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Coalition for Affordable Util. Servs. & Energy Efficiency in Pa. v. Pennsylvania Public Utility Commission

Commonwealth Court of Pennsylvania

July 14, 2015

Coalition for Affordable Utility Services And Energy Efficiency in Pennsylvania; the Tenant Union Representative Network and Action Alliance of Senior Citizens of Greater Philadelphia, Petitioners
Pennsylvania Public Utility Commission, Respondent; Tanya J. McCloskey, Acting Consumer Advocate, Petitioner
Pennsylvania Public Utility Commission, Respondent

Argued, March 11, 2015

Page 1088

Appealed from No. M-2012-2290911 and P-2012-2283641. State Agency: Public Utility Commission.

Robert W. Ballenger, Philadelphia, Harry S. Geller, Harrisburg, Elizabeth R. Marx, Harrisburg, and Thu B. Tran, Philadelphia, for petitioners.

Christy M. Appleby, Harrisburg, for intervenor Office of Consumer Advocate.

Deanne M. O'Dell, Harrisburg, for intervenor Direct Energy Services, LLC.

James A. Mullins, Assistant Counsel, Harrisburg, for respondent.


Page 1089



Petitioners, all of whom advocate on behalf of consumers affected by the Customer Assistance Program (CAP) of PECO Energy Company (PECO),[1] appeal two orders entered by Respondent the Pennsylvania Public Utility Commission (PUC). In those two orders, the PUC approved in part a PECO plan, called the CAP Shopping Plan, which would allow PECO's CAP customers to shop for and choose their electric generation supplier (EGS). The PUC approved the PECO plan only in part, because it rejected a condition proposed by PECO that would require EGSs that wish to enroll PECO CAP customers to charge a generation supply rate equal to or below PECO's residential price-to-compare (PTC). The PUC also rejected a proposal by the OCA to prohibit EGSs who enroll PECO CAP participants from imposing cancellation or termination fees on those participants. For the reasons set forth below, we affirm the PUC's decision to reject PECO's proposal to impose a ceiling on the rate an EGS may charge a CAP participant for electricity supply. We reverse, however, the PUC's rejection of the OCA's proposal to prohibit early cancellation/termination fees.


PECO is an electric distribution company (EDC), as defined by the Electricity Generation Customer Choice and Competition Act (Choice Act), 66 Pa. C.S. § § 2801-2815,[2] delivering electricity to retail customers in southeastern Pennsylvania, inclusive of the City of Philadelphia. The orders currently on appeal arise out of a proceeding initiated by PECO before the PUC on January 13, 2012, when PECO filed with the PUC a request for approval of PECO's Default Service Program for the period from June 1, 2013, to May 31, 2014 (DSP II). Through DSP II, PECO proposed a plan to fulfill its statutory obligation to provide default electric generation service to its customers who do not choose an alternative energy supplier or whose contracted EGS fails to supply the electric service. See 66 Pa. C.S. § § 2803 (defining " default service provider" ), 2807(e).

In an opinion and order entered on October 12, 2012, the PUC approved DSP II in part (DSP II Decision). Relevant to this appeal, in its DSP II Decision the PUC directed PECO to develop a plan

Page 1090

that would allow PECO's CAP customers to choose their EGS. (Reproduced Record (R.R.) 52a.) With respect to non-CAP customers, the PUC approved PECO's Standard Offer Customer Referral Program (Standard Offer Program). Under this program, residential customers who have not selected an EGS on their own could request that PECO assign them to an EGS that participates in the Standard Offer Program. To participate in PECO's Standard Offer Program, an EGS must agree to supply electricity to referred PECO customers at a fixed rate of at least 7% below PECO's PTC[3] at the time of customer enrollment for a term of 12 months. The customer may cancel at any time.[4] (R.R. 36a-42a.)

At the time it issued its DSP II Decision, the PUC was considering PECO's Universal Service and Energy Conservation Plan (Universal Service Plan) for 2013-2015. A utility's universal service and energy conservation plan or program sets forth how the public utility proposes to serve low-income customers[5] in a manner that allows those customers to maintain electric service. 66 Pa. C.S. § 2803. To meet this mandate, an EDC must include in its universal service and energy conservation plan a CAP. Id. ; 52 Pa. Code § § 69.261-.267; see also 66 Pa. C.S. § 1403 (defining " customer assistance program" ). Under a CAP, the low-income customer agrees to pay a monthly amount for electric service based on household size and income, which may be less than the actual amount billed by the EDC, in return for the continued provision of electric service. 66 Pa. C.S. § 1403; 52 Pa. Code § 54.72. Under the Choice Act, the PUC is required to ensure that these programs and policies continue, are adequately funded, and are available in every electric service territory. 66 Pa. C.S. § § 2802(10), (17), 2804(9). The PUC has promulgated regulations to implement this statutory duty. See 52 Pa. Code § § 54.71-.78.

Implementation of a CAP comes at a cost to the EDC. While the EGS receives payment in full from the EDC for the contracted supply, the CAP customers only pay the EDC the amount they are required to pay under the CAP in order to maintain service. The difference between the amount EDCs bill CAP customers for service and the amount CAP customers actually pay the EDC for service is referred to as the " CAP shortfall" or " CAP discount." Under PECO's CAP Program, PECO recovers the bulk of the CAP discounts from its non-CAP residential customers through (a) base rates and (b) a universal service fund charge (USFC). In practice, the wider the gap between the billed amount and the amount paid by the CAP customers, the greater the financial burden placed on non-CAP customers, from whom PECO recovers the CAP discounts. In 2013, non-CAP customers absorbed approximately $82.3 million in PECO CAP costs through base rates and another $15.7 million through the USFC.[6]

Page 1091

In an opinion and order entered April 4, 2013 (PUC Docket No. M 2012-2290911), the PUC approved in part PECO's Universal Service Plan for 2013-2015, and directed PECO, inter alia, to file an amended Universal Service Plan within thirty days. In that decision, the PUC noted its October 12, 2012, decision with respect to DSP II and, specifically, its directive to PECO to submit a plan under the DSP II docket to allow for CAP shopping.

PECO filed for PUC approval of its CAP Shopping Plan under the DSP II docket on May 1, 2013 (CAP Shopping Petition). The plan proposed by PECO has many elements. Relevant for our purposes is PECO's proposal with respect to the participation of EGSs in PECO's CAP. Under the PECO proposal, an EGS that wishes to serve PECO's CAP customers would need to submit to PECO a notice of intent to participate as a CAP supplier and must agree to charge a rate for electricity supply to CAP customers that is at or below PECO's PTC-- i.e., a " price ceiling." The PECO proposal otherwise allowed EGSs to structure their arrangements consistent with their business goals and interests, including, inter alia, imposing contract lengths and termination fees. PECO proposed various measures to simplify the shopping process for CAP customers. It also prohibited EGSs from discriminating among CAP customers. As part of the program, PECO proposed customer education initiatives to encourage CAP participants to shop for their EGS.

The Petitioners filed answers to the CAP Shopping Petition. Several EGSs also participated in the proceedings before the PUC on PECO's CAP Shopping Petition, including Intervenor Direct Energy, LLC (Direct Energy); Amicus Curiae FirstEnergy Solutions Corp. (FirstEnergy); and Interstate Gas Supply. The Pennsylvania Office of Small Business Advocate also participated. The matter was assigned to an Administrative Law Judge (ALJ). Following the submission of prehearing filings, the ALJ conducted a hearing on PECO's CAP Shopping Petition on July 11, ...

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