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Brian R. Greene SELTZERGREENE, PLC 707 East Main St., Suite 1025 Richmond, Virginia 23219 (804) 672-4542 (Direct) bgreene@seltzergreene.com May 7, 2010 By Electronic Filing Terry J.

1 Brian R. Greene SELTZERGREENE, PLC 707 East Main St., Suite 1025 Richmond, Virginia (804) (Direct) May 7, 2010 By Electronic Filing Terry J. Romine, Executive Secretary Maryland Public Service Commission William Donald Schaefer Tower 6 Saint Paul Street, 16 th Floor Baltimore, MD Dear Ms. Romine: Re: Case No Attached for electronic filing in the referenced matter please find the Comments of the Retail Energy Supply Association. Should you have any questions, please contact me. Sincerely, BRG/ds Attachment c: Service List SG Brian R. Greene sg

2 BEFORE THE PUBLIC SERVICE COMMISSION OF MARYLAND In the Matter of a Review of the Price to Compare Published by the Maryland Investor-Owned Electric Utilities * * * * * * * * * * * Case No COMMENTS OF THE THE RETAIL ENERGY SUPPLY ASSOCIATION I. Introduction and Background On April 13, 2010, the Commission initiated this proceeding for a comprehensive review of the price to compare ( PTC ) that appears on the Investor-Owned Electric Utilities ( IOU s ) monthly customer bills and is published on their respective websites. 1 The Commission notes correctly that the PTC is intended to assist customers in making an informed decision when shopping for a competitive electric supplier or when made an offer by a competitive electric supplier. The Retail Energy Supply Association ( RESA ) 2 appreciates the Commission s initiative in establishing this proceeding and agrees that now is an opportune time to investigate whether the PTC as calculated by the IOUs and set forth on a customer s monthly bill is an effective tool that facilitates or influences a customer s decision regarding whether to select a competitive electric supplier and provides sufficient and accurate information to make a comparison between the competitive offers and Standard Offer Service ( SOS ) provided by the customer s 1 Notice Initiating Proceeding and Setting a Procedural Schedule at 1 (April 13, 2010). 2 RESA s members include ConEdison Solutions; Constellation NewEnergy, Inc.; Direct Energy Services, LLC; Exelon Energy Company; GDF SUEZ Energy Resources NA, Inc.; Gexa Energy; Green Mountain Energy Company; Hess Corporation; Integrys Energy Services, Inc.; Just Energy; Liberty Power; PPL EnergyPlus; Sempra Energy Solutions LLC. The comments expressed in this filing represent the position of RESA as an organization but may not represent the views of any particular member of RESA.

3 IOU. 3 Not only have the new Competitive Electric Supply regulations been implemented, but Maryland is also currently experiencing unprecedented growth in the number of customers taking service from electric suppliers. As an example, during the 12 months ending March 31, 2010, approximately 51,000 residential customers of Baltimore Gas and Electric Company ( BGE ) switched from SOS to an electric supplier. 4 Approximately 24,000 of those customers switched during the first quarter of Moreover, in a recent statewide survey commissioned by a coalition of retail electricity suppliers, regulated distribution utilities and large electricity consumers, found that while 83 percent of Marylanders favor competition that would allow customers to choose the company that supplies the electricity that the local utility delivers over its system of wires, fewer than half know that they already have the option of shopping for electricity. The poll also found that 48 percent of Marylanders said they do not believe they have the option of shopping for an electricity supplier, while 44 percent know they have a choice. As new rules are implemented and competition for customers increases, customers should be afforded as much information as possible to make the most knowledgeable decisions they can about their electricity products and usage. A consistent and well-designed PTC reflecting all of that customer s bypassable charges on a per kwh basis which then consumers can use to accurately benchmark competitive pricing offers can fundamentally help these consumers choose the supply option that best 3 Notice at 1. 4 See Electric Choice Enrollment Reports for the months ending March 2009 and March See Electric Choice Enrollment Reports for the months ending December 2009 and March

