, further reducing the cost impacts of the rules. In addition, the new rules will reduce costs for customers, including small business customers, by eliminating ETFs in the last 30 days of a contract and providing enough information so that they can make an apples-to-apples comparison of supplier offers to determine which offer is beneficial to them. All of this demonstrates that the Commission has endeavored to obtain and present the cost information available.
General Comments
The FTC commends the PUC for its interest in providing parallel marketing rules for both electricity and natural gas retailers and agrees that parallel rules are likely to lessen the confusion that dissimilar rules can create for consumers. From a competition perspective, parallel marketing rules are highly appropriate for end uses in which electricity and natural gas compete head-to-head. Parallel marketing rules for retail electric and natural gas sectors are particularly timely in view of ongoing competition between electricity and natural gas for some end uses and increased national interest in efficient electrification. FTC at 7, 8.
The FTC argues that it is important for marketers to be allowed to explain their offers with enough detail. Limitations on disclosures run the risk of cutting off information that customers need to make fully informed decisions. For this reason, the FTC encourages the PUC to continue framing its disclosure requirements as minimum disclosure requirements, rather than as rules that limit disclosures to specific categories that may not be sufficient to describe some offers. The FTC encourages the PUC to continue with this generally positive approach to additional disclosures about contract offers for residential and small commercial customers. FTC at 10, 11.
While Shipley agrees that consistency between regulations for the electricity and natural gas markets is important, it should only be the goal in situations that are substantially similar. Shipley thinks that it is ironic, then, that the Commission proposes a substantial change in this proceeding that will divest EGSs of the benefits of existing and future contracts, by eliminating their ability to charge early termination fees (''ETF'') during what could be critical usage and cost periods of a contract. Shipley at 2.
FES appreciates the efforts the Commission has taken to clarify the rules related to (i) customer information regulations pertaining to standards and pricing practices for retail electricity services; (ii) disclosure statements for residential and small business customers; (iii) marketing and sales activities; and (iv) notices of contract expiration or changes in terms. FES is not opposed to the proposed changes and believes that standardization of such regulations with those for the natural gas industry will reduce potential customer confusion. FES further believes that clarification of terms and conditions will enhance the customer's shopping experience, thus benefitting the overall competitive market in Pennsylvania. FES at 1, 2.
§ 54.3. Standards and pricing practices for retail electricity service
We proposed revisions to 52 Pa. Code § 54.3(1)(ii) to update the regulation by referring to the correct location where the glossary of terms can be found (similar to our proposed revision relating to a similar requirement at 52 Pa. Code § 54.5(e)). We also proposed a new requirement at 52 Pa. Code § 54.3(2) that would in effect ban the imposition of early termination fees (ETFs) once a supplier has provided the initial contract expiration notice required by 52 Pa. Code § 54.10. We proposed this requirement in response to consumers who object to having an ETF assessed upon them simply because they acted on the expiration notices sent by the supplier. From the consumer's perspective, they are acting on the expiration notice they received from the supplier by exercising one of the following options available to them—selecting a new supplier or returning to default service. In addition, we note that the early ending of a contract can be inadvertent—the customer miss-times the switch to a new supplier or default service resulting in the ETF being imposed. This is especially true given that the customer has no actual control over the timing of the switch, as it is ultimately up to the supplier and the utility as to just when a switch occurs. The imposition of an ETF under these circumstances can understandably frustrate and discourage customers from participating in the competitive market.
The proposed requirement would be in effect only during the final 45—60 days of the customer's contract with the EGS (once the initial notice has gone out) and that this only impacts the residential and small business segment of the market. We acknowledged that this kind of requirement may not be appropriate for large commercial/industrial customers, where early exits can result in significant financial loss for the EGS and where the customer is more sophisticated and more able to manage such transitions due to the costs involved.
Duquesne supports the proposed changes to § 54.3(1)(ii) that provides a single, easily accessible and correct location for the glossary of terms related to electric choice in Pennsylvania. Duquesne notes that as technology continues to evolve and as more customers transition to accessing information mostly via electronic means, the transition to maintaining information on the www.PAPowerswitch.com website is a logical next step. Duquesne also supports the Commission's proposal deleting § 54.3(1)(iii), which currently requires EDCs to distribute the ''Common Electric Competition Terms'' as part of its consumer education program. Duquesne agrees that this change is an important step toward a further understanding among consumers of the different roles of EGSs and EDCs in the retail marketplace and reduces the likelihood of consumer confusion regarding the involvement of EDCs in the retail market. Duquesne at 4, 5.
Additionally, Duquesne supports the Commission's proposed language in § 54.3(2) that precludes any early termination fees being assessed against a residential or small business customer when the customer terminates a fixed duration contract after the notice of the contract expiration has been issued by the EGS. Duquesne states that as the retail market has evolved and as EDCs and EGSs have continued to refine the process by which customers are switched between suppliers or default service with automated transactions there is less customer control over the precise date a switch occurs. Duquesne agrees that penalizing a customer for when a transaction occurs over which the customer has no control discourages participation in the retail market and reduces customer satisfaction with both the EGS and the EDC. Duquesne at 4, 5.
