U.S. Public Outreach Programs –

Competitive Retail Market Transition from

10kV Customers to Households

Eric Matheson

Energy Advisor to Vice Chairman

Andrew G. Place

Pennsylvania Public Utility Commission

September 15, 2016

1

Overview

• Pennsylvania Retail Market Overview

• Transitional Issues

• Public Outreach

– Commencement of competitive reach markets

– End of rate caps for default supply

– Response to “Polar Vortex”

• Consumer Protections

• Key Barriers to Entry

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• Retail competition was mandated by enabling 1996 legislation. Pilot programs were designed

in 1997, and implemented in 1998. Post pilot-retail choice implemented in 1999.

• Pennsylvania is part of the PJM Regional Transmission Organization (RTO), which provides

open access to the transmission grid covering a 13 state wholesale market in the US.

• Retail competition reached over 8,000MW by 2000. Thereafter, retail market participation

weakened as market prices rose above yet unexpired restructuring settlement imposed default

service (aka SOLR) rate caps.

• After default service rate caps expired by the end of 2010, retail market participation

accelerated upward and peaked at 2.23 million accounts (39.3% of accounts and 64% of load)

in February 2014.

• In January 2014, a severe winter weather pattern (“2014 Polar Vortex”) resulted in many very

high customer bills for variable rate customers, causing some to return to default service.

• By 2015 and 2016, shopping rates stabilized and have recovered some of their “winter vortex

losses”. (2.08 million accounts – 36.6% of accounts and 68.1% of load)

• Future: Anticipate “smart meters” will create the environment for more innovative competitive

supplier products.

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Pennsylvania Retail Market Overview

Implementation – Rate Cap Period

• Generation, Transmission and Distribution are unbundled. Generation is unregulated.

• Electric utility companies given stranded cost recovery.

• In exchange, electric utilities are required to cap rates on electric generation – helping customers avoid wholesale price run-ups.

• Major electric utility rate caps remain for a decade.

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Pennsylvania Retail Market Overview - PA Electricity

Generation Choice and Competition Act of 1996

Pennsylvania Retail Market Overview

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Large to Small Customers

• Competitive retail natural gas markets originated with large customers

– Customers often were interruptible or were able to secure their own upstream transportation for supply.

– Involved fewer stranded cost issues, and fewer transactions

• Competitive retail electricity markets originated with all customers

– Legislatively required

– Relatively mature wholesale markets for transmission service and supply service facilitated simultaneous implementation

– Some Distribution System Operators (DSO’s) did phase in retail choice equally over 3 years for all customer classes based on peak load share for each customer class. 6

Transitional Issues

Factors affecting rate of transition to Competitive Suppliers (CSs)

1.Default service model [opt in] vs. non-default service model [customer must choose a CS from the start]

2.Default service supply price relative to wholesale market prices

3.“Opting in” by customers to receive service by a CS makes prospecting for new customers takes time and effort.

4.Allowance for community “opt-out” aggregation. (PA did not)

5.DSO facilitated CS referral programs for residential and small commercial customers

6.Purchase of receivables [POR] programs – more players

7.Consumer education – takes time to “sink in”.

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Transitional Issues

Transitional Issues

Factors to consider in rate of transition to CSs

1.Impact on cost of default service

2.Systems limitations – availability of Electronic Data

Interchange (EDI) to facilitate thousands of customer switches

between CSs and Default service, and sharing of

customer/usage information

3.Portability of transmission service [network integrated

transmission service concept]

4.Maturity, competitiveness and structure of wholesale

generation markets

5.Consumer education8

Public Outreach – Part I

Competition’s Early Years

• Competitive suppliers entered the PA market with offers to commercial

and residential customers.

• Statewide electronic media ads, combined with competitive suppliers’

marketing, pushed up shopping numbers for a short period until

wholesale market prices rose above rate caps.

• Suppliers began exiting PA residential market, existing contracts expire

and shopping numbers shrink.

• Consumer surveys showed a statewide awareness rate in the high 90s.

• After a large awareness campaign (mass media advertising, public

relations and grass roots education) called the “Electric Choice”

campaign, a second campaign called “Utility Choice” expanded on that

awareness with additional educational efforts. 9

Public Outreach – Part I

Initial Outreach Outlets• Direct communications [letters] from the Chairman of the PAPUC to utility

customers regarding the pilot.

• Natural affiliations (Example – AARP)

• Hotlines – The Bureau of Consumer Services (BCS) of the PAPUC

established a “competition hotline”.

