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Retail Supplier Group Says Regulator Cannot Rely On "Skewed", "Misleading," "Irrelevant" Data Used In Staff Report Proposing Limits On Supplier Pricing, UCB
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In exceptions to a draft Investigative Report ('IR') from the Connecticut PURA's Office of Education, Outreach, and Enforcement ('EOE'), which was based on a consultant’s report ('CR'), the Retail Energy Advancement League (REAL) said that PURA may not rely on the IR and CR's reports data that is, "skewed by irrelevant inputs," as REAL again argued, citing a previously reported analysis on current and historic savings, that retail electric supplier products in Connecticut are not "overpriced" or "harmful".
EnergyChoiceMatters.com was first to report on the draft IR which would conclude that products from retail electric suppliers to residential customers in Connecticut are, "both overpriced and harmful to residential customers."
As previously reported, EOE recommended various limitations on suppliers, including: (1) limiting suppliers' use of utility consolidated billing to products whose price does exceed the standard service rate; (2) a price cap for suppliers product equal to the standard service rate, or a prescribed percent (such as 10%) above the standard service rate; (3) requiring suppliers to seek PURA approval for rates above the standard service rate
See a full discussion of the IR and CR here
The draft IR comes in a PURA proceeding investigating supplier rates pursuant to Conn. Gen Stat. § 16-245(a), which states that PURA has the authority to condition an electric supplier's license and access to the systems and billing of the electric distribution companies on terms the authority determines to be just and reasonable, including, but not limited to, proof that the electric supplier's products are not overpriced or harmful to residential customers
As previously reported by EnergyChoiceMatters.com in January, REAL authored its own report which REAL said, "definitively demonstrates that retail electric supplier products in Connecticut are not 'overpriced' or 'harmful'."
The REAL report examined current and historic savings from electric choice used actual supplier rates; customers' desire for choice, including value-added services; and the value from various supplier products offered bundled with electricity
REAL's exceptions to the draft IR reiterate these findings from the REAL report
REAL contrasted its analysis with the CR which, as alleged by REAL, "only cites to EOE-6 [responses to a specific interrogatory] data
for support."
Among other things, REAL said that the CR did not examine a customer's premium or savings over the life of the product, instead relying on monthly aggregation of prices. REAL also said that the CR, which examined the period 2017-2021 but not 2022, included pricing from products which may no longer be offered in Connecticut (such as variable rates, service to hardship customers, early termination fees) and are thus irrelevant in considering whether supplier prices, under current law, are harmful
REAL alleged, "In fact, when claiming 'aggregate consumer harm', the CR only cites to EOE-6 data
for support. EOE-6 data includes variable pricing for all five years, as the legislature did not
ban variable pricing to residential customers until 2022. It is therefore a misleading data set with
which to evaluate today’s market."
"Including variable pricing is even more egregious in this
review given that it was the same legislation that both banned residential variable pricing and
amended Connecticut General Statutes § 16-245(a) to add the 'overpriced or harmful' language
that is the subject of this proceeding. The legislature set out the authority for an evaluation of the
current market knowing that variable priced products would not be permitted and the plain
language of the statute would not support a retroactive evaluation of historic types of products," REAL said
REAL said that its position is not that the Authority may only review current prices, "but that the five year
period used in this proceeding contains irrelevant data reflecting practices that have no
continuing significance to the current market as it moves forward, and which significantly skews
the data set."
