By Robert J. Munnelly, Jr., Esq., Davis, Malm & D’Agostine, P.C.
Just over 20 years have passed since all New England states, except Vermont, restructured electric service to enable competitive retail supply and implemented basic protections focused on licensing, enrollment standards, customer notices and contractual protections. In recent years, additional rules have been implemented, such as credit card-style “Schumer Box” contract summaries, standard renewal notices 30-60 days prior to contract end, disclosures specific to variable price products, and minimum conduct standards for door-to-door sales. As New England heads towards its third decade of retail electric competition, the next evolution of rules and enforcement priorities is underway. The following new front-line issues, which hold the promise of both hindering and fostering competition, should be watched by all stakeholders.
New England regulatory agencies have historically policed suppliers to ensure that they fix identified regulatory issues, saving serious penalties for the few suppliers who fail to correct their errors. This focus on error correction appears to have changed in some states, notably Connecticut and Massachusetts. For example, in mid-2018, the Connecticut Public Utility Regulatory Authority (CT PURA) proposed penalties on suppliers of $1.5 million, $1.5 million plus a six month marketing freeze, $900,000, and $750,000 – not counting several additional investigations that had not reached the sanctions stage. Similarly, in 2018, the Massachusetts Attorney General (MA AG) announced a $5 million settlement with Viridian and launched a $4+ million action against Starion that resulted in the latter supplier filing for bankruptcy. Additionally, the Massachusetts Department of Public Utilities (MA DPU) has begun to address instances of misbehavior by supplier vendors by imposing lengthy and business-affecting marketing stays that remain in place during the entirety of agency-supplier discussions of potential voluntary remedial measures. Continued large damage claims and business shutdowns will threaten the ability of suppliers to cost-effectively serve New England consumers.
Residential Market Prohibitions
Several consumer-focused agencies, including the MA AG and the Connecticut Office of Consumer Counsel (CT OCC), have supported efforts to limit access to retail choice by all or some residential consumers. Specifically, beginning in 2018, the MA AG has advocated to preclude choice for all residential customers in legislative and utility agency forums. In an ongoing proceeding that is scheduled to commence hearings in June 2019, the CT OCC has advocated that CT PURA deny choice to assertedly vulnerable “hardship” customers.
Additional Marketing Requirements
Several New England states are considering new marketing requirements and restrictions that could adversely affect the ability of suppliers to serve consumers cost-effectively. For example, the longstanding CT PURA docket to protect against abusive marketing practices has proposed a host of costly and impractical conditions that have engendered uniform opposition from suppliers. Measures proposed include mandatory recording and retention of all telemarketing calls, mandatory recording and retention of all in-person, door-to-door marketing transactions, and hard-to-comply-with contract assignment requirements. Finally, the MA DPU has initiated a new wide-scale investigation to consider changes to its retail regulatory scheme, including several that suppliers have preliminarily opposed as being unreasonable and harmful to competition. Some suppliers, such as members of the Retail Energy Supply Association (RESA) and individual non-RESA suppliers, are concerned that, if adopted, several of the rules contemplated in the Connecticut and Massachusetts proceedings, as well as those that could commence in other states, would substantially impede their ability to serve New England customers.
The Connecticut legislature broke new ground in 2014 when it required utility-supplier bills to include not just the current month’s supplier price, but also the next month’s price. Stakeholders have worked hard to implement this massive effort in years of industry group meetings and, where necessary, CT PURA implementation proceedings and ensuing orders. In the most recent CT PURA orders, the implementation process turned adverse to suppliers, including a December 2018 order placing sole cost responsibility on suppliers for additional utility billing system programming and requiring that any customers not provided with timely required billing data be returned to utility standard supply service. Suppliers question whether the benefits to consumers of this lengthy and increasingly punitive effort have justified the high costs associated with resources and management time to suppliers, utilities and, inevitably consumers.
Most suppliers have contract provisions that allow them to pass through costs associated with material adverse changes, and they have not been unduly controversial from a regulatory standpoint. CT PURA appears to be changing this policy of regulatory restraint by opening a proceeding to investigate a large-scale, commercial pass-through issue between Mint Energy and commercial customers that led Mint to withdraw from Connecticut, as well as opening a declaratory ruling investigation into the propriety of pass-throughs by any suppliers of a large assessment by the regional grid operators. An adverse result in this latter proceeding could introduce doubt about the ability to pass through unexpected costs and could lead to higher consumer prices to account for the potential risk of future costs unable to be passed through to customers whose services trigger such costs.
Pro-Market Potential Changes
Suppliers, led by RESA and non-member suppliers, have advocated in several forums about additional measures to improve New England retail markets and benefit consumers and hope to see some of these measures implemented or enhanced in upcoming months and years:
Retail supply shopping websites. All restructured states now have retail supply shopping websites to facilitate consumer purchasing decisions. Regulators have been open to continuous improvement opportunities for such sites.
“Enroll with your wallet.” The historic requirement that suppliers must include the utility account number when enrolling a customer is outdated in an on-demand world and constitutes a significant impediment to the use of innovative marketing approaches targeting customers who lack ready access to their utility bills (such as storefront retail outlets, mall kiosks and remote table top marketing). Modifying systems to permit enrollment based on easily-known data, such as account holder name, address, birthdate, and last 4 digits of social security number, would expand convenience and choice for all consumers. CT PURA has discussed this new option in supplier working group meetings and Massachusetts has specifically solicited input on this option for participants in its new regulatory docket.
Mid-cycle enrollment. Another barrier to choice is the longstanding rule that customers are allowed to change suppliers only on the monthly meter read date. This policy has resulted in discouraging and frustrating delays for consumers seeking an expeditious exit from a high-cost supply option. Several years ago, CT PURA ordered mid-cycle enrollments for switches from a supplier back to the utility and has discussed adopting the same rule for switches from the utility to suppliers or between suppliers. Massachusetts also asked for information on this option in its new docket.
New England has been historically a successful region for suppliers, with substantial competitive supply entry in all five restructured states, and substantial supplier and public support for common sense newer regulatory requirements – such as standardized contract summaries, variable price disclosures, end of term notices and contract assignment notices. All stakeholders should be concerned whether the next generation of regulations will provide net benefits to consumers or, conversely, will be so costly and burdensome that they will limit or eliminate benefits associated with competitive choice.
Author Robert Munnelly practices in the Regulatory area at Davis Malm. He has extensive experience with legal, regulatory, and compliance issues faced by energy, communications, and other regulated companies in New England and nationally. Robert can be reached at [email protected]