Return of Polar Vortex and Regulatory Changes Remind Suppliers to Review Practices for Compliance

It has been two years since the Polar Vortex bore down upon much of the  Northeast, sending energy prices skyrocketing. Since that time electric and gas suppliers have come under increasing scrutiny. Legislators and regulators in virtually all of the restructured states have either enacted or considered significant changes to the current supplier regulatory scheme. For example: 

In New Jersey, the BPU entered an Order in September requiring suppliers to include a one page summary of key terms for residential contracts. At the beginning of January 2016, Governor Christie signed into law a package of three “consumer protection” bills that would require the BPU to provide direct links to electric and gas supplier pricing information; allow the BPU to establish shorter switching times between energy suppliers; and codify the BPU’s one page contract summary Order along with a few additional requirements (for example a Spanish language version). 

In Ohio, the PUCO entered in November 2015, its “Fixed-Means-Fixed” Order, Case No. 14-568-EL-COI, banning pass-through charges in fixed-rate contracts. Specifically, the PUCO stated that, “in all CRES contracts, whether residential, commercial, or industrial, fixed should mean fixed.” Accordingly, the PUCO determined that, “on a going forward basis, CRES providers may not include a pass-through clause in a contract labeled as ‘fixed-rate.’” However, the PUCO will continue to permit narrowly defined “regulatory out” clauses in certain circumstances.  The PUCO granted rehearing of the November 11 order for further consideration but did not stay its January 1, 2016 deadline “for all CRES providers to bring existing marketing materials into compliance with the Order.”  

In Pennsylvania, the PUC responded to the Polar Vortex through regulations requiring EDCs to implement accelerated switching times of 3 business days for electric customers, and new supplier contract notice requirements to include key contractual terms. The PUC has since published press releases reminding customers of these changes and encouraging customers to evaluate electric and gas prices using its Power Switch website. In addition, complaints were filed by consumer advocates and the PA attorney general against some suppliers which, to date, have resulted in multi-million dollar settlements and civil penalties.  

In Maryland, a final set of regulations addressing all aspects of consumer protection related to competitive energy supply will be issued and take effect in the near future.  Final comments on the proposed rules were filed with the PSC on January 11, 2016 and a final hearing is set for February 10, 2016 at which time the PSC is expected to vote on the adoption of the new rules.  

The Washington, D.C. PSC is also in the midst of a rulemaking as to competitive energy supply issues.  While a workshop was held late in 2015, the rulemaking appears to be somewhat delayed in light of the DC PSC’s need to focus its attention on the pending request for approval of the merger between Exelon and Pepco. 

Conditions and energy prices have significantly changed since the winter of 2014. The arrival of another Polar Vortex and frigid temperatures together with the changes outlined above, however, serve to remind suppliers to review their contracts, marketing, and advertising materials to ensure compliance with the laws and regulations in all of the states in which they operate. 

As always, do not hesitate to reach out to any one of us for more information.

 If you have any questions about the content of this post, please contact Grace Strom Power at gpower@eckertseamans.com or (609) 989-5008, or contact any of our Energy Group attorneys.

 

Pennsylvania To Investigate Alternative Utility Ratemaking Methods

The Pennsylvania Public Utility Commission (“PUC”) is seeking information on alternative utility ratemaking methods, such as revenue decoupling.  Decoupling advocates suggest that decoupling removes possible disincentives for utilities to promote greater energy efficiency because utility revenues are no longer directly linked to the volume of electricity or gas sold.

All interested parties are welcome to submit written comments, which must be received no later than March 16, 2016.  The PUC has identified a list of 22 issues of interest to guide the discussion.  (The issue list is not intended to be exhaustive, and other issues can be discussed.)  The list includes, but is not limited to:

  • Whether revenue decoupling or other similar rate mechanisms encourage utilities to better implement energy efficiency and conservation programs;
  • Whether such rate mechanisms are just and reasonable and in the public interest; and
  • Whether the benefits of implementing such rate mechanisms outweigh any costs associated with implementing the rate mechanisms.