OCA also notes that the customer has no control over the timing of the switch that is ultimately up to the supplier and the utility. OCA asserts that while many suppliers waive the ETF under certain circumstances, there is no certainty as to whether an ETF will be waived as the decision to waive the ETF is left to the sole discretion of the supplier. OCA also asserts that when a customer acts as a result of a contract expiration notice and faces the imposition of an ETF as a result, the customer typically perceives these charges as unfair, resulting in a lower level of customer interest in the retail energy market generally. Accordingly, the OCA supports the Commission's proposed revision as it provides a critical protection to customers who are acting in good faith based on the required notices. OCA at 3—5.
OCA also recommends that the Commission consider other protections regarding ETFs. OCA submits that it is not just the imposition of an ETF nearing the end of the contract that is of concern. OCA asserts that some ETFs are prohibitively high and discourage a customer from entering into a contract or leaving a contract that is harming the customer. OCA suggests that the Commission should consider whether it wants to limit the ETF charged to customers. OCA notes that both Illinois and Connecticut impose a maximum ETF limit of $50 on residential customers on fixed rate contracts. OCA submits that an ETF exceeding $50 discourages ratepayers from participating in the competitive market. OCA at 3—5.
The Low Income Advocates and the CAC support the Commission's proposal and believe that such a ban will reinforce the notion that customers are permitted to make a choice prior to expiration of their existing EGS contracts and should not be penalized for doing so. The Low Income Advocates assert that suppliers may penalize a consumer for making an active choice in response to information provided in the options notice. The Low Income Advocates agree wholeheartedly with the Commission's assessment that this practice leads to widespread customer frustration and often negative financial implications for the customer, who in many cases cannot afford to pay inflated charges. Low Income Advocates at 6—8; CAC at 2, 3.
The Low Income Advocates also agree that the practice damages the reputation of the market, causing many consumers to return to and remain with their default service provider to avoid further financial consequences. The Low Income Advocates assert that waivers and refunds do not mitigate the impact of the practice on consumers or the competitive market as fee waivers and refunds are not automatic. The Low Income Advocates state that current early termination fees range as high as $200, but could go even higher, which for a low-income family can mean significant hardship. Low Income Advocates at 6—8.
AARP strongly urges the PUC to halt the process under which unsuspecting customers are hit with large penalties simply because they follow the instructions in their current supplier's contract expiration notice and let the supplier know that they do not wish to renew their contracts. AARP states that the proposed changes should be adopted. AARP at 2.
In the FTC's view, the proposed limitation on ETFs reduces customers' switching costs, but may also introduce additional risks for EGSs. The FTC proposes that the Commission consider making the switch effective at the end of the contract period unless the customer explicitly indicates that the switch should take place earlier, resulting in the customer's payment of the ETF. The FTC notes that one potential unintended consequence of reducing switching costs is that marketers might increase the minimum duration of customer contracts. The FTC suggests that the Commission engage marketers in a discussion of whether these and other potential costs associated with the proposal are likely to occur, and then weigh the benefits against the costs in reaching a determination on this proposal. FTC at 2, 8.
RESA recommends that the Commission revise the proposal to limit the ban on the imposition of ETFs starting 14 days prior to the contract expiration date. RESA thinks this would be a reasonable balance between the information EGSs are required to provide to customers two months in advance and the EGSs' financial exposure. RESA notes that EGSs generally secure load for customer contracts through wholesale supply contracts consistent with the duration of the customer contract. RESA asserts that the EGS will likely be bound by a wholesale supply contract even if the customer cancels the contract early, depriving the EGS of the revenue to cover the wholesale contract. RESA notes that contracts with small business customers may have specific requirements that are negotiated as part of the contract and significant usage associated with the contract increasing the EGS' financial risks. For these reasons, RESA asserts that ETFs may play an important role in the ability of the EGS to offer a particular price to a customer. RESA asserts that since EGSs are already required to provide the date when the fixed duration contract is set to expire, consumers will know the appropriate timing in which they must act to cancel the contract to avoid imposition of an ETF. RESA at 12—15.
RESA proposes the following revisions for each of the impacted Sections:
Section 54.3(2) For residential and small commercial customers, contracts for retail electric service entered into after the effective date of this regulation may only impose a feenot include any feesto be paid by the retail electric customer for terminating a fixed duration contract up to 14 days prior to the date the contract expiresbetween the date the initial notice required in § 54.10 (relating to notice of contract expiration or change in terms for residential and small business customers) is issued and the expiration of the fixed duration contract.Section 54.5(c)(11) An explanation of limits on price variability, penalties, fees or exceptions, printed in type size larger than the type size appearing in the terms of service. Penalties and fees shall be disclosed in actual dollars or a specific method for determining the actual dollars shall be disclosed. This explanation shall include a statement advising the customer that the customer may will not be subject to any penalty or fee if the customer terminates the contract up to 14 days prior to the date the contract expires.at any time between the date the initial notice required in § 54.10 (relating to notice of contract expiration or change in terms for residential and small business customers) is issued and the expiration of the fixed duration contract.Section 54.10(1)(vi) A statement indicating whether the existing fixed [term] duration contract has a cancellation fee, and an explanation [of the fee amount and how to avoid the fee, if possible, including notice of the date when the customer can choose a different product from the customer's existing EGS, choose an alternative EGS or return to default service] that the customer may be is not subject to the cancellation fee if the customer terminates the contract up to 14 days prior to the date the contract expires.at any time between the date of the initial notice and the expiration date of the fixed duration contract.RESA at 12—15.
