Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC staff advises Delaware Public Service Commission on proposed revisions to electrical supplier rules, (Nov 15, 2013)

By Linda O’Brien, J.D., LL.M.

The staff of the FTC Office of Policy Planning, General Counsel, and Bureau of Economics on November 13 filed a comment with the Delaware Public Service Commission (PSC) on its proposal to revise the Rules for Certification and Regulation of Electric Suppliers. Significant technical developments made it timely for the FTC to consider how retail competition can contribute to the achievement of substantial power systems efficiencies while facilitating customized electric services that benefit consumers.

Delaware has established a system for the mandatory certification of electricity marketers and developed disclosure requirements applicable to electricity sales contracts between retail electricity customers and certified electricity marketers. The rules for certified electricity retailers include restrictions on the use of unfair marketing practices by electricity marketers. Contract disclosures required by the PSC include the prices to be charged, length of the contract, and a list and explanation of any additional charges. States with retail competition, including Delaware, have revised the certification and operating rules to address new conditions or practices that are of concern to consumers.

The proposed revisions include amending Section 2.1.1.9.1.2 to require any supplier of variable-priced residential electric service to provide a toll-free telephone number or link on the supplier’s website where customers could obtain the price per kilowatt-hour (kWh) at least five calendar days prior to the price effective date. The FTC recommended against adoption of the revisions as proposed and set forth alternatives to either include an exemption to allow customers use to a device that displays the price on an ongoing basis or replace the five-day advance notice requirement with a requirement of one day’s notice.

The energy sector, including electric power, has been an important focus of the FTC’s merger review and other antitrust enforcement, competition advocacy, and consumer protection efforts, according to the FTC staff. Significant technical developments in the electricity industry warrant the consideration of competitive retail dynamic pricing to benefit consumers through the lowering of costs, increased innovation, and an expanded variety of services being offered. Consumers are able to help address the suppliers’ challenges of balancing supply and demand by reducing power consumption in response to higher power prices. Reducing power use during periods of high wholesale prices can reduce overall system costs, support reliability of services, and provide environmental benefits. As an example of dynamic pricing, the pricing of electricity more cheaply overnight than during daytime hours would provide an incentive to owners of electric vehicles to recharge their vehicle overnight which would help level out electricity load profiles. Flat-rate electricity pricing at the retail level results in subsidies for customers consuming power in peak demand periods and penalties for customers consuming power in demand troughs. Retail competition can help transition away from flat-rate pricing, the FTC staff concluded.

The FTC staff observed that the requirement of a five-day notice of prices restricts dynamic price offers that can benefit consumers by precluding retail prices from closely following wholesale price changes and limiting variable price offers from electricity marketers. Additionally, a delay of five days before price changes can be implemented means customers will have less accurate price signals to invest in more efficient equipment and appliances.

As an alternative to the proposed revision, the FTC staff recommended an exemption from the five-day notice requirement that would allow customers to use devices, such as in-home displays or web portals, to keep informed of the prices that they are paying for power. With this information, customers can adjust their power consumption to gain savings on their electric bills. The PSC could add this exemption if the customer could certify that he or she is satisfied with access to on-going price information in lieu of a five day notification of price changes. If the PSC determined that real-time prices do not provide sufficient information to customers, another alternative would be to shift the notice requirement from five days to a one-day notice.

News: Antitrust ConsumerProtection FederalTradeCommissionNews