PPL Seeks To Move Customers Back To Default Service At End Of Customer Referral Program

Seeks To Automatically Cancel Retail Supplier Contracts If Customer Enrolls In Low-Income Program

Proposes That 80% Of Residential, Small C&I Default Service Be Served By 24-Month Contracts (Ends Use Of 6-Month Contracts)

Also Proposes Larger, Longer Long-Term Block Energy Contract

March 12, 2024

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Reporting by Paul Ring • ring@energychoicematters.com

As part of a newly proposed default service plan (DSP VI) filed today, PPL Electric Utilities (PPL) in Pennsylvania is seeking changes to the Standard Offer customer referral program (SOP), including moving SOP customers back to default service unless the customer makes an affirmative choice to remain with their supplier

A witness for PPL said, "Analysis of customer actions after the conclusion of the SOP contract has shown that most customers do not take any action upon expiration of their SOP contract and therefore are placed on a new contract at a new rate with their existing supplier. This result is problematic because the customer’s new rate is oftentimes higher than the currently-effective PTC and higher than the customer’s previous rate."

A witness for PPL said, "after four months following the conclusion of their SOP contract, 50% of these customers [of those who initially stayed with their SOP EGS] continued to be served under a new contract with their prior SOP supplier."

A witness for PPL said that the majority of those customers (both Residential and Small C&I) who retain their existing supplier upon expiration of their SOP contract paid a rate that was above the price to compare (PTC).

"82.45% of residential customers who remain with their SOP supplier after the conclusion of their SOP contract are paying a rate at or above the PTC in the first month following the end of their SOP contract. Even four months later, when approximately 18,000 customers have taken action, of the remaining customers, 82.91% are still paying rates at or above the PTC, with over 76.11% paying 10% or more above the PTC. Only 17.09% of these customers are paying rates at or below the PTC," a witness for PPL said

"For the Small C&I customers, as the charts show, 86.28% of Small C&I customers who remain with their SOP supplier after the conclusion of their SOP contract are paying a rate at or above the PTC in the first month following the end of their SOP contract. Even four months later, when approximately 1500 customers have taken action, the remaining 93.25% customers are still paying rates at or above the PTC, with over 87.45% of customers paying 10% or more above the PTC. Only 6.75% of these customers are paying rates at or below the PTC," a witness for PPL said

A witness for PPL said, "The data shows that many customers do not take action for four months after the expiration of their SOP contract, and some customers take even longer. This includes some customers who are paying double the PTC from the time that their SOP contract ends."

PPL proposes to require SOP suppliers to automatically transfer SOP customers to default service upon the expiration of the SOP contract unless the customer affirmatively elects to remain a shopping customer

PPL further proposes that as a term of participating in the SOP, SOP suppliers agree to provide an additional notice to SOP customers.

"This notice will explain that the SOP contract is ending and detail what the customer is currently paying for generation supply as compared to what they will be paying when the SOP contract expires. The notice will also include the PTC that is in effect at the time of SOP contract expiration," a witness for PPL said

"This notice will request that the customer make an affirmative choice to stay with the SOP supplier or to be returned to default service. If the customer does not respond, the SOP supplier will be obligated to switch the customer to default service upon the expiration of the SOP contract," a witness for PPL said

PPL said that this change would reduce "brand confusion" PPL alleges that it has experienced with respect to customers believing the SOP is offered by PPL itself. "Returning customers who take no affirmative action at the end of their contract to default service will help customers understand that, if they elect to shop, they will be doing so through an EGS, not through PPL Electric," a witness for PPL said

PPL also sought PUC approval to continue its current process of communicating with SOP customers and informing them of an upcoming expiration and their options

A witness for PPL also "suggested" the following: "A SOP supplier would have an obligation to communicate to a customer after the expiration of a SOP contract each month until the customer takes some affirmative action. The communication would explain that the customer’s SOP contract has ended, provide the rate supplier is currently charging as compared to the rate the customer was paying under the SOP contract, and provide the current PTC. The communication would include instructions to the customer on how to choose what action to take after the SOP contract expires."

PPL also proposed to increase the SOP referral fee to $33 per customer referral, from the current $28

Other changes to the SOP proposed by PPL include:

• Requiring suppliers to lock-in their participation status in the SOP 20 days before the start of the period rather than 5 days before

• Limit PPL customer service representatives to offering the SOP to customers only once per month. Currently, PPL Electric Customer Service Representatives are required to offer the SOP to all eligible PPL Electric default service customers who contact the Company call center, with the exception of those calling for an emergency or for termination of services.

From 2020 through 2023, an average of 50,006 customers per year enrolled in the SOP.

In 2023, the SOP administrator handled 27,224 SOP calls on PPL Electric’s behalf. Approximately 91% of those calls resulted in SOP enrollment.

Shopping & Customer Assistance Program

Customers participating in OnTrack, PPL's customer assistance program (CAP), are prohibited from shopping for a retail supplier

Currently, PPL's OnTrack rules require a customer to cancel their supplier contract as a condition of enrollment in the OnTrack program.