"Calendar year 2022 is the first period which reflects current market requirements
and, as shown in the REAL Report, that period was certainly not harmful to customers," REAL said
"Although REAL maintains its objection to the use of an aggregate docket, if the
Authority wanted to conduct an analysis useful to understanding supplier products as they are
relevant to the current market, the data set reviewed should contain only those types of products
that could exist in the market today. Therefore, REAL proposes that the correct data set for
review would exclude variable rates, hardship customers, contracts with early termination fees,
and products sold by suppliers who have left the market. It also would include value for green
products, those with longer term contracts that provide rate stability benefits, and those with
other value-added benefits. The correct data set should also include more recent supplier prices
as compared to corresponding standard service rates," REAL said
Even without accounting for these issues, REAL said that its analysis for 2017-2021 still showed that, for those contracts 7 months or
longer, there are actual savings realized by customers
"[E]ven when REAL uses the same flawed data set that the CR uses during the
same 2017-2021 time period as the CR without any value for green products or those with a perk
or amenity, the tables below [link below] demonstrate conclusively that for those contracts 7 months or
longer there are actual savings realized by customers," REAL said
"These tables report for each product
(shown by term length and start month across all five years together) whether customers on
average saved over standard service (shown in green), paid a premium of less than 5% over
standard service (shown in orange), or paid a premium of greater than 5% over standard service
(shown in yellow)," REAL said
"These are not theoretical opportunities, but actual, realized savings
compared to known standard service rates," REAL said
The REAL tables may be found on pages 36-37 of the PDF file containing its written exceptions (click here)
"[M]any contract term and start month
combinations from 2017 through 2021 yielded customer savings compared to standard service
rates. Further, there were also many scenarios where customers received superior value to
standard service rates in the form of longer fixed price terms, green products, and other add-ons,
yet only paid a small premium for such benefits. While there were instances where premiums
over standard service were higher, such premiums reflected market conditions at the time, and
customers made a conscious choice to opt for such products as they valued the price stability and
other product benefits over standard service. This is how a market works," REAL said
"The data shown in these tables also does exactly what the CR does not, but what is
required for a full and proper evaluation of the data; it follows the customer journey for the full
term of the product to evaluate information specific to that customer against known standard
service rates. Otherwise, the CR’s statistics of customer loss are overstated and not supported by
the data in the proceeding. While the data from supplier responses to EOE-6 demonstrate that
for some customers there was a loss one particular month, reviewing the overall term of the contract confirmed net savings," REAL said
As an example, REAL said, "Using actual customer data reported by Direct Energy Services, LLC ('Direct') clarifies this point. See, e.g.,
Direct Energy Services, LLC Response to EOE-6, Attachment A, Row 56651, which shows a customer in
Eversource’s territory who began service in May 2020 on a 36 month contract at a rate of 10.09 cents/kWh. Dollar
values are based on an average usage of 750 kWh per month, consistent with the usage used by EnergizeCT.com.
The customer would not have been saving in comparison to the then current standard service rate of 9.414
cents/kWh (loss of $5.07 per month for two months), but would save compared to the upcoming July 2020 standard
service rate of 12.05 cents/kWh (savings of $14.70 per month for six months). And although the customer would
then not save again compared to the standard service rates for 2021 of 8.391 cents/kWh (loss of $12.74 per month
for six months) and 7.003 cents/kWh (loss of $23.15 per month for six months), in 2022 the customer would save
again compared to standard service rates of 11.484 cents/kWh (savings of $10.46 per month for six months) and
12.05 cents/kWh (savings of $14.70 per month for six months). And by the last 4 months of the customer’s
contract, in January to April of 2023, the customer saved significantly compared to the standard service rate of
24.172 cents/kWh (savings of $105.62 per month for four months). Over the lifetime of the product, the customer
saved $436.16."
REAL said, "The CR report is presented as a month-by-month evaluation
of prices, whereas the correct analysis to evaluate a supplier’s products is to look at the
individual customer’s term overall across multiple months. The tables above present an apples to apples comparison of supplier prices from EOE-6 to utility standard service rates and report an
aggregate of customer gains or losses by product term and start month. These charts, both in
these written exceptions and also in the Real Report take into account the number of customers
(and the number of bills), as they report weighted averages across all products and suppliers. To
the extent the Authority or any stakeholder wants to view the underlying data set or customer
counts in the matrices, REAL is happy to provide them."
"To adopt the IR’s recommendations, based on data that is skewed by irrelevant inputs,
would be erroneous in view of the reliable, probative, and substantial evidence on the whole
record," REAL alleged
REAL addressed criticisms of citing to 2022 which broadly shows savings from retail choice versus standard service
"In response to REAL’s discussion of 2022 data, the IR says '[p]resuming the data REAL
cites to be accurate and suppliers’ rates to be lower than the standard service rate, the docket
would then have six years’ of data in which one year demonstrated that suppliers benefited
consumers and five years demonstrated that suppliers harmed customers. It would be irrational
to disregard the five years and focus on only the one.' What would be irrational would be to
ignore recent data showing that a problem does not exist and upend the market over old data that
is no longer an accurate reflection of the market based on a faulty and unsupported standard.