NEMA does not recommend adoption of this proposal because requiring EGSs to send consumers notices of contract expiration and then penalizing EGSs for the result is a perverse outcome. NEMA suggests it may be more appropriate to explore how the date is placed on the notice and whether it could be improved to facilitate consumer awareness and understanding of the consequences. NEMA asserts that instances of consumer ''objection'' to the ETF are not enough to impose this material rule change on the industry. NEMA states that EGSs have the discretion to waive or forego an ETF as part of their business plan and desire to satisfy consumers if they deem it appropriate. NEMA states that the ETF serves an important role in mitigating supplier risks of serving consumers for the entire term of the contract. NEMA notes that EGSs hedge to provide service up to the point when the customer may be served by an alternative product, alternative supplier or the utility. NEMA asserts that prohibiting the imposition of ETFs may encourage EGSs to ''front load'' the ETF to avoid the impact of the prohibition. NEMA at 2—4.
Inspire suggests that EGSs should specify in the initial notice, or in subsequent communications with customers that a customer has two options: (1) to cancel the contract early and possibly incur a cancellation fee; or (2) request that the contract not be renewed, but with the understanding that the customer will continue to receive service from the supplier through the pendency of the existing term. Inspire at 2.
Shipley states that, contrary to the speculation in the order, the proposed change poses the likelihood that serious supplier harm will result. Shipley notes that the period during which a customer could exit a contract without an ETF would be, under the proposed rule, 1/6 of the length of a one-year contract or 1/3 of a six-month contract, which in either case is substantial and can mean the difference between a supplier making or losing money. Shipley also states that if a customer's contract renews in August and the notice is sent in June, and the customer leaves in early July, the supplier will lose the revenue for the high consumption months of July and August, thus inflicting even more substantial loss, which the ETF is intended to mitigate. Shipley states that EGSs are willing to offer fixed prices because they can at least somewhat insure against loss with an ETF. Shipley asserts that eliminating that bargain will harm consumers—more than the few customers who end up paying ETFs because they switched after they received a notice that their contract was ending. Shipley at 2, 3.
Shipley believes that the solution is to change to a single notice at 30—45 days before the end of the contract: a notice that includes the renewal price. Shipley asserts that under this single notice proposal, EGSs might lose part of the last month of a contract, but if they did it would likely be because another supplier made a better offer, not because the customer was scared into shopping prematurely. Shipley at 2, 3.
IRRC commends the Commission for proposing amendments to address ETFs and for encouraging affected parties to offer their perspectives relating to any possible unintended consequences. In addition to eliminating ETFs after the initial notice, IRRC has two suggestions. First, IRRC notes that under existing § 57.173(1), the customer can specify a future date for the switch to a new supplier, but that in practice, customers and their new suppliers do not appear to be specifying a future date for the switch. IRRC posits that instead, the switch request is immediately processed, creating problems for both the customer and current supplier. IRRC asks whether prospective suppliers should be required to better inform customers of the option to specify a future date to align a switch with the end of the customer's current contract. Second, IRRC notes that commentators suggested that notices closer to the expiration date may more reasonably limit the economic impact on suppliers while still protecting the consumer. IRRC asks the Commission to consider whether, consistent with its statutory authority, the regulation can better balance the interests of both the suppliers and consumers by amending the customer notice process. IRRC at 1.
Also concerning § 54.3(1)(ii), IRRC notes that the terminology used in customer communications is to use the terms in accordance with the glossary posted at www.PaPowerswitch.com or other successor media platform as determined by the Commission. IRRC states that the regulation should specify how the reader can determine whether the Commission has opted to use another successor media platform. IRRC at 2.
Discussion
Not surprisingly, there was a broad range of comments to the Commission's proposal to restrict the imposition of ETFs as a contract expiration approaches, from enthusiastic support to vigorous disagreement. Nonetheless, some parties took a position between these two extremes, suggesting that there is some possible ''middle-ground'' that would address the Commission's concerns while avoiding some of the more adverse unintended consequences. After considering the comments, we are convinced that there is a reasonable compromise here that will protect consumers while avoiding most of the hazards identified by some suppliers.
We think Shipley has a point when they argue that barring ETFs for the final two months of a contract is substantial—in effect 1/6 of a one-year contract or 1/3 of a six-month contract—and that this could impose significant financial harm on suppliers. RESA agrees that requiring suppliers to possibly absorb two months of losses is overly prescriptive. The FTC and IRRC also point to this possibility and asked us to weigh these arguments against possible alternatives.