Because of the importance of such issues, in addition to written comments, all five Commissioners will be sitting “en banc” – as a full panel – in the March 3, 2016 hearing (in Harrisburg) regarding the issues listed in the bullet points (above) from participants (selected by the PUC) to present testimony and answer questions from a diverse set of perspectives.  The hearing is open to the public and the PUC will also be video streaming the hearing (on its website) for those unable to attend in person. 

The full issue list (which is in a Secretarial Letter dated December 31, 2015) and all documents related to the hearing, including prepared testimony and the final agenda for the en banc hearing, can be accessed by searching Docket Number M-2015-2518883 on the PUC’s website.

Please note that the PUC has also approved settlements submitted by PECO Energy Company and PPL Electric Utilities Corporation that require each of those utilities to host public collaboratives on decoupling in early 2016.  These collaboratives will be separate from the comments submitted to the PUC.

If you have any questions about these proceedings, please contact Dan Clearfield at (717) 237.7173,dclearfield@eckertseamans.com, or Carl Shultz at (717) 255-3742; cshultz@eckertseamans.com.

NJ BPU Publishes Draft Update to NJ Energy Master Plan; Comments Due 12/4

 On November 20th, the New Jersey Board of Public Utilities issued a press release that it had published a draft update to the 2011 New Jersey Energy Master Plan. In its Update, the Board emphasizes that this is not a rewrite of the plan, but an update to the 2011 EMP.  

The 2011 EMP contained five overarching goals, for which the Update provides a status of the progress made in the last 3 years:

  1. Drive Down the Cost of Energy For All Customers
  2. Promote a Diverse Portfolio of New, Clean, In-State Generation
  3. Reward Energy Efficiency and Energy Conservation/Reduce Peak Demand
  4. Capitalize on Emerging Technologies for Transportation and Power Production
  5. Maintain Support for the Renewable Energy Portfolio Standard 

The Update also adds a fifth general section to the 2011 EMP’s Plan for Action, “Improve Energy Infrastructure Resiliency & Emergency

Preparedness and Response,” based upon New Jersey’s Plan for Action in the aftermath of Superstorm Sandy. These policy recommendations are:

  • Improve Energy Infrastructure Resiliency & Emergency Preparedness and Response
  • Protect the State’s critical energy infrastructure
  • Improve EDC emergency preparedness and response
  • Increase the use of microgrid technologies and applications for distributed
  • energy resources (DER)
  • Create long-term financing for resiliency measures through the ERB 

There is a 2 week open comment period, with written comments due Friday, December 4, 2015.  If you have any question or need additional information, please contact Grace Strom Power at (609) 989.5008 or at gpower@eckertseamans.com.

Competitive Suppliers – Bankruptcy Priority For Electricity

Recently, the United States District Court for the Southern District of New York issued a decision that could have far-reaching implications in bankruptcy cases for competitive suppliers.

The key issue is whether (or not) electricity is a “good” for purposes of the Bankruptcy Code.  If it is a “good,” competitive suppliers are entitled to administrative priority claim for electricity sold to and received by the debtor within 20 days of its bankruptcy filing.

This decision does not fully resolve the debate, but it is sure to be cited in other forums and jurisdictions.  Here’s what happened.

