Press Release

PUC Clarifies Municipal Aggregation Rules

Published on 3/17/2011

Filed under: Electric

HARRISBURG – In response to several petitions it received requesting that the Pennsylvania Public Utility Commission (PUC) issue a declaratory order to remove uncertainty concerning electric generation suppliers (EGSs) and opt-out aggregation agreements, the PUC today further clarified its rules regarding the ability of EGSs to participate in municipal aggregation.

Commissioners voted 5-0 to clarify Commission regulations already in place that an EGS will remain subject to Commission jurisdiction and regulatory authority for consumer protection, licensing and other purposes authorized under the Public Utility Code. 

In a statement, Chairman Robert F. Powelson expressed his concern that municipal aggregation “may actually hinder competition by allowing a single supplier to lock in large groups of customers at a single point in time,” which may prevent other “suppliers from making offers, thereby stifling innovation and competition and deterring the development of a robust retail market.”

In making its decision, the Commission sought to protect consumers from slamming, a term used to describe the practice of changing a customer’s electric generation supplier without their direct approval. The General Assembly explicitly prohibited slamming, as set forth in the Public Utility Code. Regardless of whether municipalities that undertake municipal aggregation programs must be licensed, EGSs that contract to provide generation supply services to municipal residents under a municipal aggregation program remain subject to Commission oversight and, in particular, remain subject to the Commission’s customer switching (anti-slamming) protections.

Under a municipal aggregation, municipalities, by ordinance, become representatives (called “municipal aggregators”) of their participating residents to procure electric power as a group, with the expectation that they will be able to bargain for electric power on better terms as a group, as opposed to the residents bargaining for power individually.  The municipality then contracts with an EGS for the EGS to provide electric generation supply to municipal residents participating in the municipal aggregation program.  Municipal aggregation programs authorized by ordinance can be opt-out (where residents automatically participate unless they actively notify the municipality that they do not want to be in the program) or opt-in (where the residents can participate if they actively sign up for the program).

The Commission received several petitions requesting that it initiate an investigation and issue a declaratory order to remove uncertainty and terminate a controversy concerning the lawfulness of the activities of FirstEnergy Solutions Corp. and other electric generation suppliers in soliciting home rule municipalities in Pennsylvania to approve opt-out aggregation agreements for the provisions of electric supply by EGSs to residential and small business customers located within the municipality. 

On Oct. 28, 2010, the Retail Energy Supply Association filed a petition with the Commission requesting it initiate an investigation and issue a declaratory order to remove uncertainty and terminate a controversy concerning the lawfulness of the activities of FirstEnergy Solutions Corp. and other electric generation suppliers in soliciting home rule municipalities in Pennsylvania to approve opt-out aggregation agreements for the provisions of electric supply by EGSs to residential and small business customers located within the municipality.  On Oct. 29, 2010, Dominion Retail Inc. petitioned the Commission requesting a declaratory order that the implementation of an opt-out municipal aggregation program is illegal in the absence of an act of the General Assembly authorizing it.  On Nov. 9, 2010, FirstEnergy Solutions corp. filed a petition with the Commission requesting confirmation that no approvals are necessary for FirstEnergy Solutions Inc. to participate in an opt-out municipal aggregation programs developed in Crawford County, Warren County and Mercer County. 

In regard to the FES petition, the Commission ruled that “absent a legislative change to the anti-slamming provision, opt-out aggregation programs must be explicitly approved by the Commission, and the Commission will approve such programs only in unique circumstances where it is clearly in the public interest to do so.  FES did not present any unique or exigent circumstances in its Petition demonstrating that the opt-out programs would be in the public interest.   Under the facts that exist at this time, Commission approval of an opt-out municipal aggregation program would be an improper and unnecessary abrogation of individual consumers' rights concerning electricity choice.

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner.

For recent news releases, audio of select Commission proceedings or more information about the PUC, visit our website at www.puc.state.pa.us.

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Docket Nos. P-2010-2207062; P-2010-2207953; P-2010-2209253

Contact:

• Denise McCracken
  Senior Communications Specialist
  717-787-5722
  demccracken@pa.gov