RESA offers as an alternative a 14-day ETF exclusion period at the end of a contract. While we appreciate RESA offering this alternative, we fear that this is unworkable from a consumer's perspective as it assumes that a customer knows or will remember the precise date of their contract expiration and be able to identify when the 14-day ETF exclusion period begins. We are also concerned that a 14-day window may be too short. We also find that such a rule would require additional administrative costs on EGSs in that they would have to implement additional controls to track and identify when the 14-day ETF exclusion period begins. Whereas, setting the ETF exclusion period to coincide with the issuance of the second options notice would require little to no additional administrative costs for EGSs as they already have such processes in place.
We find that a more reasonable and still consumer-friendly alternative is to date the ETF exclusion period from the date that the second (options) notice is sent to the customer. This second (options) notice is issued no later than 30 days prior to the expiration of the contract. This will in effect create an ETF-exclusion period of approximately 30 days; compared to a 60-day period originally proposed. While we understand and appreciate that some suppliers may waive or refund ETFs in these situations, we agree with the Low Income Advocates that consumers should not have to pursue such waivers, which they may or may not receive. We point again, as we did in the NPRM, that the impact of this ban will also be limited by the fact that it is contained within the Chapter 54 customer information regulations that only apply to residential and small business accounts. Large commercial and industrial accounts will not be covered by this ban, where we acknowledge that such a ban could expose a supplier to a far more substantial financial risk.
Again, one of our primary motives for this change is the fact that a customer has no control over the precise date of a supplier switch. While some of the commentators, including the FTC and IRRC, have interesting suggestions addressing this matter via the supplier switching rules and procedures, we find that those matters lie outside of the current rulemaking and that the approach adopted in this final rulemaking is more reasonable and balanced.
We agree with OCA and Duquesne that the customer must rely on the supplier to submit the drop/add request to the EDC. Significantly, the supplier submitting the request would be a new supplier that has no knowledge of the terms and conditions of the customer's current supply contract and would have no business reason to act to protect the customer from any potential ETF. Once the supplier submits the request, the EDC must complete the switch within three business days. See 52 Pa. Code § 57.174 (relating to the time frame requirement). Again, the actions of these two entities, the new supplier and the EDC, are beyond the customer's control and their interests do not necessarily align with that of the customers.
While the regulations do permit an EGS to submit a drop/add request on a date specified by the customer,20 the customer still has no actual control over whether the request is submitted on the date requested. This process assumes that residential and small commercial customers know the utility business practices and regulations enough to precisely know when to have the new supplier submit the request, especially when their time and energy is consumed with daily life activities or with running a small business. EGSs are at a distinct advantage because the wholesale and retail electric market is their business and they know how to deal with such markets and how to mitigate any potential risks caused by customers leaving after the final options notice is provided.
While an EGS may be subject to financial risk if a customer switches to another EGS or default service before the end of a contract, we find that the customer is also subject to financial risk based on the actions of the supplier if a switch does not occur on the date requested. If the supplier submits the request early, the customer is subject to the ETF which, as pointed out by the OCA and Low Income Advocates, can be significant. If the supplier submits the request late, the customer may be subject to a higher price than the price offered by the new supplier or default service. We also find it significant that the customer has no real recourse against a supplier that does not submit the request on the date specified by the customer. The only recourse is for the customer to request that the EGS they left to waive any ETF, which provides no significant improvement over the existing circumstances. We find that suppliers are sophisticated enough to be able to hedge against any potential losses that may occur due to a customer leaving a contract less than 30 days before it ends and should be the ones that bear that risk, not the residential or small business customer.
We also reject OCA's suggestion to impose caps on the amount charged by EGSs for ETFs. While we do have concerns about the perception of the competitive market caused by large ETF amounts and the resulting impact on consumers' willingness to participate and shop, imposing caps would be a significant change to the market and one that has not been fully vetted by all the stakeholders. We find that prohibiting the charging of ETFs after the second options notice is provided to the customer is more reasonable and balanced in that it protects customers from financial risk for actions beyond their control and allows EGSs to continue to hedge against potential losses due to a customer leaving the EGS before a significant portion of the contract term has lapsed.
Regarding IRRC's suggestion that the regulation should specify how the reader can determine whether the Commission has opted to use another successor media platform, we decline to codify in the regulation how the Commission will make such a determination or what other types of media platforms will be available in the future as such information or methods are unknown at this time. With that said, we note that as with the current www.PaPowerswitch.com, the Commission will use all appropriate methods and media available at the time of the change to inform customers.
§ 54.5. Disclosure statement for residential and small business customers
52 Pa. Code § 54.5(c)(1)
We proposed revising this Section to bring the electric rule into alignment with the natural gas rule at 52 Pa. Code § 62.75(c)(1). This requirement is intended to ensure that the prices presented to consumers are bundled appropriately to make ''apples-to-apples'' comparisons possible. However, we recognized that as we move forward to an electric market with advanced metering technology, new products and pricing structures are possible and we invited parties to comment on the need for this regulation to accommodate these possibilities or, at the least, not to obstruct or be an obstacle to future innovations.
OCA fully agrees with the Commission's proposal that generation charges should be disclosed in a price per kWh format. This will result in an apples-to-apples price comparison with the PTC and between supplier offers. OCA believes that new pricing structures will have to fit within this regulation to fully inform the customer and if there are enrollment fees or monthly fees, these will need to be incorporated and treated in accordance with § 54.5(c)(4). If a flat bill only option is proposed, it also will need to be treated as a price that changes with usage and show price/kWh at 500, 1000, and 2000, even though the flat bill is the same for each usage level. OCA at 5, 6.
