August Orders Advance Retail Choice in NY, PA and DC

September 2004

New York Lays Out Energy Choice Vision and Road Map

In the most comprehensive retail choice decision of the year, the New York PSC approved its new energy policy (Case 00-M-0504) on August 25th. As New York implements its competitive electricity policy vision, suppliers will offer more choices and customers will see more benefits.

This order is a road map providing the PSC's vision for New York's market development. The PSC order's Vision Statement is one of the strongest regulatory endorsements of energy choice in the US:

"The provision of safe, adequate, and reliable gas and electric service at just and reasonable prices is the primary goal. Competitive markets, where feasible, are the preferred means of promoting efficient energy services, and are well suited to deliver just and reasonable prices, while also providing customers with the benefit of greater choice, value and innovation. Regulatory involvement will be tailored to reflect the competitiveness of the market."

The New York PSC directs the utilities to plan for accelerating customer migration through choice by building on best practices like Orange & Rockland's residential PowerSwitch program. Described in the PSC's order as one of the most successful retail competitive programs in the country, it switches about a third of the company's mass-market electric and gas customers to non-utility providers.

In addition, the Commission envisions a mature market where utilities may be relieved of the obligation to serve due to high levels of customer migration, the use of auctions for non-migrating customers, and retail market rules encouraging large customers to choose a competitive supplier for tailored contracts. Like New Jersey, Maryland, and the recent Pennsylvania ruling discussed below, New York will consider offering large customers retail prices tied to wholesale spot prices, creating the incentive for those customers to seek alternative contract structures in the competitive supply market.

Pennsylvania Orders Advances for Retail Choice in Duquesne's Post-Transition Plan

In an order that is expected to lead to further retail customer choice, the Pennsylvania PUC voted (Case P- 0003207) on August 19 to approve a Provider of Last Resort Service (POLR) III plan covering the period January 1, 2005 through December 31, 2010. As expected, at the PUC's September 10 public meeting, the PA Commission approved Duquesne's request for reconsideration of the order. A timetable for reconsideration has not yet been established.
The plan approved by the PA Commission has several key elements that would expand retail choices for large customers. As in New Jersey and Maryland, and as envisioned in New York, large customers still served by DQE would have prices tied to wholesale spot prices encouraging the use of competitive suppliers for tailored service, including fixed prices.

Other elements supporting customer choice included the Pennsylvania PUC's rejection of a utility proposal for switching restrictions, their decision that ratepayer funded customer service centers should be prevented from recruiting customers for POLR service, and their approval to include a retail cost proxy in the price to compare.

The PUC accepted a compromise position on small customers, maintaining fixed rate plans for a single 3- year period instead of the utility proposal of two terms of that length. While the decision around the 3 year fixed price POLR product is still not ideal, it points the market in the right direction - prime for re-examination after the initial 3 year period.