The review of the data should not be a matter of one year compared to five, but of the current
reality compared to no longer existent trends. After all, as discussed above, this historic data
uses billed pricing information that includes elements of the market that don’t exist today -- such
as variable pricing and early termination fees," REAL said
REAL alleged, "The IR and the CR cling to the five year period covered in discovery and bury their heads
in the sand with regard to current, enduring market conditions. Since at least the start of 2022,
the best way to help customers, including low income and other disadvantaged customers,
manage their electricity costs is to proactively inform them of competitive supplier offers that are
priced substantially below the current standard service rates. The CR goes to great lengths to
paint misleading conclusions about the 'harm' of supplier products using strained statistical
analyses to show an alleged overpayment of on average $9.27 per month. Those overpayments,
even if accurate, pale in comparison to the savings of 50% or greater over standard service that
customers can and are achieving through supplier products today. In fact, the Rate Board
itself indicates that with offers available as of February 28, 2023, customers can save up to
$101.26 per month in the Eversource territory and $83.04 per month in the UI territory based on
an average usage of 750 kWh per month. Should a customer use more than 750 kWh, the
savings could be even greater."
REAL also disputed the CR's conclusion that various value-added products, services, or perks provided by retail suppliers to customers were miniscule.
REAL alleged, "EOE cannot avoid the fact that customers are voluntarily choosing supplier products,
even if in some cases historically those prices were higher than the standard service rates. The
IR and the CR dismiss the value of included amenities that are bundled with supplier products.
First, the CR claims to calculate a value of $7 million for such amenities,138 but the methodology
used to derive this assumed value cannot be verified. REAL’s experts have analyzed the same
supplier responses to EOE-7 and have calculated a value of $17 million. Furthermore, the
CR’s assertion that such benefits are of 'miniscule value' demonstrates a profound lack of
understanding of customers’ interests, as shown in the Emerson Poll. For instance, the poll
shows a majority of those polled value various types of bundled supplier products."
REAL's cited poll was previously reported in our January story
REAL alleged, "EOE ignores the record evidence in this proceeding that customers want choice, which includes a
poll conducted by Emerson College that REAL had to commission because EOE has done no
education or outreach, no focus group or customer listening session, and is instead relying on
conjecture and misconstrued information to arrive at a faulty outcome. The poll revealed that
95% of Connecticut ratepayers want choice, not government restriction on products, but EOE
seems uninterested in what Connecticut consumers want and focuses single-mindedly on
achieving an outcome that is not consistent with the facts."
REAL also alleged that PURA lacks statutory authority to adopt generic or market-wide policies under the relevant statute (Connecticut General Statutes § 16-245(a)) or make any conclusions about the market, and suppliers' prices, as a whole and/or in aggregation
REAL alleged that the statute empowers PURA to limit a specific electric supplier's access to utility systems upon finding that such specific supplier's rates are overpriced or harmful
Connecticut General Statutes § 16-245(a) provides: "The Public Utilities Regulatory Authority shall have the authority to condition an
electric supplier's license and access to the systems and billing of the electric
distribution companies on terms the authority determines to be just and
reasonable, including, but not limited to, proof that the electric supplier's products
are not overpriced or harmful to residential customers."
REAL alleged, "the Authority has no statutory authority to condition the entire residential retail
electric supplier market based on the plain language of Connecticut General Statutes § 16-245(a),
and it is an error of law to even attempt to do so in an uncontested proceeding."
"Instead, Connecticut General Statutes § 16-245(a) was meant to be a surgical tool to allow the
Authority to condition how bad actors operate in the market. In addition to any civil penalties or
restitution levied in connection with a finding that an individual supplier’s market activities were
overpriced or harmful, the Authority could use this statute to limit the supplier’s license or access
to utility billing systems instead of the more draconian licensure suspension or revocation," REAL alleged
REAL alleged, "Adopting the recommendations in the IR would exceed the authorization granted to the
Authority under Connecticut General Statutes § 16-245(a). The plain language of that statute
allows the Authority to 'condition an electric supplier's license and access to the systems and
billing of the electric distribution companies' in certain circumstances and on certain terms
based on 'proof that the electric supplier's products are not overpriced or harmful to residential
customers.'" [emphasis by REAL]
REAL said, "The statute is plainly written in the singular and does not, anywhere in its plain
language, authorize market-wide conditions or limitations -- both in terms of the conditions and
in terms of what proof is required."