OCA further notes that the word ''product'' is an undefined term that may require clarification from the Commission. OCA notes that if the EGS ''product'' is a pricing structure such as a time-of-use (TOU) rate, flat bill, or fee that is part of receiving the electric generation service, then the ''product'' should be converted to a cents per-kilowatt-hour basis and disclosed to the customer since the ''product'' is part of the generation service. OCA states that if, however, the ''product'' is a tangible product or a service such as a home security system, an HVAC maintenance contract, or a smart thermostat, then these charges should be unbundled from the generation service and disclosed separately. OCA asserts that these charges are similar to non-basic services and must be disclosed to the customer as to their cost impact on the monthly bill. OCA states, however, that since these ''products'' are not a requirement of the generation service, they may not need to be disclosed on a price per-kilowatt-hour. OCA at 5, 6.
The Low Income Advocates strongly support the proposal to amend § 54.5(c)(1) to require suppliers to disclose generation charges in actual prices per kilowatt-hour as it will provide a critically important tool for consumers to conduct an apples-to-apples comparison of various offers. The Low Income Advocates assert that disclosure of the kilowatt-hour price will make these complicated pricing structures more transparent, enhancing the competitive market. The Low Income Advocates also assert that when a consumer is harmed by a pricing structure that they do not understand, they are less likely to engage in the market in the future and are more likely to sway others to follow their example. The Low Income Advocates state that the requirement will likely allow suppliers to more clearly translate their innovation into savings that consumers understand. Low Income Advocates at 9—13.
The Low Income Advocates opine that while suppliers may create offers which bundle the rate for electricity in various ways to serve specific consumer interests, or which offer bonuses, rewards, or additional products or services, the commodity sold remains the same. The Low Income Advocates note that unit pricing, which has been around since at least the early 1970s, appears in a multitude of other commodity markets and has not stifled competition or innovation in those markets. They point to, for example, the grocery store label for orange juice that includes both the total price and the unit price per ounce, allowing consumers to easily compare products and make a value judgment about the quantity and brand of juice they wish to consume. The Low Income Advocates assert that the electric generation market is no different: suppliers are offering the same commodity, electricity, but ultimately the unit price of energy—per kilowatt-hour—is the critical benchmark allowing consumers to make a value judgment about an offer they wish to accept. Low Income Advocates at 9—13.
The CAC believes that the Commission's proposed requirement will reduce the likelihood that customers will be misled by low kilowatt hour fees that are often coupled with high monthly or one-time fees that might not be displayed as prominently in the materials provided by some marketers. The CAC notes, for example, that an examination of offers in the PECO service territory on the PAPowerSwitch website reveals the ''lowest'' price per kilowatt hour offered to residential customers is a mere 3.88 cents per kWh, as compared to the much higher PECO PTC of 7.09 cents. The CAC states that the low per kWh rate, however, is coupled with a fixed fee of $29.95 per month. The CAC asserts that it is essential that these types of fees be readily identified, incorporated into the unit price of energy, and the information provided to consumers so that they can make intelligent choices for their retail electric service. CAC at 3, 4.
The FTC commends the Commission for focusing on improving customers' ability to obtain the information they need to make fully informed electricity service choices. The FTC states that this approach is particularly admirable and economically significant because it preserves the ability of residential and small commercial customers to contract with marketers for dynamic pricing rate plans. The FTC asserts that the proposal thus preserves an important link between wholesale and retail electricity markets—a link severed by flat rate offers. The FTC states that preserving this link improves the efficiency and reliability of electricity service in Pennsylvania and beyond. FTC at 1.
The FTC believes that the challenge for marketers is to develop a reasonable and truthful way to include the value of non-price elements in making price comparisons. The FTC notes that a key example is when a marketer's electricity contract offer bundles electricity supply with a physical device that can help reduce the customer's power use and bills. The FTC further notes that in other instances, the contract may bundle electricity supply with unrelated services, such as gift cards or entertainment discounts, that the customer receives at some point after the supply contract is signed. The FTC encourages the Commission to allow marketers to explore how best to incorporate the value of bundled goods or services for purposes of developing accurate and clear apples-to-apples price comparisons. The FTC asserts that a policy that requires marketers to value these bundled goods or services at zero does not allow for an apples-to-apples comparison. FTC at 8, 9.
RESA is concerned that several of the Commission's proposed revisions mandating how EGSs are to present their pricing structure to customers will have the effect of limiting the creative pricing structures that can be developed in the competitive market. RESA notes that the increasing availability of smart meters provides important interval level usage data necessary to enable EGSs to develop creative and new products and services that are already beginning to emerge. Since these new products and services will not neatly fit within predefined boxes, RESA urges the Commission to avoid being too restrictive in these regulations such that it stymies this innovation. RESA asserts that consumers receive the greatest benefit of these inherent drivers when EGSs are not overly restricted in how they are required to explain their pricing structures. RESA at 4.
