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Pennsylvania PUC Concludes Default Service Is Barrier to Electric Choice, Changes to be Investigated in Phase II

July 28, 2011
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The "inescapable conclusion" from the Pennsylvania PUC's first phase of its investigation of the retail electric market is that, "Pennsylvania's current retail market requires changes in order to bring about the robust competitive market envisioned by the General Assembly when it passed the Electricity Generation Customer Choice and Competition Act," the PUC said today in an order initiating the second phase of the investigation (I-2011-2237952).

The second phase of the investigation, designed to answer what changes should be made, will be conducted by the Office of Competitive Markets Oversight (OCMO).

"[T]estimony and comments received during the first phase of this Investigation conclusively establish that the current default service model stands as a substantial impediment to a robust competitive retail market in Pennsylvania," the PUC said.

The Commission thus directed that Phase II of the investigation examine the structure of the current default service model to determine what changes need to be made to that model to eliminate or at least minimize the impact of default service on the competitive retail market

The PUC determined that Phase II of the investigation will include two work plans: one for intermediate steps involving changes to the existing market model, and a second plan for the long range steps involving structural changes to the default service model. "We anticipate that the intermediate work plan will be presented to this Commission in December of 2011. The long range work plan will be presented in the first quarter of 2012," the PUC said.

With regard to intermediate steps, OCMO is directed, without limitation, to examine the following areas:
1. Prohibition of marketing of default service;
2. Assignment of new customers or customers on default service who move to new addresses to EGSs, i.e. eliminate the automatic assignment of customers to default service;
3. Customer referral programs;
4. Information access, including smart meter data;
5. Annual auction of customers on an opt-in basis;
6. Examination of current default service procurement schedules;
7. Accelerated switching time frames, e.g. examination of 16 day waiting period;
8. Uniform EDC/EGS coordination protocols, e.g. credit standards;
9. EDC supplier charges

For long range steps addressing market structure, the PUC directed OCMO to examine:
1. The basic definition of default service, i.e. should default service be last resort service or open to anyone who simply declines to choose a provider;
2. Cost allocation, i.e. does the current structure capture all of the costs of default service, or are some of those costs retained in distribution rates;
3. Should default service remain with the EDCs;
4. Pricing of default service, including term and reconciliation;
5. Uniform EDC/EGS coordination protocols, e.g. billing systems;
6. Accelerated switching time frames, e.g. mid-cycle meter reads and integration of customer switching in smart-meter deployment.

"One of the most important issues we expect to see addressed is the impact of any recommended changes on universal service programs and how those programs will be maintained in any new environment. In addition, impacts on Act 129 Plans and the Alternative Energy Portfolio Standards Act requirements must also be taken into account," the PUC said.

The Commission's Office of Communications shall work with OCMO on enhanced customer choice education plans as well.

The second phase of the investigation will be managed through a series of technical conferences lead by OCMO. OCMO will be free to convene working groups, as needed, to review discrete issues and provide specific proposals for issue resolution.

The first technical conference has been scheduled for Wednesday, Aug. 10 in Harrisburg to address organizational issues and also to begin substantive discussions on some of the key issues involved.

The next en banc hearing on the investigation has been scheduled for Thursday, Oct. 27.

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