• Press releases (PRs) – distribute PRs regarding all significant steps along

the way to media outlets. [example – PRs announcing PAPUC filings by

DSOs and PAPUC approvals of pilot programs]; PRs were released by the

Governor of PA also on retail choice.

• Websites – establish competition websites for DSOs and the Commission;

include Q&As, list of suppliers (what service territories they are marketing

and to which class of customers), etc.

• Library networks

• Legislative offices

• Videotapes 10

Public Outreach – Part I

Initial Outreach Outlets – (Continued)• Public service announcements

• Radio talk shows

• Brochures – Q&A brochures with competition hotline phone number

on it;

• TV/Cable

• Speakers bureaus

• Train the trainers bureau

• DSO educational programs– Marketing plans submitted for PAPUC review

– Education plans submitted for PAPUC review

– Distribution of material plans submitted for review

– Feedback mechanisms submitted bi-monthly, as well as pre-research data.

[independent consultant to measure plan effectiveness]

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Public Outreach – Part II

Preparing for Rate Caps to Lift

• Competition proponents see rate cap expiration as key to awakening a

dormant residential market.

• In May 2007, the Commission directs a new statewide education campaign, and directs Distribution System Operators (DSOs) to develop education plans for their service areas.

• PA Legislature does not approve $5 million request to conduct statewide

campaign. Voluntary CS funding fails. Without funding, campaign is shelved.

• Commission does move forward with DSOs on 5-year education plans for

the respective territories.

• Office of Competitive Market Oversight (OCMO) created a consumer

education subgroup - comprised of Commission staff, CSs and consumer

representatives [OCA, OSBA] - to develop a comprehensive statewide

consumer education campaign.12

Commission and DSO Outreach

• Commission oversees process, approving DSO’s education plans,

reviewing education materials relating to electric shopping and monitoring

implementation.

• Commission approved DSO plans that funded more than $55 million of

consumer education carried out between 2008 and 2012. DSOs are entitled

to cost recovery in future filings. Some implemented choice education

surcharges.

• Commission’s Office of Communications continues educating consumers

through its public outreach throughout the state.

• Additionally, as major DSOs rate caps begin to expire in January 2010, the

Commission launches PAPowerSwitch.com – an online tool to help

consumers Stop. Switch. Save.13

Public Outreach – Part II

Development Timeline

• April 29, 2011: Retail Markets Investigation kicked off.

• June 08, 2011: First en banc hearing held.

• July 28, 2011: Staff directed to develop consumer education program.

• August 10, 2011-December 2, 2011: 10 tech. working group sessions held.

• November 10, 2011 – 2nd en banc hearing held.

• December 15, 2011 – Education program proposed.

• February 29, 2012 – Commission endorsed customer letter delivered.

• March 1, 2012 – Education program finalized.

• June 29, 2012 – 1st PAPowerSwitch upgrade implemented.

• September 24, 2012 – 2nd PAPowerSwitch upgrade implemented.

• February 28, 2013 – Tri-fold choice brochure delivered.

• December 31, 2013 – DSO choice letter delivered.

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Part II DSO Public Outreach

• Eight DSOs were directed to produce and mail three separate

mailings to residential and small business

– A Commission-endorsed postcard on PAPowerSwitch to all residential and small

business customers delivered no later than February 29, 2012.• Included the signatures of all five Commissioners.

• The Commission’s call center received significant inquiries from consumers following

those mailings, including many requests for shopping information.

• Additionally, the number of visitors to www.PAPowerSwitch.com doubled during the

month following the mailings.

– Tri-fold flier highlighting PAPowerSwitch and how to shop for a CS delivered no

later than February 2013.

– DSO letter and “Frequently Asked Questions] document delivered end of 2013• Encouraged consumers to shop.

• Directed consumers to www.PAPowerSwitch.com

• Reinforced the notion that all consumers, regardless of who supplies their electricity,

continue to receive safe and reliable distribution service from their DSOs.

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Commission’s Multi-Media Approach

• Press releases;

• Video news releases;

• Educational videos;

• Targeted mailings;

• Choice education fairs

• PAPowerSwitch.com; and

• Social media

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The Commission uses various media resources to educate the public, including:

Launch of PAPowerSwitch.com

• The Commission launched PAPowerSwitch in early 2010 and launched a mobile-friendly version in 2014.

• The Commission significantly upgraded the website in 2012 and in the 2Q of 2015.

• PAPowerSwitch gave residential and small business shoppers online access to CS offers, consumer alerts, educational videos and shopping information.

• With easy navigation and a postal code search, users can filter and sort competitive offers and switch online.