  • Hudson Energy Services, LLC (“Hudson”) was the energy service company (“ESCO”) for The Great Atlantic and Pacific Tea Company, Inc., better known as “A&P.” 
  • A&P filed for bankruptcy protection in December 2010. 
  • In April 2012, Hudson filed an administrative claim seeking payment of over $875,000 for electricity provided to A&P during the twenty days prior to its bankruptcy filing. 
  • A&P objected to Hudson’s claim on the basis that the electricity did not qualify as “goods” under Section 503(b)(9) of the Bankruptcy Code, which confers administrative priority over general unsecured claims on claims for “the value of any goods received by the debtor within 20 days before the date of the commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.”  
  • In August 2012, the Bankruptcy Court denied Hudson’s claim.  In doing so, the Bankruptcy Court concluded that electricity did not “clearly fall” within the definition of “goods” under Section 503(b)(9).  
  • Hudson appealed, and the U.S. District Court for the Southern District of New York vacated the Bankruptcy Court’s order and remanded for further fact-finding.  498 B.R. 19, 29-31 (S.D.N.Y. 2013).  Simply put, that decision concluded that there was a lack of record evidence about the nature of electricity. 
  • On remand, the Bankruptcy Court held a hearing at which both sides presented expert testimony.  In November 2014, the Bankruptcy Court again denied Hudson’s claim.
    • It recognized that neither the bankruptcy court nor the district court actually held flat out that electricity was not a “good.”  It looked at the evidence, and concluded that under the facts presented, electricity did not qualify as a good under Section 503(b)(9) since by the time an electricity meter registers a reading, the electricity has already been used and is therefore no longer moving.
    • In the alternative, the Bankruptcy Court found that given the “metaphysical” and “ultimately unresolvable nature of this dispute,” the principle that administrative priority claims should be narrowly construed dictated that Hudson’s claim should be denied.
  • Hudson filed an appeal.  This time the U.S. District Court ruled that the Bankruptcy Court did not make an error.  2015 U.S. Dist. LEXIS 129049 (September 24, 2015).
    • The District Court did not decide the issue of whether electricity was a good, and did not take up the issue.  In an non-binding opinion, the District Court agreed with the Bankruptcy Court that under the facts presented, electricity does not so qualify as a good under Section 503(b)(9).
    • However, the District Court also agreed that Hudson’s claim could be denied, relying on the principle of narrow construction.  The District Court concluded, that based on the record, it was not clear if electricity fell within the ambit of the Section 503(b)(9).  Faced with such uncertainty, the Court narrowly construed the statute so as to exclude electricity.
  • Hudson has not indicated if it will appeal the decision of the District Court.

This lengthy litigation serves as a reminder that competitive suppliers need to understand bankruptcy law and the steps needed to protect themselves in the event of a customer bankruptcy. 

For more information contact Dan Clearfield at dclearfield@eckertseamans.com, or Karen Lee “’Kitt” Turner at kturner@eckertseamans.com.  Dan is the Co-Chair of the Utilities and Telecommunications Group and Kitt is the primary contact for the Eckert Seamans’ Bankruptcy and Restructuring Group.

Electric Competition in Pennsylvania: Curtailable Customer Programs

Compared to past years, Pennsylvania shopping customers appeared more willing in 2014 to use curtailable programs offered by suppliers. 

The 2014 Pennsylvania data shows that the use of both mandatory and voluntary programs grew substantially as compared to usage in 2013 and 2012.  Mandatory curtailable programs has the most customer accounts 27,304 (81.57%) of 33,473.  The residential class comprised 96.08% of the mandatory programs and 77.84% of the voluntary programs.  The small, non-residential class have the most mandatory curtailable accounts, 894 (3.27%).  The large, non-residential class had the most voluntary curtailable accounts, 705 (11.43%).

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The data and the full Retail Choice Activity Reports, which discusses retail electricity choice activity trends in Pennsylvania, are available at http://www.puc.state.pa.us/utility_industry/electricity/retail_choice_activity_reports.aspx.

 For more information contact Carl Shultz at cshultz@eckertseamans.com or Dan Clearfield at dclearfield@eckertseamans.com.

Who Is Choosing Green Power In Pennsylvania?

Continuing the trend from prior years, the 2014 Pennsylvania data shows that green power customers are more likely to be residential customer. 

The residential class comprised 91.98% of the green power accounts reported to the Pennsylvania Public Utility Commission for 2014. The small non-residential class has the next highest percentage with 5.36%. The medium non-residential class had 2.42% with the large class having less than 1%.

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2014 also experienced a hefty growth in the number of customers signing up for green power.  Green power accounts grew by 108,000 accounts or 56% on a consolidated basis, with the growth emanating mostly from residential customers. 

