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MPUC to Issue Advisory Ruling on Two-Segment Fixed Rate Contracts

November 18, 2015 By Cheryl Kaften

Competitive retail supplier Electricity Maine filed a request (Docket No. 2015-00335)with the Maine Public Utilities Commission (MPUC)on November 5 for an advisory ruling on whether a two-segment fixed-rate contract – each segment, with different predetermined fixed rates – would fall within the definitions of “Indexed Variable Rate or Charge” and “Non-indexed Variable Rate or Charge” pursuant to 65-407 Code of Maine Rules (C.M.R.) ch. 305, § 1(B)(24)-(25).1

The chapter of the Code of Maine Rules to which the advisory ruling pertains establishes licensing requirements and consumer protection rules for competitive electricity providers. Electricity Maine is hoping that the commission will rule that its two-segment contract is fixed – not variable – because, the company said, “As the Commission is aware, the resolution of this question will impact the applicable constraints on auto-renewals and disclosure requirements.”

The following examples illustrate the two-segment fixed rates for which Electricity Maine is seeking guidance:

  • Example 1. The competitive energy provider (CEP) offers a contract for a total fixed term of service of 12 months. The customer would pay Rate A during the first segment, for months one through six (six months). The customer would pay Rate B during the second segment, for months seven through 12 (six months). Both Rate A and Rate B would be predetermined by the CEP and disclosed to the customer in advance (i.e., before the total fixed term of service commences).
  • Example 2. The CEP offers a contract for a total fixed term of service of nine months. The customer would pay Rate Y during the first segment, for months one through four (four months). The customer would pay Rate Z during the second segment, for months five through nine (five months). Both Rate Y and Rate Z would be predetermined by the CEP and disclosed to the customer in advance).

Electricity Maine notes that, “Confirming that the two-segment fixed rate is a fixed rate is consistent with the consumer protection purposes underlying the separate definitions and rules for variable rates.”

First, the company asserts, there is no continuous potential for variation and the consumer would be informed of all rates at the time the contract is signed. Moreover, a two-segment fixed rate would not allow a CEP to unilaterally increase the rate mid-term, or to change the rate to anything other than the fixed rate to which the consumer originally agreed. Likewise, a two-segment fixed rate does not present the market volatility risks posed by variable rates.

In addition, Electricity Maine contends that a two-segment fixed rate is preferable to “the permissible alternative of separately offering the first segment of the two-segment fixed rate, and then automatically renewing at the second rate for the second segment.”

To Electricity Maine’s knowledge, the issue presented in this advisory ruling request is not the subject of a pending MPUC proceeding.

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