RESA states that the proposed restrictions on pricing presentation would have the effect of dampening some of the current innovation that is already beginning here in Pennsylvania. RESA states that flat billed products, for example, charge the customer the same amount on a monthly basis without regard for the number of kilowatt-hours used; thus, presenting a price per kilowatt-hour for this type of product is not relevant for the customer. RESA further states that some time-of-use products are not priced on a per kilowatt-hour basis but rather have pricing based on usage on certain days (i.e. ''free weekends''). RESA asserts that the expansion of on-site generation also impacts pricing presentation because pricing can be based on the credit that is applied for on-site generation. Accordingly, RESA suggests the following modification to § 54.5(c)(1) of the Commission's proposal: ''Generation charges shall be disclosed according to the actual prices per kilowatt-hour, as applicable.'' RESA at 5, 6.
RESA recognizes that one purpose of the proposed language is to align the regulations with Commission precedent in the ''Fixed Means Fixed'' Order so that EGSs include an estimate of gross receipts tax (GRT) in the pricing offered to potential customers. RESA supports the inclusion of this language in the Commission's regulations for residential customers to better broadcast the Commission's expectations so that all EGSs are held accountable to the same standard. However, RESA offers that small business customers may need or want pricing to be shown in a different manner, for example, in a Request for Proposal process. Therefore, RESA suggests adding the following language to § 54.5(c)(1) to give EGSs the flexibility to satisfy the specific requirements of a potential customer: ''Generation charges must include an estimate of all applicable taxes except for State sales tax and county tax, unless the customer specifically requests a different price presentation.'' RESA at 6, 7.
WGL is also concerned that the proposed revision's mandate for per-kilowatt hour pricing does not allow for other types of products, such as flat-bill products or unlimited energy supply products that are growing in popularity among suppliers and customers. For this reason, WGL submits that the new proposed ''per kilowatt-hour'' reference at the end of the first sentence should be removed. WGL asserts that the current language in the first sentence of § 54.5(c)(1) sufficiently conveys the requirement for the contract to accurately disclose the actual price of generation charges, without unduly limiting the availability of price structures that are not based on a per kWh model. WGL submits that if the new ''per kilowatt hour'' language is retained, then the regulation needs to be expanded to address products that are not based on per kWh price. WGL proposes that § 54.5(c)(1) be further revised as follows:
Generation charges shall be disclosed according to actual prices per kilowatt hour, if the customer will be billed under per kilowatt hour price structure. If a customer will not be billed under a per kilowatt hour price structure, the contract's terms must clearly explain the pricing structure and what the customer's price for generation charges will be for a given period of time. Generation charges must include an estimate of all applicable taxes except for State sales tax and county sales tax.WGL at 1, 2.
Inspire likewise opines that the proposed requirement, if interpreted strictly and without exception, will present a substantial obstacle to future and present innovations. Inspire notes that its subscription energy supply offering is a flat bill product in which customers are charged the same amount each month—regardless of usage—for the full term of the contract. Inspire states that this product is tailor-made for each customer, with Inspire looking at a variety of customer characteristics to generate a monthly energy supply price for a potential customer. Inspire's flat-bill plans are paired with a loyalty program, which offers generous bill credits to customers who reduce their consumption. Inspire asserts that few people understand the kWh and, specifically, what a kWh rate will mean for their ultimate bill. Inspire further asserts that what customers do understand, and what they care about, is how much they will ultimately pay each month. Inspire at 2—8.
Inspire insists that a requirement to present the price for an energy product as a cost per kWh at the point of sale would greatly limit innovation, and ultimately choice, and if applied strictly and without exception, it could essentially lock market participants into just two rate structures, fixed and variable. Inspire asserts that the best way to provide customer choice is to ensure that market rules are not so restrictive that innovation is stalled and that consumers are not presented with competitive options simply because suppliers cannot make their products fit within the restrictive rules. Accordingly, Inspire urges the Commission to eliminate the cost per kWh requirement or, in the alternative, clarify its inapplicability to flat-bill and other innovative products. Inspire at 2—8.
IRRC asks if the term ''product'' should be defined. IRRC at 2.
Discussion
This is one of the more complex issues addressed in this rulemaking—one we urged stakeholders to comment upon, including a statement from then Vice Chairman Place specifically inviting comment on the impact of the proposed changes on sophisticated products made possible by advanced metering.21 This complexity was reflected in the thoughtful comments. Many of the parties acknowledged the tension between providing consumers with sufficient information to make informed decisions and comparisons, while at the same time not restricting innovative new products.
First, we agree with OCA and IRRC that the term ''product'' used in these regulations may be ambiguous. Initially, we note that the purpose of this subchapter ''is to require that electricity providers enable customers to make informed choices regarding the purchase of electricity services. . . . '' 52 Pa. Code § 54.1(a). Furthermore, as we have consistently stated, the information provided must be in a form to permit customers to make an apples-to-apples comparison of all offers for retail electric service. We recognize that some suppliers may also offer other services or value-added products with the basic generation service. While these other products and services may induce consumers to choose that supplier, in the end, the consumer must know what they are purchasing and what the cost of all the products and services are. With that said, we agree with the OCA that charges for generation service must be disclosed on a cents-per-kilowatt-hour basis, regardless of how they are structured, which includes time-of-use rates, flat bills or fees related to that service. We also agree with the OCA that for tangible products and services that can be provided in a manner that is distinct and separate from generation service, their costs or charges are to be disclosed separately. Accordingly, we have replaced the term ''product'' with the term ''offer'' or removed it altogether to eliminate any potential confusion.