• The Commission was given authorization to impose assessments on CSs to recover the costs of its choice related expenses. Implementation regulations were subsequently developed.

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Development of PAPowerSwitch.com

• Development cost: $500,000.

• Average cost of website maintenance, weekly email

alerts, website hosting and reporting for

PAGasSwitch and PAPowerSwitch is $9,250 per

month.

• PAPUC Staffing costs = 1 FTE [Full time equivalent].

• CSs enter their own offers.

• Pavone is the current web-hosting vendor.

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PAPowerSwitch

Features of PAPowerSwitch.com

• Not just a “shopping” website

• Educational videos

• Other educational links– Consumer protection rights

– Low income programs

– Energy efficiency (EE) tips and links to DSO EE programs

– Smart Meter educational section

– Understanding your electric bill

• Very popular – 55,000 to over 125,000 “hits” per month.

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• Posting of a “consumer alert” as a slider on the PUC website (www.puc.pa.gov)

• Posting of a “consumer alert” on the home page of www.PAPowerSwitch.com

• Press releases on January 31 and February 14

• Development of a separate page on www.PAPowerSwitch.com devoted to information on fixed vs. variable products

• Addition of a fixed vs. variable Q&A on existing fact sheets and an enhancement to “Frequently Asked Questions” on variable rates 21

Public Outreach - Part III

PAPowerSwitch During Polar Vortex

of 2014: Variable Rate Exposure

• 3 part-time educators in PAPUC Communications Dep.

• Attend local special events and set up in public spaces [Shopping Malls, Farm Shows, Fairs, etc]

– Set up booths and computers to help customer navigate our PAPowerSwitch website.

– Customers can switch on the spot.

• Electronic Media– Facebook page to promote PAPowerSwitch and a PUC Twitter account for

information about utility service outages, conservation tips, consumer events, was created in early 2013.

– Between Jan. 1, 2014, and Jan. 1, 2015, “likes” for the PAPowerSwitch Facebook page rose from 245 page to 2,438, or by 895%.

– Digital ads that the PUC ran during the past winter generated more than 2,000 visits to the PAPowerSwitch website.

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Public Outreach

Where We Stand Today

• Make sure CS names provided to customers are marketing in each of the applicable service territories. Some CSs only provide service to certain areas and for certain customer rate classes. Therefore, when providing CS information to consumers, be sure to include the customer rate classes and service territories they are marketing in.

• Ensure that customers know who to call to enroll [generally the customer should work with CSs to enable enrollment].

• Develop a common terms to avoid customer confusion over terms of retail choice.

• Be sure customers understand the length of time necessary to become enrolled, and when the first CS bills will come due.

• Be sure consumer representatives and Commission employees are aware of BCS hotline number; have effective communications of the hotline number externally.

• Emphasize that retail choice participation does not impact the reliability of DSO distribution service. DSO’s remain responsible for ensuring delivery of energy to the home or business.

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Public Outreach

Lesson’s learned

• Standards and Practices for competitive suppliers are

needed to ensure the fairness and integrity of the

residential energy market.

• Anything that damages the reputation of the

competitive market harms not only consumers, but also

all suppliers participating in the market.

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Consumer Protections

Enhanced Consumer Protections

The Commission continues educational outreach on key regulatory changes in the marketplace, including:

• Disclosure and Customer Notification Requirements;

• Enhanced Information on Variable Rate Products;

• Accelerated Switching;

• New CS Contract Summaries highlighting important terms and conditions; and

• Contract Renewal and Changes in Terms Notices.

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Slamming and Billing Protections

• Slamming – zero tolerance: 52 Pa. Code § 57.177

(customer dispute procedures)

• Strict billing and payment standards:

52 Pa. Code § 56.11

• Bill format for residential and small business

customers: 52 Pa. Code § 54.4

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Consumer Protections

Marketing/Sales Activities

Advertised prices = disclosure prices = billed prices.

Licensees shall provide consumers with accurate

information about their electric generation services using

plain language and common terms.

Door-to-door, telemarketing and other marketing regulations

are found at 52 Pa. Code Chapter 111.

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Consumer Protections

Response to 2014 Polar Vortex

1.2014 Polar Vortex: Bitter cold, high demand and price spikes in the wholesale energy market.

2.Customers needed the ability to switch CSs, or return to default service, more quickly.

3.New Accelerated Switching regulations shorten the timeframe for a customer to switch CSs.

4.A typical change in CS reduced from 16 to 45 days to as little as 3 business days.

