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NEMA: CT Retailers Should Charge Monthly Market-Based Rates

November 18, 2015 By Cheryl Kaften

On August 19, the Connecticut Public Utilities Regulatory Authority (PURA) published a request for comments on Public Act 15-90 – a bill enacted in the Constitution State in June that bars electric suppliers from charging variable rates to residential customers.

Under the new law, as of October 1, competitive retail electric suppliers doing business in Connecticut were prohibited from entering into a contract with a residential customer that charges, “a variable rate for electric generation services” – or a contract that automatically renews and charges a residential customer, “a variable rate for electric generation services.”

However, according to the National Energy Marketers Association (NEMA), in comments submitted to PURA on November 13 (Docket No. 15-06-15), the new act is lacking in clarity, because it fails to distinguish between the terms “variable rate” and “month-to-month rate.”

Specifically, NEMA pointed out, the act directs the authority to: “… initiate a proceeding to develop recommendations and guidance regarding (1) what type of generation services rate structure is best suited for residential customers who allow a fixed contract with an electric supplier to expire and begin paying a month-to-month rate for generation services from such supplier; and (2) what change to the generation services rate and to the terms and conditions of such service that customers may experience after the expiration of a fixed contract when such customers begin paying a month-to-month rate.”

NEM proposes that the definitions adopted for these two terms be the same ones that were used under a November 5, 2014, PURA decision (Docket No. 13-07-08), which found that:

  • Under Variable-Daily and Variable-Weekly plans, suppliers can adjust rates during the customer’s billing cycle; however,
  • Under a Variable-Monthly plan, rates only can be adjusted on the customer’s On-Cycle date.

NEM contends that the interpretation of a month-to-month rate to denote the automatic renewal of a fixed contract at the original fixed price would impose “significant potential costs and risks on residential consumers and competitive suppliers.”

Automatic renewal provisions that incorporate a market-based, changing rate “must be permitted to continue,” the trade organization argued, “because … [i]ncorporation of a market-based, changing rate in automatic renewals ensures that the rate that the consumer pays is brought into line with current market conditions.”

Indeed, NEMA points out, “Otherwise, if a customer served on a long-term fixed rate continues to be served at the original fixed rate by the terms of the automatic renewal, it may cause the customer to be charged a higher rate than current market conditions and market-reflective pricing would otherwise allow. This problem would only be compounded over time. Likewise, requiring suppliers to honor original fixed contract pricing terms for terms of indefinite duration imposes a significantly higher risk and cost of doing business in Connecticut. The unnecessarily increased higher risk and cost will be factored into supplier pricing to the detriment of residential consumers.”

In summary, the association recommends that PURA adopt a “… law [that] allows a fixed contract that automatically renews at a month-to-month rate to do just that – renew at a rate that changes on a month-to-month basis.”

If the electric customer takes no action when a fixed-term contract ends – and is, therefore, automatically renewed at a rate that changes on a month-to-month basis – NEMA assumes that, under this scenario, the customer already would have received all of the required notices from the supplier. “It would not be consistent with customer expectations that they would be slammed back to utility standard service at that time,” said the energy marketing group.

Finally, NEMA comments warn, “It is important that the volume of notices sent to consumers not become so burdensome and overwhelming that consumers simply start to disregard and ‘tune out’ the messages that are being sent to them.”

When these and other comments have been reviewed by PURA, the authority will report all findings to the joint standing committee of the Connecticut General Assembly having cognizance of matters relating to energy, on or before January 1, 2016.

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