Pa. PUC Affirms Authority to Allow Opt-Out Aggregation, Reserved for "Unique" Circumstances

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March 18, 2011  

The Pennsylvania PUC's written order prohibiting opt-out municipal aggregation programs developed by home rule municipalities affirms the Commission's "strong preference for individual choice," but finds that the Commission itself may approve an opt-out program under "unique circumstances."

Matters first reported yesterday that the PUC held that home rule municipalities may not conduct opt-out aggregation without Commission authorization (3/17). The release of the PUC's written order provides greater insight into the PUC's legal interpretations, which will likely prove important as opt-out issues will assuredly be addressed as the PUC institutes a statewide investigation into default service mechanisms.

The Commission affirmed that home rule opt-out aggregations are, "inconsistent with the consumer protection rules applicable to switching electric generation suppliers which are controlled on a statewide basis by Section 2807(d)(1) of the Public Utility Code and the related Commission regulations." The statute prohibits distribution companies from switching a customer, "without direct oral confirmation from the customer of record or written evidence of the customer's consent to a change of supplier."

Regardless of a home rule municipality's authority to pass an ordinance authorizing municipal aggregation, a distribution company or electric supplier, "cannot switch a customer who does not opt-out without Commission approval," the PUC said.

The Commission also affirmed that, as it did at Pike County Light & Power, it may approve opt-out programs on a case-by-case basis. The PUC stressed that such opt-out aggregation was only found to be consistent with the existing statute due to its implementation under the Commission's oversight and according to the terms and conditions of the approved Request for Proposals.

"In its Pike County decision, the Commission did not endorse opt-out programs as a general rule, rather the Commission approved such a program to deal with an emergency situation with appropriate consumer protections within the context of the situation," the PUC clarified.

"Given the anti-slamming provisions in the Public Utility Code, opt-out aggregation programs should be authorized only in unique circumstances where it is clearly in the public interest to do so, such as in Pike County. In Pike County, the consumers of a single, small EDC were facing default service rate increases of over 70% and had no shopping options. In comparison, all, or nearly all, residential customers in Pennsylvania currently have multiple competitive offers or reasonably-priced default service options or both; therefore the unique and exigent circumstances that led to the Commission's approval of an aggregation program in Pike County do not currently exist," the PUC said.

"Absent a legislative change to the anti-slamming provisions, opt-out aggregation programs must be explicitly approved by the Commission, and the Commission will approve such programs only in unique circumstances where it is clearly in the public interest to do so. [FirstEnergy Solutions] did not present any unique or exigent circumstances in its Petition demonstrating that the opt-out programs would be in the public interest. Under the facts that exist at this time, Commission approval of an opt-out municipal aggregation program would be an improper and unnecessary abrogation of individual consumers' rights concerning electricity choice," the Commission added.

The Commission further asserted continuing jurisdiction over electric generation suppliers (EGSs) due to their requirement to be licensed. "Therefore, because the opt-out provisions violate the anti-slamming protections absent Commission approval, EGSs are not authorized to participate in an opt-out municipal aggregation program," the PUC said.

The PUC also dismissed FirstEnergy Solutions' argument that municipal opt-out aggregation is consistent with the PUC decision to permit alternative default service providers, without affirmative customer consent, which was upheld in George v. Pa. PUC, 735 A.2d 1282, 1287 (Pa. Cmwlth. 1999).

"The Commission believes the situation in George is different because in George, it was the EDC [electric distribution company] that was creating the alternative plan. Customers in the City of Meadville are already in the EDC default service plan; they are not picking a default service provider from scratch. Accordingly, moving such customers from the existing default service provider requires the customer's affirmative oral or written consent per the anti-slamming statute and related regulations in order to avoid violating the law," the PUC said.

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