REAL also cited legislative history in support of its reading of the statute.
REAL said, "For instance, during the June 7, 2021 Senate debate, Senator Needleman, chair of the Energy &
Technology Committee, stated that '[p]assage of this vital legislation means PURA will now
have more tools to implement additional safeguards to protect consumers from the bad
actors…within the energy markets.' Similarly, during the May 6, 2021 House debate,
Representative Ackert acknowledged that suppliers 'are a business here in the State of
Connecticut that operate here. And for the most part, do it soundly' and 'not all these suppliers
are wrongdoers.' Clearly the legislators intended the language to target only certain actors in the
supplier market, and not the entire market."
REAL alleged, "Instead of focusing on individual wrongdoers and bad actors based on supplier-specific
products, as the legislature intended, the IR lumps supplier data into a general study of pricing,
creating a generic general data set, and then attempts to label all supplier products as overpriced
based on that aggregate data. Any bad outliers get entirely lost in this analysis, contrary to the
legislative purpose of singling out the bad actors. Further, the IR itself acknowledges that
individual licensing dockets are the proper proceedings for these recommendations: 'If deemed
necessary, the Authority could impose [restrictions on supplier rates at or below standard service
rates] or other suggested conditions during each supplier’s next periodic review.' To roll in a
market-wide limitation one supplier at a time (not based on review of individual supplier
products) over a period of time up to five years in duration, in addition to being an impermissible
method of applying a statement of general applicability, discussed further below, raises questions
about the equity of such an approach and the urgency of the supposed harm to customers. If
the Authority does properly seek to condition individual supplier’s licenses in the future pursuant
to Connecticut General Statutes § 16-245(a), the aggregate data provided in the IR and the CR is
not a lawful basis to show any single supplier’s products are 'overpriced or harmful' pursuant to
the plain language of the statute."
OCC Exceptions
The Connecticut Office of Consumer Counsel noted, "its strong support and agreement with both the recommendations and conclusions set forth in EOE’s Phase I Report as well as the analysis and conclusions reflected in the [consultant's] Report."
"OCC believes that the most straightforward and beneficial condition that the Authority could impose on third-party suppliers would be to implement a requirement that supplier rates offered to consumers be equal or less to the then-applicable EDC standard service rate," OCC said
"One aspect of the Phase I Report that gives OCC pause is the suggestion that the Authority restrict third-party supplier access to EDC billing systems if the rate charged is higher than standard service and that in such instances third-party suppliers be required to render their own direct bills to customers separate from the EDC bill ... OCC has historically been opposed to direct supplier billing given the significant potential for consumers to be subject to additional misleading information and marketing harm. OCC anticipates that review of direct supplier billing would consume significant regulatory resources and open yet another front in the seemingly endless enforcement actions against third-party suppliers for failure to abide by laws and regulations governing the Connecticut market. Similarly, OCC suspects that many consumers would either be confused or annoyed by suddenly receiving two electricity bills instead of one. This poses another potential issue -- currently a consumer who cannot pay has access to the various payment assistance plans offered through the EDCs. A customer who cannot pay a separate supplier bill for generation supply would presumably not have access to these same remedies, placing the consumer at the mercies of the third-party supplier’s magnanimity. OCC does not believe that a situation where consumers are hounded by collections firms hired by third-party suppliers to collect delinquent direct generation bills is preferable to the current situation where a customer who cannot pay -- either due to generation or delivery -- can seek accommodation via an EDC payment plan. Accordingly, OCC urges extreme caution should the Authority entertain direct supplier billing as a remedy to the harms outlined in the proceeding," OCC said
OCC said that, to the extent that the Authority pursues conditions that require billing system modifications, OCC submits that EDC recovery of associated costs from third-party suppliers is warranted in this instance rather than recovering such expenses from the general class of electric ratepayers.
OCC noted that the consultant's report, but not the EOE report, recommended that Connecticut abolish the retail electric supply market, "due to persistent overpayment and consumer harm."
"Although OCC has itself advocated for this same solution in the past, at this juncture OCC agrees with EOE that the Authority can take certain steps that would ensure that the market delivers actual benefits to consumers," OCC said
Docket 18-06-02RE01
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Suppliers Highlight Current, Historic Realized Savings Under Electric Choice
March 2, 2023
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