4 meets their needs. Additionally, greater price transparency for SOS pricing is necessary to facilitate further market entry by competitive suppliers into the Maryland market. As such, RESA also urges the Commission to pursue additional measures, beyond a review of the price to compare calculation, to foster greater SOS price transparency. In establishing the procedural schedule for this case, the Commission set forth six questions for the IOUs to answer in their comments. Those questions address fundamental issues relating to the PTC, including how it is calculated, how it is displayed on the bill, whether there is an explanation on the bill, where it is found on the bill and website, how often it is updated, and the costs and other implications of listing multiple PTCs. For commenters such as RESA, the Commission has asked What calculation and display of the [PTC] would be of most use to customers, and why? RESA submits that the calculation and display of the PTC should be guided by the three core principles of simplicity, accuracy, and accessibility. As explained below, the IOUs current calculation as RESA understands the calculations is not an accurate comparison between the current SOS price and the competitive offer. Rather, the current PTC calculations are annual calculation that, as the year progresses, present mostly stale pricing information that is no longer an annual calculation and that leads to customer confusion. The Commission can rectify this problem and transform the PTC into a dependable tool that truly assists customers in understanding and assessing retail offers. II. The IOUs Prices to Compare RESA is unaware of any Commission directive or IOU tariff that initially established how the PTC is calculated or displayed. The only information explaining the PTC calculation is found on the IOUs websites. From the BGE tariff, it appears that the 3

5 IOU calculates the PTC for the upcoming year after SOS rates are set for the period June 1 through September 30, and for October 1, through May On its website, BGE provides the PTC for its two residential rate classes and its two small commercial rate schedules 7 and explains that the PTCs are effective for one full year (effective 6/1/09-5/31/10). BGE instructs customers: When shopping, use the Price to Compare to compare offers proposed by other electricity suppliers. The Price to Compare reflects the average annual amount customers within a specific rate schedule pay per kilowatt-hour for BGE Electric Supply. Thus, for BGE, although the exact calculation is not included on the website, the PTC is (1) an average price for the specific rate class, and (2) updated annually. The Pepco website is more detailed. 8 Pepco s PTC is also a class average and appears to be updated only annually. To calculate the class-average PTC, Pepco states that it takes the total kwh usage for all customers within a rate class for a 12-month period and multiplies that amount by the actual generation and transmission rates. Pepco then divides by the total 12-month kwh usage, which provides an average per kwh rate for generation and transmission for the rate class. Lower down on the website, Pepco explains how to arrive at your individual PTC as opposed to the class average. 9 While the top of the page says that the average calculation is a tool for you to use in comparing competitive offers, the inclusion of the individual PTC could be confusing to 6 See BGE tariff, Schedule R. 7 See 8 See 9 The Delmarva Power PTC appears to also be a class average, although it is unclear how often the PTC is updated. The website gives two prices per year and provides a useful worksheet for the customer to use to determine his PTC. See 4

6 customers to the extent it suggests that the class average is not reliable. There would be two statements on the web page that would appear to say two different things. In essence, the PTCs for BGE and Pepco appear designed to provide an average price, by rate class, for an IOU s SOS and other bypassable charges for an entire year. 10 The PTC is not the IOU s current, actual SOS rate. In actuality, a customer looking to shop has potentially four price comparisons: (1) the PTC, as calculated and presented by the IOU which is average rate class price for the year; (2) the customer s individualized PTC for the year; (3) the current SOS price; and (4) the retail supplier s price. In RESA s view, the four price comparisons can cause customer confusion for several reasons. First, a class average PTC is not informative for an individual customer s shopping decision. If a customer is on a special rate design that differs from the class average, the individual PTC may be substantially higher or lower as compared to the class average. Second, if the rate design for any of the bypassable cost components (such as the SOS price, any adders to the SOS price, or transmission charges) rely on complex demand based declining block rate structures, the individual PTC will most certainly vary from the class average PTC, because the individual PTC is influenced by the customer s actual energy consumption for the current billing period. 11 Additionally, SOS prices under the current SOS structure change twice per year, in October and in June. On June 1, the new PTC reflects that change for the upcoming 10 That said, Pepco s website refers to the PTC as being the average per kilowatt-hour rate for generation and transmission for the rate class. There is no mention of any other bypassable charge included in Pepco s PTC. BGE s tariff also refers to the PTC as includ[ing] Generation and Transmission, but does not explain what other elements, if any, are included. RESA assumes that the current PTCs include all bypassable charges, including the SOS administrative charge. 11 These two factors may not apply in Maryland if there are no rate designs that differ from the class average or rely upon complex demand-based rate structures. 5

