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Pa. PUC Staff: Only Beneficiaries of Low-Income Shopping Are Retail Suppliers; Recommend Low-Income Customers Be Restricted To Rate-Regulated Shopping Program (Existing Customers Cannot Continue With Chosen Supplier)

July 11, 2016

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Reporting by Paul Ring • ring@energychoicematters.com

Customer Assistance Program (CAP) customers at PPL should only be permitted to shop through a new Standard Offer Program (SOP) exclusive to CAP customers, Pennsylvania PUC Bureau of Investigation and Enforcement Staff said in a brief in PPL's default service proceeding.

Currently at PPL, CAP customers may shop freely, and CAP benefits are portable.

I&E Staff said that this has led to CAP customers paying more than the Price to Compare, resulting in such customers using up their CAP benefits faster and being removed from the program (for reaching their maximum benefits), while non-CAP customers pay higher rates to subsidize CAP shopping.

"The evidence in this case has revealed that the result of unbridled OnTrack [CAP] shopping is that, on the whole, OnTrack shoppers have been exceeding their CAP credits at a faster pace than they would have if they did not shop beyond PPL's PTC. PPL has also proven that unrestricted OnTrack shopping has led to increased CAP costs that are paid for by its non-CAP residential customers through its Universal Service Rider (USR)," Staff said

"[T]he data reported by PPL indicates that on average, over half of all OnTrack shoppers exceeded the PTC, and paid substantially more per month, potentially jeopardizing the shoppers' continued access to electric service," Staff said.

"Taking into account the shopping decisions made by all OnTrack customers, including the experience of those who shopped at or below the PTC, PPL calculated an annual impact of $2,743,872 [in higher costs] ($3,580,872 above the PTC- $837,000 below the PTC)," Staff said

"According to PPL, 'the net financial impact of OnTrack shopping is an increase of approximately $2.7 million annually in the energy charges paid for supply provided to OnTrack customers,'" Staff said

"When PPL' s CAP program is causing a negative financial impact on both its participants and its non-CAP ratepayers, it cannot be considered a cost-effective program. In essence, each party considered in the Commission's balance of interests is at a financial loss, and the only beneficiaries of unrestricted CAP shopping are EGSs," Staff said

Staff, along with PPL and the Office of Consumer Advocate, therefore proposed that PPL adopt a CAP Standard Offer Program ("CAP-SOP") effective June 1, 2017

Under the proposal, the CAP-SOP will be the only vehicle that PPL's CAP customers may use to shop and receive supply from an EGS, and all other CAP customer shopping requests will be denied.

Existing CAP shopping customers not on an EGS fixed price plan may not continue with their EGS, and must either elect the CAP-SOP program, or will be returned to default service

Existing CAP shopping customers on an EGS fixed price plan may continue to take service from such EGS, but only until the contract term "expires" and/or is terminated. Once the existing CAP customer shopping contract expires or is terminated, the CAP customer will have the option to enroll in the CAP-SOP or return to default service, but in any event will only be permitted to shop through the CAP-SOP

Currently, there are about 20,000 CAP customers who shop (of 40,000 total CAP customers)

Under the proposed CAP-SOP program, EGSs participating in the CAP-SOP must agree to serve customers at a 7% discount off the PTC at the time of enrollment, and honor that price for a 12-month term.

After the CAP-SOP term concludes, the CAP customer will be returned to the CAP-SOP pool and be re-enrolled in a new CAP-SOP contract, unless the customer requests to be returned to default service or is no longer a CAP customer. Although CAP-SOP customers may continue in the program for multiple terms, it does not appear the EGS initially assigned such customer may retain the customer at the end of the initial term, even under the new CAP-SOP price, as customers are re-assigned to the pool.

As with the SOP, CAP-SOP customers may terminate the CAP-SOP contract at any time and without any termination or cancellation fees or other penalties.

EGSs must enroll separate from the standard SOP to be a participating supplier in the CAP-SOP. EGSs would be free to voluntarily elect to participate in none, one or the other, or both the traditional SOP and the proposed CAP-SOP. EGS enrollment in the program will be for a three-month period, and will conform to the enrollment process for PPL's standard SOP. As such, EGSs may opt in to participate in the CAP-SOP on a quarterly basis, and are free to leave the CAP-SOP on a quarterly basis.

Staff and other CAP-SOP proponents propose that the program be an interim measure pending a statewide collaborative on CAP shopping

The Retail Energy Supply Association said in a brief that the Staff proposal would restrict CAP customers' shopping choice, and warned that suppliers would not participate in the CAP-SOP program

"The proposed structure of the CAP-SOP ... includes program restrictions that would result in no EGSs participating. This is because the CAP-SOP would require the EGS to pay a $28 referral fee for each customer, agree to only provide below market electricity (7% off the then-effective PTC at enrollment) and prohibit the EGS (or any other EGS) from marketing other products to the CAP customer. EGSs are not likely to view such structure as favorable and would not agree to provide service under these conditions. The practical result would be to remove any opportunity for CAP customers to shop," RESA said

RESA criticized the data relied upon by Staff and other parties to conclude that CAP customers were paying more under EGS service, noting that the data captures a limited portion of time, and that, "This data does not take into account a specific contract term with an EGS to show whether the CAP customer paid a higher price for the entire term of their contract with EGSs or the CAP customer -- when he or she first chose the EGS -- obtained some benefit or incentive for switching (such as a lower price, a gift card, or energy audit). In fact, PPL testified that it 'has no way of knowing of or tracking such incentives.' Thus, the point of time used for the comparison is most certainly not reflective of the conditions experienced by shopping CAP customers over their entire shopping experience."

RESA noted that limiting CAP customer shopping is at odds with recent PUC decisions to make CAP program benefits portable at PECO and the FirstEnergy EDCs, and noted that CAUSE-PA, an advocate of the CAP-SOP program, has identified the problem with the CAP program to be the program's structure (not shopping inherently), but that CAUSE-PA's solution does not address this structural problem.

Under PPL's CAP program, a CAP customer is limited to incurring a specific amount of charges based on usage and price per kWh during the CAP customer's 18-month enrollment period (referred to as the 'CAP Credit'), but a problem arises because CAP Credits are designed based on PPL's default service rates. During the 18-month period, the amount remaining for this CAP Credit is reduced each month on a dollar for dollar basis for any total monthly bill amount that is in excess of the customer's CAP bill. If the CAP Customer exceeds the CAP Credit within the 18-month period, then that CAP Customer is required to pay the charges in full with the situation reassessed at the end of his or her 18-month period (when the customer may again be placed in the CAP Program). Thus, if the CAP customer receives alternative generation supply service for a price higher than the PTC, then those additional charges will be applied to reduce the CAP Credit.

"[T]he record is completely devoid of any analysis regarding changes that could be implemented to the structure of PPL's CAP program as an alternatives to restricting shopping for CAP Customers ... Adjusting the CAP customer's CAP Credit to align with the price of a competitive supplier seems like an easy way to address the concerns raised by CAUSE-PA. There may be other reasonable alternatives within the PPL CAP Program that would not require restricting CAP Shopping but none have been offered in the record," RESA said

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