Currently, if a shopping customer becomes eligible for OnTrack and decides to enroll in OnTrack, the customer is informed that they have 15 days to contact their supplier and cancel their contract. If this does not occur, the customer’s OnTrack application is rejected.

A witness for PPL said, "However, requiring customers to cancel their supplier contracts on their own, rather than allowing the Company to return them to default service, can sometimes be a barrier to customer enrollment."

"PPL Electric would like to continue to prohibit OnTrack customers from shopping but modify its procedures so that the Company can automatically return OnTrack customers to default service upon enrollment in OnTrack," a witness for PPL said

"Additionally, the Company requests that the Commission order that suppliers are prohibited from charging early termination fees to customers who terminate their contracts to enroll in OnTrack," a witness for PPL said

Default Service Procurement & Rates

For non-hourly customers, PPL would generally rely on fixed price full requirements contracts (plus a block purchase for residential customers)

However, PPL proposes to end the use of 6-month contracts, and introduce the use of 24-month contracts

Under PPL's proposal, 80% of the residential portfolio served under full requirements contracts would be served by laddered 24-month contracts, after a transition period from the current portfolio

The 12- and 24-month contracts would be laddered in a similar manner to the current program, except the procurement dates would be held earlier (discussed further below).

More specifically, for Residential customers, DSP VI is composed primarily of a portfolio of 12- and 24- month fixed-price, full-requirements (including AECs) products procured semi-annually. There is a transition period at the start of the DSP VI period in 2025 where 6- and 12-month products are phased out and replaced with 24-month products. In the 2025 transition period, the February 2025 solicitation, for service beginning June 1, 2025, will procure 10% of the power supply under a 6-month contract, 30% under two 12-month contracts, and 20% under a 24-month contract. Next, the July 2025 solicitation for service beginning December 1, 2025, will procure 30% under two 12-month contracts, and 20% under a 24- month contract. All subsequent semi-annual solicitations will procure 10% of the power supply under a 12-month contract and 20% under a 24-month contract (power supply to meet the default service load that remains after deducting any long-term block supply products procured in the Company’s proposed long-term product RFPs).

Under the proposal, the 12- and 24- month products overlap, so at any one time 80% of the Residential full requirements supply is provided under 24-month contracts, and 20% under 12-month contracts

In addition to the full requirements contracts for residential customers, PPL Electric proposes to procure 150 MW of Long-Term Block contracts for 10-year terms. The Long-Term Block contracts will be for energy and capacity, but will not include AECs.

The proposed 150 MW in block contracts represents about 15% of residential DSP load.

Currently, as part of its residential portfolio, PPL has 100 MWs of block energy contracts under five-year terms. Specifically, the Company currently has 5-year contracts, with 50 MWs procured in the April 2021 auction, effective June 1, 2021, and the remaining 50 MW procured in the October 2021 auction, effective December 1, 2021. These contracts expire May 31, 2026, and November 30, 2026, respectively.

For Small C&I customers, DSP VI proposes to use a supply portfolio of 12- and 24-month fixed-price, full requirements power supply products procured semi-annually with a similar transition period as described above for Residential customers.

After the transition, 80% of small C&I default service would be served under laddered 24-month contracts

The procurement portfolios and procurement dates for residential and small C&I customers are linked below

Residential

Small C&I

A witness for PPL said of the change from 6-month contracts to 24-month contracts in the supply mix as follows: "the Company has observed increased volatility in the energy markets, and in turn increased volatility in PPL Electric’s PTC. Specifically, the Company experienced its Residential PTC increasing from 9.502 cents on December 1, 2021, to 14.612 cents on December 1, 2022. The 12- and 24-month contract mix is a straightforward procurement strategy similar to what peer EDCs in Pennsylvania include in their Default Service plans and is intended to achieve more price stability for customers."

The increase in block purchases for residential customers will also assist PPL in the following goal as stated by a witness: "the Company desires to provide a more stable PTC, which the Long-Term Block product will support."

PPL proposes that full requirements suppliers be responsible for AEC obligations associated with their load, a change from the current obligations under the full requirements contracts

PPL Electric proposes to enter into one or more long-term (20-year) contracts to procure up to 30,000 PA Solar AECs annually. These would be used for AEPS compliance associated with the block residential energy. PPL would still hold auctions for AECs for legacy full requirements (non-AEC) contracts

PPL proposes to move the full requirements procurement dates further away from the delivery date, as PPL cited more favorable results in earlier procurements

"The schedule proposes to hold Full Requirements solicitations in February and July of each year, as compared to the April and October solicitation periods in DSP V ... the Company has determined that auctions held in February and July tend to produce more favorable results than April and October solicitations," PPL said

Reviewing data for default service auctions, a witness for PPL said that auctions held in February had an average on-peak price of $40.04/MWh, and July auctions have an average on-peak price of $44.34/MWh. This is compared to the average on-peak price of April and October auctions being $45.24/MWh and $45.91/MWh, respectively.

DSP VI is proposed to run from June 1, 2025 through May 31, 2029

For mass market customers, changes in the PTC would continue to be every 6 months

Hourly pricing would apply to customers over 100 kW.