PSC Staff: Explore Phasing Out Utility Consolidated Billing

PSC Staff: Retail Supplier Prices Paid By Residential Customers, "Do Not Have A Reasonable Relationship With Market Prices For Some Customers"

Staff: "Many Residential Retail Choice Customers Are Not Benefiting From Retail Choice On A Price Basis, Which Is Likely To Continue With No Changes To Retail Choice"

Staff: Require Affirmative Consent For Fixed Rate Change, Or Switch From Fixed To Variable Rate

Staff: Require Entire Sales Interaction At Door Or On Phone To Be Recorded

Staff: Extend Consumer Protections To Small C&I Customers

Staff: Adopt Restrictions On POR

Consumer Group: Choice Customers Paid $227M More vs SOS In 2022

OPC: Ban Use Of Third-Party Agents By Retail Suppliers

Muni Aggregator Supports "Reforms" To POR To Curb "Deceptive" Practices

Some Retail Suppliers Propose POR Clawback, Increasing Supplier Security Requirement To $1 Million

November 6, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Maryland PSC have proposed a series of retail energy market reforms for consideration

Staff's proposal were made in response to a previously reported petition from the Maryland Energy Advocates Coalition (MEAC) to eliminate the purchase of receivables program at the electric and gas utilities in the state

See our prior story for background on the MEAC petition

Citing various data on customer experiences (discussed further below), Staff said, "Staff believes that the Commission should consider significant retail choice market reforms in Maryland, including changes to POR, at this time."

Among other things, Staff recommends the use of technical working groups, "to explore phasing out UCB [utility consolidated billing] once SCB [supplier consolidated billing] becomes an option for suppliers."

Staff, "believes the Commission should consider changes to POR other than removing it entirely from UCB in Maryland."

Staff recommends considering limiting residential and Type I retail choice POR to fixed price contracts of a minimum length, e.g., 12 months. "This would allow time-of-use and tiered rates but require the rates to be stated in the contract and individual rate components to remain fixed. This would maintain the level playing field between SOS suppliers and retail suppliers provided by POR for retail supply products that are similar in structure to SOS," Staff said

Staff proposed requiring affirmative customer consent when a contract changes from a fixed rate contract to a variable rate contract or a change in the fixed rate

"As the BGE residential electric market analysis demonstrates, there is an issue of retail suppliers raising prices over time through contract renewals and variable rates, leading to high rates for customers that are well above market based rates. This option would require the customer to affirmatively accept a change in their contract from a fixed rate to a variable rate or a change in the fixed rate. Staff recommends that the Commission consider this type of customer protection," Staff said

Staff also proposed requiring an "affirmative notice" of a change in rates. Currently, suppliers must provide a mechanism for customers to look-up new rates, but customers must actively seek the new rate. "Staff believes that the Commission should consider requiring suppliers to notify customers of their rate for the next billing period, along with the corresponding SOS rate, in any month where the rate changes, and that this notification be done via letter, e-mail, or text message," Staff said

Staff proposed requiring a record of the entirety of sales calls and interactions, for both door to door and telesales

"There have been numerous instances where a customer made credible allegations of false and misleading statements during a sales interaction, only to have the supplier dispute the allegation, generally without evidence. To address this, Staff recommends that the Commission should consider requiring all telephone sales calls for residential and Type I customers to be recorded and archived for a period of no less than six months.," Staff said

"Staff similarly recommends that for door-to-door sales, the Commission should consider requiring that all such sales for residential and Type I customers be recorded and archived for a period of no less than six months," Staff said

Staff proposed extending existing residential customer protections to small commercial customers

"Staff believes that the existing consumer protection regulations for small commercial customers may not provide sufficient protection. While certain consumer protection regulations are specific to residential customers and would not apply to commercial customers, based on the information gleaned from numerous Commission investigations into the marketing activities of retail suppliers, certain of the residential consumer protection regulations should be considered for small commercial customers. In particular, it may be beneficial to add to the existing list of non-residential consumer protection regulations provisions explicitly prohibiting the following: unauthorized charges, unauthorized enrollment, and the use of misleading or deceptive marketing or trade practice. Further requiring additional contracting requirements, price information, and an explicit notice of a change in rates may provide useful protections for small commercial accounts," Staff said

Staff also favored higher security requirements for suppliers

"The bond/security requirement of $250,000 has remained unchanged since these regulations were instituted in 2005. If adjusted for the Consumer Price Index, this amount would have risen to approximately $400,000 by 2023. While Staff would support raising the bond/security requirements to account for inflation, it may provide better consumer protection to bifurcate the bond/security requirements. Staff recommends that the Commission consider increasing the bond/security requirements and direct the working group to review this option," Staff said