Upon careful consideration of the comments, we believe that our original proposal to require prices to be expressed in a per-kWh rate is sound, while acknowledging some exceptions and the need to provide some additional guidance. The proposed requirement at § 54.5(c)(1) is fairly straight-forward if a traditional fixed per-kWh price is offered. We agree with many of the suppliers who argue that this requirement should only be applicable if the product is priced and presented to the customer on a per-kWh basis, and we will add language similar to what WGL suggests clarifying this point. If the product is priced on some other basis than per-kWh, the supplier is obligated to explain the pricing structure and what the customer charges are. Importantly, this does not mean that other types of products are necessarily exempt from calculating and displaying for the customer the per-kWh unit price for different usage levels, as will be explained later when we discuss our proposed § 54.5(c)(4) requirements. We find that RESA's suggestion to end this paragraph with a simple ''as applicable'' is too broad and vague. We find that more detailed guidance on this point is needed and prefer a more descriptive revision similar to what WGL offered.
There was no opposition to our proposal that the prices presented to customers must include all applicable taxes (except for sales tax). The parties agree that this is necessary as to allow for ''apples-to-apples'' comparisons. However, RESA did ask for language permitting for different pricing presentation upon the customer's request. While we understand that this may be of some use with small business customers, we find that it is not necessary to include this exception in the regulation. There is nothing to prevent a supplier from responding to such a customer request and providing a different pricing presentation, in addition to the required bundled price presentation. The regulation sets the minimum standard for what is required to be provided—a supplier is always free to provide the customer with additional information if desired by the customer.
52 Pa. Code § 54.5(c)(2)
We proposed revisions that would bring the electric rule into alignment with the natural gas rule at 52 Pa. Code § 62.75(c)(2)(ii). This requirement is also intended to provide for full price transparency when an EGS is offering an introductory price product. To make fully informed decisions in the energy marketplace, it is essential that a customer fully understands that the product is introductory, and that the customer know both the introductory price and the price they will be charged after the introductory period ends.
OCA notes that one of the hallmarks of the Customer Choice Act is that EGSs provide adequate and accurate customer information to enable customers to make informed choices. OCA submits that the proposed revision could be strengthened in several respects. Based on its experience, OCA states that many consumers make supplier decisions based on oral marketing and may not fully review the written disclosures that are not available to the customer in a telemarketing sales call. OCA asserts that even when the disclosure is provided customers often wait until a later time, after the agent has left, to read these materials. While customers have the legal option to review the multiple page contract terms and are given a three-day right of rescission without penalty, it is the OCA's experience that customers rely on the oral presentation. As a result, the OCA recommends that suppliers be required to make an oral statement concerning introductory rates and the nature of the rate that will be charged after the introductory period, as well as include this information in the third-party verification (TPV) script. OCA at 6—8.
OCA further agrees that, due to the nature of variable rate contracts, the EGS should be required to, orally and in writing, state a specific price for the next billing period after the introductory period. Additionally, the OCA agrees with the Commission that the length of the introductory period should be disclosed. To strengthen this provision, the OCA proposes the following modification:
(2) If the price is introductory, the pricing statement, THE ORAL STATEMENT MADE BY THE SALES AGENT, AND THE THIRD PARTY VERIFICATION SCRIPT, must include a statement that the price is an introductory price, the duration of the introductory period and the price for the first billing cycle after the introductory period.OCA at 6—8.
The Low Income Advocates support the proposed change. Notwithstanding their support, to further clarify the applicability of this disclosure, the Low Income Advocates recommend that the current definition of the term ''introductory price'' be modified. Low Income Advocates at 13, 14, 26.
AARP and the CAC support the requirement that marketers offering ''introductory'' rates include in their disclosure statements the duration of the introductory period and the price for the first billing cycle after the introductory period. The CAC asserts that in the absence of such information, customers really have no idea what they are purchasing. AARP at 3; CAC at 4, 5.
The FTC notes that the NPRM appropriately contains provisions requiring retailers to make clear whether introductory rates are lower than the rates that will apply after the introductory period. However, the FTC is concerned that the NPRM may focus too narrowly on problems with initial price discounting and does not account for innovations in retail electric marketing likely to involve bundling of price and non-price elements, where the non-price elements also provide value to customers. FTC at 8, 9.
