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PSC Staff Proposes Applicable Dates For Monthly SOS-Based Price Caps, Treatment Of Renewals, More
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Staff of the Maryland PSC have proposed how to apply the state's new price cap applicable to residential retail energy offers
SB1 establishes that, except from green power which is subject to other specific price limits, residential retail energy plans may not exceed the trailing 12-month average default service rate as of the date of the agreement with the customer (in other words, the supplier's rate must be below the SOS-based price cap in place at the time of contracting, but the supplier's rate does not need to be below any future trailing 12-month average default service rate).
For brevity, default service is referred to in this story as "SOS", including for default gas standard service. Also, for brevity, any discussion of contracts applies to those contracts subject to SB1, ignoring any grandfathered contracts (with certain issues concerning which contracts are eligible for grandfathering still pending)
All discussion in this story is limited to residential service, even where not specifically stated
Among other things, Staff's proposal addresses the time period during which each specific 12-month trailing average SOS rate shall apply
Staff proposes that each 12-month trailing average SOS rate shall apply to all days in the month following the filing of a utility's 12-month trailing average SOS rate (with, as discussed further below, the utility's filing required to be made by the fifth business day of the month preceding the month in which the cap, based on that specific, filed 12-month trailing average SOS rate, will apply)
For example, a 12-month trailing average SOS rate that covers the 12-month period January through December 2024 ("December 2024" average rate) would serve as the rate cap applicable for the entire month of January 2025
More specifically, under this example, Staff says that the December 2024 trailing 12-month average SOS rate should be the applicable price cap for contracts
with, "a date of agreement from January 1 through 31, 2025."
Based on such language and other discussion in Staff's proposal, it is believed that, for example, the average rate filed by the utilities in January 2025 would not apply to contracts executed during January 2025 (but would instead apply to contracts executed during, and only during, February 2025)
Aside from the stated language above, Staff says that its proposal (given the filing date for the monthly average SOS rates noted below) would, "provide retail suppliers time to determine what
prices to offer in contracts under the updated price caps, update retail supplier prices online, update
other customer communication, and time for other internal retail supplier processes."
Under this proposal, the December 2024 average rate would apply as a cap for any new contract signed, or any contracts "renewed", during January 2025, including the automatic renewals permitted under SB1
However, SB1 also requires both 90 day and 30 day notices for auto renewals. Given that, as noted below, the monthly price cap will not be known until approximately 25 days prior to the start of the month in which the price cap applies, the 90-day notice, and potentially the 30-day notice (depending on where the auto-renewal date falls in the month) will not be able to list a specific price for such auto renewal
Moreover, retail suppliers will generally not know, when deciding whether to undertake auto-renewal, what the applicable price cap at the time of the automatic renewal start date will be (except in some circumstances shortly before the 30-day renewal must be sent, again, depending on where the renewal date falls in the month)
SB1 specifically states that retail suppliers may not "offer" energy at a rate above the price cap, "as of the date of agreement with the customer."
While such language suggests that SB1 allows retail suppliers to offer forward start date agreements, applying the price cap applicable at the time that the customer executes the forward start date agreement, rather than applying the price cap which applies at the commencement of service of the agreement, and while this would allow suppliers to offer a price under a forward-dated opt-in renewal (which requires new customer authorization) with the benefit of knowing the currently applicable rate cap, for auto-renewals, the date of the agreement for the auto renewal would be the start of the auto-renewed service, and the price cap would be the price cap applicable on the date that auto-renewal service commences, which, as noted above, will not be known in most circumstances at the time of any auto-renewal notice
Staff specifically recommends that auto-renewals must renew at a rate subject to the price cap in place, "as of the date of the renewed contract."
With respect to the date on which each monthly price cap is filed, Staff proposes that the trailing 12-month average SOS rate which serves as the price cap shall be filed by the utility within five business days after the start of the month representing the last month included in the 12-month average period. In other words, the December 2024 average SOS rate (applying in January 2025) shall be filed by the fifth business day of December, with such average rate including the period January 2024 through December 2024
SB1 also generally prohibits residential variable rates except for certain statutorily permitted variations, and Staff proposes implementation of these provisions
Specifically, SB1 only allows a variable rate that adjusts for seasonal variation with such adjustment occurring no more frequently than twice per year
Retail suppliers had argued that, in allowing such rate variation, SB1 does not require the supplier to specifically list all applicable rates in the initial contract (due to such permissible variation), with suppliers stating that only the initial rate needs to be provided, with an explanation of how any future price would be calculated
Staff disagrees with the suppliers' position on this issue
Staff recommends that all residential contracts shall state all prices in "explicit numeric terms" for the
"duration of the contract".
PC64, PC 64
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December 20, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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