7 year. But, as of June 2, the PTC includes a comparison to an unknown price the price on June 2 of the following year. This problem is exacerbated as the year progresses. Thus, the current PTCs do not accurately reflect the appropriate cost comparison information for an entire year. Moreover, the PTCs are based on backward looking pricing information as the year progresses. As an example, assume an offer is made in November, but the current PTC remains in effect, untouched, until May 31 of the following calendar year. The PTC is therefore comprised in part of pricing that expired in October and which no longer exists, but the PTC will not be updated for another seven months. Thus, BGE s and Pepco s PTCs lack transparency, are overly complex, reflect stale as opposed to current prices, and are neither personalized for the customer nor accurate for the entire year for which they are calculated. III. What calculation and display of the [PTC] would be of most use to customers, and why? As stated above, the PTC should be simple to understand, accurate, and accessible. Indeed, the entire purpose of the PTC is, as the Commission stated, to assist customers in making informed decisions when shopping for competitive electricity. RESA recommends that the PTC as presented on a customer s bill should be include all of that customer s bypassable charges on a per kwh basis, which presumably would all be included in the SOS price. In most, if not all, cases, the individual bypassable charges would be the same as the SOS price for that class. There should also be a narrative explaining that the SOS price is subject to change on October 1 and June 1 of each year, which would alter the PTC. Also, the invoice would provide the website address for the IOU for customers seeking additional information relating to the PTC. Presenting the 6

8 PTC as a snapshot in time allows for an accurate, simplified PTC as opposed to the current PTC calculation. If the Commission believes it is necessary to present customers with a PTC for a full year period, the IOUs websites could include the PTC for the customer s current billing period with an explanation of when the current bypassable charges (e.g., SOS rates) will expire. The new bypassable charges could be added to the website once they become known, with an explanation of their effective dates. As an example, on June 1, the websites would post the bypassable charges for residential customers for the period June 1 through September 30 and also for October 1 through May 31. As post-may 31 charges became known, they would be added. Each website should include appropriate disclaimers informing customers that future SOS prices change in October and June. An easy-to-understand worksheet, similar to the one Delmarva Power includes on its website, would be helpful to walk customers through the math involved in calculating potential savings. In addition to being displayed in a prominent area of the IOUs websites, RESA recommends that the Commission develop a comprehensive, statewide website to post competitive offers and each IOU s PTC. 12 Once the Commission s new website exists, each IOU would provide a prominent link to that site, and the website would be referenced on each customer bill. RESA s recommendation with respect to the calculation and display of the PTC is consistent with the new Competitive Electric Supply regulations in COMAR For 12 Such websites have been developed in Connecticut ( Pennsylvania ( and Texas ( to name a few. 7

