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PUCO: ‘Fixed Means Fixed’ in Retail Contracts

November 25, 2015 By Cheryl Kaften

The Public Utilities Commission of Ohio (PUCO) ordered (Case NO. 14-568-EL-COI )on November 18 that, in all competitive retail electric service (CRES) customer contracts – whether residential, commercial, or industrial – “fixed should mean fixed.”

The commission found that adding pass-through charges to customer bills – such as those imposed by FirstEnergy Solutions to recoup the costs of response to the Polar Vortex –  is “unfair, misleading, deceptive, [and] unconscionable.”

Following the winter of 2014, the PUCO received complaints that CRES providers included extra charges on customer’s bills, despite being enrolled in a fixed-rate contract. Because of these complaints, the commission began to investigate the terms and conditions of CRES provider offers to ensure protections for consumers against unreasonable sales practices.

While some commenters to the case stated that such contracts should instead be labeled as “Conditional Fixed Price,” the commission concluded that an alternative label should not be required on a contract with a pass-through clause that has an otherwise fixed rate “as, given our previous findings, such a contract may only be marketed appropriately as a variable or introductory-rate contract. As such, the commission finds that an alternative label would be unhelpful and may further confuse customers.”

The PUCO further noted that “harm to the CRES market and shopping rates could occur when customers are dissatisfied with their contracts as a result imposition of charges that were unexpected by that customer.”

The commission emphasized, “We make no ruling with respect to existing contracts—although a customer holding an existing contract with such a provision would be free to pursue a complaint with [PUCO] against the CRES provider.”

With all that said, the commission did leave a loophole, noting that “The commission recognizes that circumstances may occasionally arise over which a CRES provider has no control and no ability to hedge, such as a regulatory change in law. [We find] it would be inappropriate to require CRES providers in those circumstances to remain bound by an uneconomic contract with no opportunity for redress. …Consequently, the commission believes that the ‘fixed means-fixed’ axiom should be balanced by continuing to permit regulatory-out clauses that would be available for CRES suppliers in very limited circumstances, which must be delineated in plain language in the clause.”

Regulatory out clauses allow a supplier to revise a contract by proposing new contract terms to the customer. If the customer affirmatively consents to the new terms, the contract would remain in place with the new terms. However, customers could affirmatively reject or passively reject the proposed terms by inaction. A customer rejecting the terms would then be permitted to pursue another CRES provider or the default service without being subjected to any penalty.”

“Our action today will provide consumers greater clarity in how they pay for electricity,” stated PUCO Chairman Andre T. Porter. “The expectation is simple—fixed means fixed.”

The PUCO ordered that, beginning January 1, 2016, an offer marketed as a fixed-rate plan should not include in its terms and conditions any mechanism that allows unforeseen charges incurred by the CRES provider to pass-through to customers. Offers that include these terms should be marketed as variable- or introductory-rate.

 

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