Senate Approves Variable Rate Ban to Protect Residential Electric Consumers []

May 22, 2015

Article as it appeared in

It is now up to the House to decide if Connecticut will become the first state in the country to ban variable-rate electricity contracts.

A bill to address deceptive and unpredictable billing practices unanimously passed the Senate Wednesday. The bipartisan measure would prevent retail electric suppliers from both entering into variable rate contracts and from automatically renewing them.

According to the bill analysis, the bill would not prohibit suppliers from charging month-to-month variable rates as long as certain notice requirements are met.

But according to state Sen. Paul Doyle, D-Wethersfield and co-chairman of the Energy and Technology Committee, the ultimate goal is to completely eliminate variable rates from electricity billing.

“Variable rates are not going to stick around,” Doyle said at a press conference prior to the Senate vote.

The bill, along with a related law passed last year, is a response to consumer complaints about third-party suppliers. A report from the Office of Consumer Counsel cites a record number of complaints in 2013 about “purportedly fixed rates unexpectedly becoming variable, phone harassment, misleading representations by sales representatives, and suppliers failing to provide adequately staffed customer service support lines, thereby thwarting consumers’ cancellation efforts.”

Consumer Counsel Elin Swanson Katz said earlier this session that her office surveyed variable electricity rates during the final quarter of last year and found 15 suppliers with variable rates more than 30 percent above the standard rate.

Data from the Office of Consumer Counsel showed the elderly and those for whom English is a second language are served disproportionately by certain third party suppliers.

Senate President Martin Looney said the bill builds on a provision of last year’s law that means every residential electric customer’s monthly bill will soon be required to include the rate for the coming month. It would go into effect on July 1.

“Electric customers deserve stable, predictable electric rates, whether obtained through standard offer service or from a multitude of highly competitive offers in the private provider marketplace,” Looney said.

Last year, lawmakers negotiated and unanimously adopted rules designed to give customers more information about their bills and greater flexibility to leave their contracts. The law prohibits raising rates for the first three months of a new contract and requires advance notice for certain rate changes.

The 2014 legislation didn’t put limitations on variable rates despite calls to cap the rates from the Connecticut chapter of the AARP.

John Erlingheuser, advocacy director for AARP Connecticut, testified before the Energy and Technology Committee that this year’s bill is necessary because the system is still broken despite the recent reforms.

He acknowledged what he described as a very small group of people who are able to reap more savings through the variable rate option than they would if they stuck with the standard offer rate from their primary provider. But he said that’s not a good enough reason to keep variable rates alive.

“…there are a few customers who no doubt know exactly what they are doing and they actively ‘play’ the market by moving from supplier to supplier or from fixed to variable and back again when they see it is in their interest to do so,” Erlingheuser testified. “…We should keep in mind that electricity is not a luxury; it is a necessity for health and safety. It is not a product that should be treated as a financial instrument used to ‘play the market.’”

Data from the Office of Consumer Counsel shows that almost 9 out of 10 customers of Connecticut Light and Power, now known as Eversource, paid more than the standard offer in September 2013.

Suppliers say existing law and regulation through the Public Utilities Regulatory Authority provide enough consumer protections.

Christopher H. Kallaher, of Direct Energy Services, testified that variable-price contracts allow suppliers to quickly adjust prices to align with market conditions. “Thus, when prices are decreasing, suppliers can quickly reduce prices and vice versa.”

But Katz testified it’s not always the market that drives third party prices.

“For example, in October 2014, when the ‘market conditions’ involved low prices because of mild weather, pricing data submitted by the suppliers to the Rate Board reveals that consumers were paying as much as 24 cents/kWh, at a time when standard service was being offered for less than 10 cents/kWh.”

The bill would not apply to commercial variable-price contracts. Doyle said there have not been many, if any, complaints from commercial entities. He cited a greater degree of experience and sophistication among those responsible for securing electric rates for businesses.

The bill was touted widely by lawmakers as a bi-partisan effort. State Rep. Lonnie Reed, D-Branford, called it a “great Kumbaya moment.”

But legislators could not agree what should happen at the end of a fixed term if a month-to-month rate comes into play, Doyle told his fellow Senators Wednesday during discussion on the bill.

That’s why lawmakers drafted an amendment that would leave the decision up to regulators. The agency would be required to submit its recommendations by Jan. 1.

State Sen. Paul Formica, R-East Lyme, asked Doyle what happens to customers whose contracts expire between the time the bill, if passed, goes into effect and the time PURA comes back with its decision.

“We would not be prohibiting them from raising their rates,” Doyle said “I would hope they utilize their judgement and keep in mind the intentions of this legislation to protect our consumers.”

The debate on the bill took several hours as Sen. Kevin Witkos and Senate Majority Leader Bob Duff worked behind the scenes to come up with a schedule of when certain bills would be called for debate. Duff described it as a “speed bump” and a “snag,” while Senate Republican Leader Len Fasano described it as a “family disagreement.”