New PUC Suit May Answer When Suppliers May Pass On Price Increases to Customers on “Fixed Price” Contracts?
April 9, 2014
The Utility Workers Union of America (UWUA) has filed a petition for declaratory order from the Pennsylvania PUC asking it to find that FirstEnergy Solutions’ fixed price contract language for residential generation service does not permit FES to increase its bills to those customers because of higher PJM ancillary service costs. If the Commission agrees, it could affect the ability of FES, as well as other EGSs with similarly worded fixed price contract terms to pass on the higher PJM ancillary service and other wholesale costs of the “Polar Vortex” to their fixed price service customers.
In the past, FES notably offered residential customers long term (as much as seven years) “fixed price” contracts, materially longer than the contracts available from its competitors. However the contracts contain a clause that states that FES can increase its bills to residential customers if PJM, “imposes on FES new or additional charges or requirements.”
The petition points out that the costs that FES has announced it will begin to pass through are for increases in PJM “ancillary service” charges, and, in particular, the charge for “synchronized reserve.” But, the petition points out, it does not appear that FES is claiming that any of these charges are ‘new’ or that any additional ‘requirements’ were imposed on FES. The petition stated:
“It appears that the higher costs from PJM to FES were for synchronized reserve. Importantly, though, FES (as a load-serving entity) is not required to purchase such services from PJM. Specifically, PJM states: ‘Load-serving entities can meet their obligation to provide synchronized reserve to the grid by using their own generation, by purchasing it under contract with another party or by buying it on the Synchronized Reserve Market.’”
Procedurally, look for an answer from FES in about two weeks; unless the Commission decides that it needs an evidentiary record to be developed to decide the petition (which would not appear to be the case) the Commission could rule on the request fairly expeditiously after that. However, the PUC is not obligated to rule on the petition within a specified time.
The UWUA is represented by Scott Rubin, formerly an Assistant Consumer Advocate with the PA Consumer Advocate’s Office.
This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions about the content of this post, please contact Dan Clearfield at (717) 237-7173; dclearfield@eckertseamans.com