The data and the full Retail Choice Activity Reports, which discuss retail electricity choice activity trends in Pennsylvania, are available at http://www.puc.state.pa.us/utility_industry/electricity/retail_choice_activity_reports.aspx.

 For more information contact Carl Shultz at cshultz@eckertseamans.com or Dan Clearfield at dclearfield@eckertseamans.com.

Electric Competition in Pennsylvania: EDC Consolidated Billing versus Supplier Billing

The 2014 Pennsylvania data shows that retail customers are more likely to receive bills under consolidated billing from the electric distribution company (EDC).  But, there is a growing use of supplier billing across the Commonwealth. 

It was reported that, as of December 31, 2014, 2,101,254 electric accounts were served by suppliers.  95.32% of those accounts use consolidated billing.  Only 4.68% of those accounts use supplier billing.  This is likely driven by the fact that Pennsylvania purchase of receivables (POR) programs require participation in the EDC’s consolidated billing option.

That being said, the 2014 data shows a large increase in the use of supplier billing across all customer classes.  The number of residential customers using supplier billing increased from 1,632 (in 2013) to 9,175 (in 2014).  The number of non-residential customer using supplier billing increased from 39,217 (in 2013) to 89,101 (in 2014). 

For customers using supplier billing, the use of autopayment remains small.  In 2014, less than 3% of supplier billed accounts use the autopayment option. 

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The data and the full Retail Choice Activity Reports, which discuss retail electricity choice activity trends in Pennsylvania, are available at http://www.puc.state.pa.us/utility_industry/electricity/retail_choice_activity_reports.aspx.

For more information contact Carl Shultz at cshultz@eckertseamans.com or Dan Clearfield at dclearfield@eckertseamans.com.

Electric Competition in Pennsylvania: Number of Customer Accounts Served by Suppliers

The 2014 Pennsylvania data shows that the total number of accounts served by suppliers decreased for both residential and non-residential customers.  The total percentage of customers shopping went from 38% to 36.7%. 

Between 2013 and 2014, the total number of residential accounts served by suppliers decreased by about 3%.  The total number of small and medium non-residential accounts served by suppliers also decreased by about 3%.  There was a slight increase in the number of large non-residential accounts served by suppliers. 

This runs counter to the trend between 2012 and 2013, which saw increases in the numbers of customer accounts served by suppliers by about 12% for residential accounts and about 7% for non-residential accounts. 

Why?  There is not a clear answer.  But, one theory is that the polar vortex, which impacted the markets in early 2014, caused some customers to stop shopping and return to default service.

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The data and the full Retail Choice Activity Reports, which discuss retail electricity choice activity trends in Pennsylvania, are available at http://www.puc.state.pa.us/utility_industry/electricity/retail_choice_activity_reports.aspx

For more information contact Carl Shultz at cshultz@eckertseamans.com or Dan Clearfield at dclearfield@eckertseamans.com.

PUC Creates Private Right of Action Against Act 127 Companies

In what appears to be a first for the PUC, the Commission voted last week to allow private parties to sue “pipeline operators” under Pennsylvania’s Act 127 for alleged noncompliance with federal safety standards (Laffey v. Knox Energy Cooperative Associates, Inc.).

The complainant filed a complaint against Knox at the PUC alleging that a private gas line on her property owned by Knox was creating a hazardous condition and asked the Commission to order Knox to bury the line.  Knox defended at the hearing stage by pointing out that the Commission does not have jurisdiction over “bona fide cooperative associations,” like Knox, and the ALJ agreed.

At the Commission, the PUC agreed with Knox and the ALJ that it didn’t have jurisdiction over Knox because, as a coop, Knox didn’t satisfy the definition of a “public utility” under Title 66.  But, in a motion by Vice Chairman Coleman, the Commission decided that Laffey could nonetheless prosecute a complaint against Knox to determine whether it was violating Act 127.  Act 127 generally requires “pipeline operators” as defined in the Act to register with the PUC and to pay assessments on jurisdictional facilities.  It also gives the PUC explicit authority to enforce federal pipeline laws against such non-utilities.  But that enforcement authority is conferred upon the PUC itself – until now.

