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Direct Energy Recommends Abating Met-Ed/Penelec Residential Referral Program Pending Default Service Investigation
May 18, 2011
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The Pennsylvania PUC should abate the customer referral mailer for residential customers at Met-Ed and Penelec while moving forward with the referral program for small businesses, Direct Energy Services said in comments to the PUC.
The referral program, required under the Met-Ed/Penelec default service settlement, calls for the utilities to send, in envelopes bearing the utility's name and logo, letters to customers notifying customers of available residential and small commercial offers from retail suppliers participating in the referral program. The letters notifying customers of supplier offers are to be sent at least twice during each calendar year beginning in 2011.
The utilities are authorized to spend up to $2.25 million of ratepayer funds for the referral program; all other costs shall be recovered from participating suppliers.
In March (4/1), the PUC solicited comments on whether the referral program should be delayed, given that, at that time, there were only two (or three) residential offers in the service areas, from FirstEnergy Solutions, BlueStar Energy Solutions, and Palmco Power (Met-Ed only). In the over six weeks since the PUC's request for comments, there have been no additional residential suppliers entering the Met-Ed and Penelec territories, at least among those offering on PA Power Switch.
Direct supported moving forward with the small commercial referral program, given that the Met-Ed/Penelec territories have seen 15-20% migration among commercial customers and more suppliers are active in this space, though it is unclear exactly how many suppliers are offering small business service. Direct said that, while better than the residential market, the Met-Ed and Penelec small commercial market is not "healthy," and said that it would benefit from immediate implementation of the referral program.
As for residential service, while generally not supporting the modification of settlements, Direct noted that the Commission has identified a "very real problem" in the lack of competition for residential customers at Met-Ed and Penelec.
Direct Energy said that the lack of offers at Met-Ed/Penelec, and their residential switching levels of under 2.5%, is, "disconcerting though not surprising given the current default service model."
As the PUC is currently conducting a statewide investigation into the structure of default service, Direct recommended holding the residential referral program in abeyance until that investigation is completed.
Direct said that the referral program may be re-assessed after the default service investigation, to ensure it provides maximum value to customers.
Furthermore, Direct offered that, "[w]ithout the implementation of real structural changes in [the FirstEnergy] service territories similar to those offered by Direct Energy in the context of the recent merger of Allegheny Power with FirstEnergy, Direct Energy's ability to enter the FirstEnergy markets remains uncertain."
The Office of Consumer Advocate said that it is reluctant to retreat on the terms of the settlement and delay the residential program, since there are offers available today that could save customers money. Furthermore, OCA said that, "[w]hile offers today may be limited, the mailing process envisioned in the Settlement may encourage other suppliers to include offers for the mailing as it will reach so many more customers."
If the retail market participants which agreed to the settlement wish to delay or modify to referral program, OCA suggested that a working group be established to address such issues.
The Office of Small Business Advocate recommended moving forward with the small commercial program and took no position on the residential program.
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