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Consumer Protections

Response to 2014 Polar Vortex (continued)

5.New Disclosure Regulations

6.Customers provided with greater, uniform detail in CS disclosure statements, including conditions such as price variability and historical pricing information.

7.More timely information on contract renewal and change in terms notices.

8.A separate CS contract summary along with the full disclosure statement highlights key terms and conditions.

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Consumer Protections

Key Barriers to Entry

1. Access to Customer Lists

2. Consistent Information Technology (IT) Communication [Electronic Data

Interchange (EDI), DSO web portal for CSs]

3. Access to Customer Usage Data for Prospecting and Billing [EDI]

4. Purchase of Receivables

5. Referral Programs

6. Excess Utility Credit Requirements

7. Regulator Credit Requirements

8. Enrollment Acceleration

9. Seamless Moves and New Customer Enrollment Enhancements

10. Consumer Education

11. PAPowerSwitch

12. Continuous Improvement – Office of Competitive Market Oversight [OCMO]30

Barriers: Access to Customer List

• Customers can opt out every 3 years

• Used by CSs to develop pricing offers

Standard Information includes:

Customer name Meter type (interval?)

Billing/service address Capacity obligation

Account number Net metering status

Rate class/subclass Sales tax status

Load data 12 months usage KWh

Meter read cycle 12 months peak demand, KW

Load profile group On/off peak usage, 12 months

Transmission obligation Loss factors, if applicable

DS customer status 31

Barriers: Electronic Data Interchange (EDI)

• EDI = Common standards for communication

between DSO’s and CSs.

• EDI Communications standardized methods for

sharing of customer information and data, as well

as the processing of customer enrollments.

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* EDI Technical standards are available at: http://www.puc.pa.gov/utility_industry/electricity/edewg_files_for_downloading.aspx

Barriers: Purchase of Receivables

• CSs in PA cannot terminate service for non-payment

• Inefficiencies could result from dual billing systems.

• Many CSs lack sophistication to bill for the DSO

currently

• Solution: DSO consolidated billing with purchase of

receivables (POR) by the DSO

• If bad debt expense is 1%, DSO purchases the CS

receivables at 99% of CS billing amount.

• DSO issues one bill, and is accountable for all utility customer

collection efforts

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Barriers: Referral Programs

Referral programs: DSO acts as a facilitator to provide information on retail offer programs

Example: PA’s Standard Offer Program [SOP]

• DSO customer service reps provide information to incoming callers regarding SOP when they field service calls

• CSs pay DSO service fee for referrals

• SOP program characteristics:• 1 year fixed price

• 7% of the current Default Service Price

• No switching restrictions or cancelation fees

• Customers can chose a participating CS, or a CS can be randomly assigned to the customer.

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Questions?

Eric Matheson

Energy Advisor to Vice Chairman Andrew G. Place

Pennsylvania Public Utility Commission

E-mail: ematheson@pa.gov

Office Phone: 717-346-3863

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Appendix A – PPL Education Plan

Objectives – educate customers about:

• The end of rate caps – rates may significantly increase!

• Customer choice, how to shop, and customer rate options

• Provide Provider of Last Resort [default service]

• Customer bill components

• How to calculate the “Price to Compare”

• The “Rate Stabilization Plan”

• Demand Side Response and Energy Efficiency Programs

(Act 129 Programs)

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Appendix A – PPL Education Plan (Con’d)Communication Medium

• Customer choice bill inserts twice a year

• Direct mailings– Choice/Energy Education Information Kit mailed to all new customers

– Choice fulfillment kits mailed upon customer request

• Expand PPL choice website

• Public speaking engagements

• Community Based Organizations (CBOs)

• Televisions

• Radio

• Newspapers

• Community Library – education on use of “Energy Analyzer”

• Call center scripts updated

• Press releases

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Appendix A – PPL Education Plan (Con’d)

Design Characteristics

• Target Latino, African American and rural customer

segments in radio and newspapers.

• Target visually impaired customers on radio

• CBO’s target the low income sector

• Developed Literature

– Electric Choice Handbook

– “How to calculate your price to compare” Booklet

– “Shopping for an electric supplier” booklet

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Appendix A – PPL Education Plan (Con’d)

Budget

• $875,000 budget for 2007-2009 approved in the default service case

• $5/Million per year thereafter, recovered in its 2007 base rate case– Includes education for customer choice, meter data

management [smart meters], Energy Analyzer [customer usage analysis tool], Bill Analyzer, customer rate options and energy efficiency.

– $2.69Million of this funding was related to Energy Efficiency

– Annual level of funding until next base rate case

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