WGL supports the requirement to provide customers with clear information regarding the duration of the introductory price. WGL, however, is concerned with the requirement to state a definitive price for the first billing period after the expiration of the introductory price for products that involve a variable pricing structure following the introductory price. WGL believes that if a supplier is required to state a specific price for a billing cycle following the introductory period at the time of contracting, the supplier will need to build in a risk adder to protect itself against the possibility that wholesale market prices will increase. Accordingly, instead of requiring a specific price be disclosed for the billing period following the introductory period, WGL submits that an EGS should only be required to explain whether the price following the introductory period will be fixed or variable, and how often the price is subject to change. WGL submits the following revisions:
If the price is introductory, the pricing statement must include a statement that the price is an introductory price, provide the duration of the introductory price, and state whether the price following the introductory period will be a fixed price or a variable price. If the price following the introductory period is fixed, the pricing statement must state what the fixed price will be. If the price following the introductory period is variable, the pricing statement must explain the conditions of variability and limits of variability in accordance with the remainder of this section 54.5.WGL at 3, 4.
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1 See Chapter 28 Electric Generation Customer Choice and Competition Act—Customer Information—Interim Requirements, Docket No. M-00960890F0008 (Order entered July 11, 1997).
2 See Final Rulemaking Order Establishing Customer Information Disclosure Requirements for Electricity Providers 52 Pa. Code, Chapter 54, Docket No. L-00970126 (Order entered May 1, 1998).
3 See Final Rulemaking Order Re Electric Distribution Companies' Obligation to Serve Retail Customers at the Conclusion of the Transition Period Pursuant To 66 Pa.C.S. § 2807(e)(2), Docket No. L-00040169 (Order entered May 10, 2007).
4 See Final Order Re Interim Guidelines Regarding Advance Notification by an Electric Generation Supplier of Impending Changes Affecting Customer Service; Amendment re: Supplier Contract Renewal/Change Notices, Docket Nos. M-2010-2195286 and M-0001437 (Order entered September 23, 2010).
5 See Final-Omitted Rulemaking Order Re Rulemaking to Amend the Provisions of 52 Pa. Code, Section 54.5 Regulations Regarding Disclosure Statement for Residential and Small Business Customers and to Add Section 54.10 Regulations Regarding the Provision of Notices of Contract Expiration or Changes in Terms for Residential and Small Business Customers, Docket No. L-2014-2409385 (Order entered April 3, 2014).
6 See Rulemaking Regarding Electricity Generation Customer Choice, 52 Pa. Code Chapter 54, Docket No. L-2017-2628991 (Order entered December 7, 2017).
7 See Final Order Re Guidelines for Use of Fixed Price Labels for Products with a Pass-Through Clause, Docket No. M-2013-2362961 (Order entered November 14, 2013).
8 See Final Order Re Guidelines for Use of Fixed Price Labels for Products with a Pass-Through Clause, Docket No. M-2013-2362961 at 28 (Order entered November 14, 2013).
9 Id.
10 Id. at 29.
11 Order Re Review of Rules, Policies and Consumer Education Measures Regarding Variable Rate Retail Electric Products, Docket No. M-2014-2406134 (Order entered March 4, 2014) (Variable Rate Order) at 4-5 (citing 66 Pa.C.S. § 2807(d)).
12 Secretarial Letter Re Rulemaking to Amend the Provisions of 52 Pa. Code, Section 54.5 Regulations Regarding Disclosure Statement for Residential and Small Business Customers and to Add Section 54.10 Regulations Regarding the Provision of Notices of Contract Renewal or Changes in Terms, Docket No. L-2014-2409385 (served March 19, 2014) (Secretarial Letter).
13 Pennsylvania Representatives Robert W. Godshall and Peter J. Daley; the Office of Consumer Advocate, the Office of Small Business Advocate, Citizen Power, UGI Energy Services, LLC, Washington Gas Energy Services, Inc., Constellation NewEnergy, Inc. and Constellation Energy Power Choice, Inc., IGS Energy, the Retail Energy Supply Association, NRG Retail Northeast Companies, Alphabuyer, the National Energy Marketers Association, and FirstEnergy Solutions Corp.
14 See Final-Omitted Rulemaking Order Regarding the Provisions of Notices of Contract Expiration or Changes in Terms for Residential & Small Business Customers, Docket No. L-2014-2409385 (Order entered April 3, 2014).
15 See Final Rulemaking Order—Rulemaking to Amend and Add Regulations to Title 52 of the Pennsylvania Code, Sections 62.72, 62.75, and 62.81 Regarding Customer Information Disclosure Requirements for Natural Gas Suppliers Providing Natural Gas Supply to Residential and Small Business Customers, Docket No. L-2015-2465942 (Order entered April 21, 2016).
16 CHARGE (Committee Handling Activities for Retail Growth in Electricity) participants include EDCs, EGSs, industry trade organizations, consumers, the Office of Consumer Advocate, and the Office of Small Business Advocate.
17 See Rulemaking Regarding Electricity Generation Customer Choice, 52 Pa. Code Chapter 54, Docket No. L-2017-2628991 (Order entered December 7, 2017).
18 48 Pa.B. 1696.
19 See 52 Pa. Code § 57.173 (relating to customer contacts the EGS to request a change in electric supply service).
20 See 52 Pa. Code § 57.173 (relating to customer contacts the EGS to request a change in electric supply service).
21 See Statement of Vice Chairman Andrew G. Place re Rulemaking Regarding Electricity Generation Customer Choice, 52 Pa. Code Chapter 54, Docket No. L-2017-2628991 (Public Meeting of December 7, 2017).
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