"Specifically, Staff believe that the existing requirements listed above should remain in place in order to be granted a supplier’s license. However, if a supplier wants to provide service to residential customers, an additional $250,000 bond/security should be required. Staff recommends the additional bond/security requirement mainly because the bond/security requirement of $250,000 has not changed since the introduction of retail competition. As previously mentioned, if the bond/security was adjusted for the Consumer Price Index, the amount would have risen to approximately $400,000. Additionally, the number and severity of complaints, combined with an increased focus on good market practices has led to higher fines. In some cases, the fines were higher than the bond/security amount of $250,000," Staff said

Staff's comments discussed the Energy Institute at Hass Working Paper about Residential Retail Choice in BGE Service Territory

Staff concluded, "the paper provided evidence in the BGE residential electric retail choice market that retail supply customers are paying considerably more than SOS on average, with customers in lower income areas paying the highest rates. Another issue is that door-to-door marketing may result in customers paying higher rates, relative to offers on https://www.mdenergychoice.com/, and that door-to-door markets are targeting low-income areas in the BGE service territory. BGE retail residential customers who remain on choice contracts after the initial fixed rate concludes or switches to variables rates face increasing rates over time relative to market-based prices. The type of analysis conducted in the BGE residential electric market has not been conducted elsewhere in the state. However, BGE is the largest utility by customer count in the state and the results there warrant consideration of significant reforms statewide."

Staff said that the data from the Hass report, "indicates that retail supply prices paid by BGE residential customers do not have a reasonable relationship with market prices for some customers."

Concerning customers which stay with a retail supplier beyond an initial contract and/or over a long period of time, Staff said that the report, "shows that customers are worse off over time relative to the initial fixed price paid, with customers in the low income zip code grouping worst off."

"In other words, when a customer’s contract was renewed with the same supplier or switched to variable rates, the average customer steadily became worse off over time. The paper’s author states that retail suppliers appear to be aware that customers are inattentive to price and appear to increase prices over time and that over time the effects of these increases are large, with customers experiencing 11-20 separate price changes by their current supplier (number of times the customer’s price is changed by their current supplier) paying an extra $0.035/kWh on average.49 Staff concurs that the data indicates that BGE residential retail suppliers increased customer prices over time with contract renewals and variable price rates," Staff said

Staff also, "agrees that the data indicates that customers who sign up through telemarketing and door-to-door sales pay higher prices than customers signing up for residential retail supply service online."

Staff said that the report shows that, "in the Baltimore metropolitan region for this period [2019-2022], retail suppliers targeted low-income areas for door-to-door marketing. Staff notes that retail supplier targeted marketing of low-income customers in the Baltimore metropolitan region for this period is consistent with the data above showing that sing-ups [sic] through marketing, rather than sing-ups [sic] from searching retail choice, lead to higher prices for customers and that customers in low-income areas pay higher prices on average than customers in higher income areas."

"Staff concludes the following based on the paper. On average, over the analysis period presented in the paper, BGE residential electric customers served through retail supply rates would have been considerably better off on average from a rate and bill standpoint if they had been served via SOS. It is clear that retail supplier door-to-door marketing in the BGE residential electric market targets low-income areas by zip code, with higher prices than retail choice prices available to the same customers on MDenergychoice.gov, and that BGE electric residential customers would be significantly better off if they only contracted for retail supply through the MDenergychoice.gov website. For the analysis period presented in the paper, BGE electric residential customers who live in low-income zip codes consistently pay higher prices than customers in higher income zip codes, likely due to door-to-door marketing. Additionally, residential electric retail suppliers in the BGE service territory consistently raised BGE residential customer prices over time when customer contracts renewed, or customers were on a variable rate," Staff said

Staff further concluded, "The BGE residential electric retail choice market data provided in the Energy Institute at Hass paper clearly shows that most residential retail choice customers in the BGE service territory are not benefiting from retail choice now on a price basis. Thus, maintaining the status quo with retail choice in Maryland may result in residential customers with high bills relative to SOS."

MEAC Comments

The Maryland Energy Advocates Coalition (MEAC) said that, "MEAC would like to see Maryland eliminate energy supplier residential direct sales altogether."

Barring that, MEAC proposed prohibiting door to door solicitations entirely, or at least in designated communities

MEAC also believes that telesales for retail energy should be prohibited

"Research reveals the bulk of the enrollments are made via outbound direct sales, not inbound consumer marketing. Thirteen years’ worth of data, high sales churn, consumer CAD complaints, $1.2 billion in excess premiums paid -- these facts make clear that the retail choice direct sales model isn’t working for consumers. It has been nearly impossible to enforce the laws and regulations to protect residential customers from unlawful enrollments and excessive prices," MEAC said

MEAC also suggested adding one personal security question for every TPV call and recording that can only be answered by the customer. For example, questions about the town of birth or the mother’s maiden name.

