Ameren Residential Competition "Effectively Closed" Due to Subsidized Electric Heating Rates, BlueStar Says

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February 23, 2011  

Competition against Ameren’s residential retail electric rates is "effectively closed" due to the subsidization of electric heating customers, BlueStar Energy Services said in comments to the ICC.

As only noted in Matters (2/9), the Office of Retail Market Development is investigating the lack of residential choice at Ameren, despite implementation of Purchase of Receivables over a year ago. Though the ICC is conducting the review on a confidential basis, BlueStar provided a copy of its comments to Matters.

"BlueStar is convinced that lack of competition in Ameren's service territory is directly tied to a Commission decision authorizing Ameren to subsidize its residential rate structure. In fact, the Commission's decision in docket 07-0165 is probably the largest culprit that stopped development of residential competition in Ameren’s territory," BlueStar said.

BlueStar, which was the first supplier to actively serve ComEd residential customers (beginning prior to the introduction of POR), said that the ICC's order in Docket 07-0165 resulted in a shift of revenue responsibility causing winter rates at Ameren to decrease, particularly for residential customers with significant winter space heating usage, and summer rates to increase (see 2/9 story for further discussion). "This deliberate shift in revenue responsibility caused Ameren’s residential winter rates to fall to the point where it makes it almost impossible for RES' [retail electric suppliers] to compete," BlueStar said.

"To be more specific, RES' will likely continue to be unable to compete for ANY residential customers with high winter usage (customers with a load profile of High Summer, High Winter (HH) and Low Summer, High Winter (LH)). Similarly, RES' are most likely also unable to compete in CIPSME (Metro East) and CILCO for residential customers whose usage is above 800 kWh. The simple economic fact is that Ameren’s subsidized retail rates for residential customers with these load profiles are not cost based. In the most extreme case, CIPSME’s retail energy rate for residential customers with usage above 800 kWh may be half [of] what competitors can charge based upon market prices," BlueStar noted.

Aside from the default service rate subsidization, BlueStar said that a lack of customer education is hindering residential choice. While recognizing the budget limitations of the Commission, BlueStar said that much of this education can be done at minimal expense via Commission press releases, Commission-sponsored events (similar to the shopping expos held by the Pennsylvania PUC) and improvements to the Plug-in Illinois website.

Furthermore, BlueStar said that regulatory uncertainty, specifically with respect to Commission proceedings, is hindering choice. BlueStar acknowledged that some level of legislative uncertainty is a nature of the business, but said that the ICC could improve certainty with respect to its administrative proceedings.

"Addressing the problem of regulatory uncertainty begins with adherence to existing rules and statutes followed by thoughtful decisive and consistent action. One only need to review the list of pending actions, and the length that such actions or problems have existed, to understand that the status of those proceedings greatly weigh upon how the Illinois market is viewed by competitive suppliers," BlueStar said. Though BlueStar did not cite any cases specifically, the Part 412 electric consumer protection rulemaking has dragged beyond the 12-month maximum time for rulemakings, necessitating a withdrawal of the originally proposed rules. Tariffs for purchase of uncollectibles have not yet been filed, and implementation of purchase of receivables at ComEd took over three years.

"BlueStar strongly believes that [the] easiest way to ease regulatory uncertainty is for the Commission to resolve proceedings as expeditiously as possible ... [I]t is the uncertainty that may exist for more than a year while a matter goes unresolved (often without any interim guidance by the Commission) that has a paralyzing effect on [a supplier's marketing] plans. Indeed, it is ironic that utility rate cases, which have [historically] been viewed as the most complex, are resolved within eleven months, while comparatively narrow issues involving competitive matters can fester for more than a year without the Commission taking any substantive action," BlueStar said.

"Given the Commission’s ability to handle complex rate cases within eleven months, BlueStar sees no reason why competitive issues cannot be resolved within three months."

BlueStar suggested, noting the state's budget situation, that the Commission could even seek authority from the Legislature to impose reasonable filing fees for matters to be handled on a so-called “rocket docket” basis.

Finally, BlueStar expressed concern with the Office of Retail Market Development's decision to seek comments on Ameren residential choice on a confidential basis. "Ostensibly to encourage candid responses, and because of the potentially competitively sensitive nature of certain comments, Staff noted that it will summarize stakeholder responses and that any given comment will not be associated with any specific company. Although BlueStar appreciates Staff’s concern to protect confidential information, BlueStar believes that stakeholders’ comments [should] be available to be read in their entirety with the exception of confidential information which should be redacted. The Commission has a long-held practice of having an open and transparent process whereby all stakeholders’ comments are available to each other for their own edification and interpretation. BlueStar is a strong proponent for the continuation of this process because there is serious danger in deviating from a tradition of openness and transparency," BlueStar said.

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