9 example, in COMAR (2), a supplier marketing to residential customers that wants to compare its offer price to the IOU s price must use the SOS price: When an electricity supplier compares the supplier s price to the price a customer would pay for utility electric commodity service, the electric commodity services price is the standard offer service price offered in the electric utility territory where the supplier s service is to be provided. The PTC as described above would compare the offer price to bypassable charges on a per kwh basis, all of which should be included in the SOS price. As a result, RESA s recommendation is consistent with the new regulations. IV. Additional measures to promote price transparency In addition to presenting a current, customer-specific PTC on customer bills, the IOUs should be required to implement additional measures to promote price transparency. This should include the development of a section on each IOU s website to present detailed information on SOS procurement results, current SOS rates, and information on other current bypassable charges. Ultimately, the PTC is a retail price that reflects the wholesale costs resulting from the SOS procurement process plus additional bypassable charges such as transmission costs and the administrative charge. Presenting this information on an IOU s website will better enable current and potential retail suppliers to evaluate potential business opportunities and to present useful price comparison information to customers. RESA specifically recommends that the IOU s add the following SOS procurement and pricing information to their websites: a. Post a narrative description of how SOS prices will be set for each SOS procurement group including a detailed description of the products to be procured (including contract length, amount of supply, and amount of supply as a percentage of total SOS supply needs for the given procurement class) 8

10 b. Within 10 business days of each procurement event, post the resulting winning bid prices on an aggregate basis. Specify all applicable inclusions or exclusions in these bid prices. For example, specify whether the resultant bid prices include line losses, any applicable state taxes, transmission costs, capacity costs, renewable portfolio standard compliance costs, etc. These bid results should be presented on a procurement group specific basis (Residential, Type I, Type II, etc.) c. As soon as possible prior to the effective date of each price application period, post actual retail rates resulting from each SOS procurement event. The SOS bid pricing information discussed in (b) should be translated into retail prices for the applicable customer groups. d. Post actual retail tariffs including the above information. RESA believes that the price information published by PPL Electric in Pennsylvania is a good example that could be replicated in Maryland. 13 Moreover, the above information is necessary to develop a full understanding of the SOS pricing structure and this information is necessary to enable a supplier to fully comply with COMAR regulation. In sum, the accurate calculation, maintenance, and presentation of the PTC and other SOS pricing information, is critical to ensuring appropriate price transparency for customers and mitigating confusion that may impede retail electric competition. V. Conclusion RESA appreciates the opportunity to comment on the current PTCs and the improvements that the Commission can make to them. 14 While the IOUs current 13 See 14 At the same time, however, it is apparent that there is information surrounding the current PTCs that is not readily accessible to non-utility stakeholders in this proceeding. That information includes much of the information on which the IOUs have been asked to comment by May 7, As a result, information may come out in the IOUs written comments that RESA was unaware of or that might warrant written reply comments prior to the June 1, 2010 hearing. If that happens, RESA may request permission to submit reply comments, or may ask to respond to such information at the hearing. 9

11 method of calculating PTCs is no doubt well-intended, it is ineffective in practice and does little to assist customers in making informed decisions. Improving the PTCs so that they reflect customer-specific information and are more visible and accessible, and presenting additional SOS pricing and procurement information, would provide customers with the components they need to assess competitive offers and suppliers with information needed to market services to customers. These suggested revisions to the PTC would reduce customer confusion and provide customers with more accurate information. Respectfully submitted, RETAIL ENERGY SUPPLY ASSOCIATION By Counsel Brian R. Greene SELTZERGREENE, PLC Eighth and Main Building 707 East Main St., Suite 1025 Richmond, Virginia Tel: (direct) Fax: CERTIFICATE OF SERVICE I certify that copies of the foregoing Comments were mailed, this 7 th day of May, 2010, to each person on the official service list for this proceeding. Brian R. Greene SG

PUBLIC SERVICE COMMISSION OF THE DISTRICT OF COLUMBIA

BEFORE THE PUBLIC SERVICE COMMISSION OF THE DISTRICT OF COLUMBIA IN THE MATTER OF ) ) The Petition of the Office of the People s ) Formal Case No. 1047 Counsel for the District of Columbia ) for an Investigation