Vice Chairman Coleman’s rationale for establishing a private right of action at the PUC for prosecuting violations of Act 127, and, in turn for Federal Pipeline Safety laws, is that federal law grants to individuals a private right to bring enforcement actions for violation of federal pipeline safety laws.  But the provision in federal law (48 U.S. C. § 60121) grants an individual a right to bring an action in federal court, subject to certain limitations.  Nothing in that section confers similar authority on state commissions charged with enforcing federal pipeline safety laws.

The PUC’s complaint authority is set forth in section 701 of the Public Utility Code, which states that “any person” may complain about “any public utility in violation … of any law which the commission has jurisdiction to administer, or of any regulation or order of the Commission.  So, the PUC’s right to create a right to sue for individuals would appear to be limited to actions against “public utilities,” which, as the Commission found, does not include Knox.  On the other hand, a strict reading of this section would mean that the Commission doesn’t have authority to authorize complaints against electric generation or natural gas suppliers, that are licensed by the PUC but which are not public utilities.  The PUC regularly adjudicates such complaints.

In addition to remanding the case back to the Office of Administrative Law Judge, the Coleman motion also directed the PUC’s Law Bureau to review the matter and to advise whether it would be appropriate to promulgate regulations on the issue of private causes of action under Act 127.  If they do, one issue that the PUC lawyers should consider is whether the Commission really has the authority to establish such private rights to sue Act 127 companies in the first place.

If you have any questions, please contact Dan Clearfield at (717) 237-7173 or dclearfield@eckertseamans.com or Sarah Stoner at (717)237-6026 or sstoner@eckertseamans.com

This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.

PAPUC ALJs Block EGS’s Attempt to End Complaint Proceeding By Exiting the Jurisdiction

An order by two Pennsylvania Public Utility Commission ALJs make clear that an electric generation supplier may not block complaints alleging unfair marketing practices even by attempting to exit the jurisdiction of the Commission.  In Kane & McCloskey v. Blue Pilot Energy, LLC,  the EGS responded to a complaint filed jointly by the Attorney General and the Office of Consumer Advocate alleging deceptive or unreasonable marketing practices by filing a notice of its intention to abandon its EGS license.  It then filed a motion to dismiss the AG/OCA complaint alleging that the complaint process should not go forward.  Specifically, Blue Pilot contended that the complaint should be dismissed in part because it didn’t have the resources to continue to litigate the proceeding, and it had notified all its customers that it was going to cease doing business in Pennsylvania.

The AG/OCA opposed both the request for abandonment and the motion to dismiss the complaint alleging unreasonable marketing practices.  They argued essentially that abandoning service is not a valid basis on which to dismiss a complaint and that the motion had not set forth any other valid basis for dismissal.

The ALJs rejected the motion, pointing out that Blue Pilot had not filed for bankruptcy or failed to maintain legal representation.  It also pointed out that, at the time of the resolution of the motion, Blue Pilot still had about 175 customers in Pennsylvania.  Since the AG/OCA were not interested in ending the prosecution of their complaint case, the ALJs reasoned, the case should go forward.

This case can be contrasted to a recent complaint filed by the PUC’s Bureau of Investigation and Enforcement against Glacial Energy (Pa PUC, Bureau of Investigation and Enforcement v. Glacial Energy of Pennsylvania, Inc.).  After responding to a complaint filed by BIE alleging that Glacial had not provided fully accurate information in its PUC licensing application and should have its license rescinded, BIE agreed to end the prosecution after Glacial filed for bankruptcy under Chapter 11.  Glacial asked that the complaint proceeding could be stayed while its assets were sold in bankruptcy, and both BIE and the ALJ agreed.

The lesson appears to be that shutting down retail operations in Pennsylvania won’t necessarily stop a complaint action at the PUC – but a bankruptcy filing and a sale to an unaffiliated entity might.

If you have any questions, please contact Dan Clearfield at (717) 237-7173 or dclearfield@eckertseamans.com

This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.