MEAC also supports a switch block option for customers

"MEAC thinks a reasonable choice is for account holders to opt out of Choice. This idea is to require utilities to offer the ability for accountholders to apply an account freeze so that regulated supply cannot be switched to competitive supply," MEAC said

MEAC recommends the prohibition of variable rates.

MEAC proposed that the PSC prohibit the use of all-in-on-bundled [sic] energy and non-energy product pricing for both UCB and SBC [sic, SCB] billing.

MEAC also supports several of the proposals raised by Staff listed above

MEAC provided an updated comparison of aggregate retail choice costs versus SOS costs.

For 2022, MEAC said that residential electric customers on choice paid $178 million more than SOS, and residential gas customers paid $49 million more than default service ($227 million across both commodities)

MEAC also detailed several alleged interactions concerning fraudulent activities and/or abuse of Choice IDs. MEAC did not list any vendor names in its public filing

MEAC alleged, "In 2023 at GEDCO, a Baltimore City non-profit organization, three previous supplier salespeople were getting bill assistance help. All three had worked for the same local direct sales vendor. They claimed they had been trained to take BGE envelopes out of mailboxes and enroll them on iPads. All three said this was a common practice with this marketing vendor, even naming some suppliers names they had sold for."

Montgomery County

Montgomery County filed comments in which the would-be CCA stated that it, "generally agrees with the conclusions of MEAC that the use of POR has enabled 'deceptive marketing and contracting practices by certain energy suppliers [to become] common in this marketplace.'"

"Montgomery County also shares the concerns of MEAC that limited income customers are paying unusually high energy prices. The County encourages the Commission to consider regulatory changes to address these issues as part of any proceeding considering reforms to POR specifically or the energy retail market in general," Montgomery County stated

Montgomery County cautioned against any impact to CCAs from POR changes, however.

"However, the County notes that the use of POR has separately been contemplated in relation to the Montgomery County Community Choice Aggregation ('CCA') Pilot Program, which the Commission is considering in PC54 / RM80. The County requests that consideration be given to how changes to POR may impact CCA programs and looks forward to participating in those discussions," Montgomery County said

OPC Comments

The Office of People's Counsel made several unique proposals in addition to others already discussed above

OPC proposed that, "The Commission should prohibit suppliers from using third-party sales agents to make sales to consumers."

"Alternatively, the Commission could require suppliers to register their sales agents to identify and track agents that repeatedly violate consumer protection laws," OPC said

OPC proposed that the Commission should prohibit signed enrollment contracts during the door-to-door sale, and require customers to submit the signed contract to the retail supplier after the agent leaves the customer’s premises

OPC said that renewable or green products should be at least 75% renewable, and that such products must use RECs that meet the definition for a Tier 1 REC in PUA § 7-701(m) and (s)

OPC said that retail suppliers should be required to annually disclose the average rates charged to residential customers

As part of this proposal, OPC said, "Relatedly, to inform the public, the Commission’s regulations should require that the annual average customer prices for the most recent calendar year appear on all marketing material, contract documents, and contract summaries."

RESA/NRG Comments

The Retail Energy Supply Association and NRG Energy, Inc. said that retail choice is working in Maryland and that significant retail market reforms, including eliminating POR programs, are not necessary or warranted.

RESA and NRG proposed "targeted changes" to help discourage supplier behavior that may contribute to customer complaints (including a POR clawback provision, an increased licensing bond, and third-party sales vendor notification).

"The Commission could consider modifying the POR structure to include a clawback provision (similar to the mechanism implemented by FirstEnergy utilities in Pennsylvania)," RESA/NRG said

"Additionally, RESA and NRG support robust enforcement to ensure that all suppliers are adhering to the rules. Rather than eliminate POR, the Commission should leverage engagement by its Consumer Affairs Division and its recently established enforcement unit to proactively identify compliance issues, contact suppliers to notify them of compliance issues and trends in the marketplace, and engage with suppliers to resolve compliance issues. The Commission can use its existing enforcement tools to ensure all suppliers are playing by the same set of rules. Implementation of the Competitive Markets Division, as discussed below, will further enhance the Commission’s proactive compliance and enforcement capabilities," RESA/NRG said

RESA/NRG said, "The Commission could consider updating the licensing bond amount from $250,000 per supplier to $1,000,000 per supplier."

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