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PUCO’s “fixed-means-fixed” Order

March 11, 2016

On November 18, 2015, the Public Utilities Commission of Ohio issued its Finding and Order in Case No. 14-568-EL-COI, which held that Competitive Retail Electric Service (CRES) providers cannot include pass-through clauses in contracts labeled as “fixed-rate.” This case was triggered by FirstEnergy Solutions’ attempt in 2015 to pass through polar vortex charges pursuant to terms and conditions in fixed-rate contracts that expressly permit such a pass through. The Commission opened this docket to consider whether CRES providers can pass though similar charges in either fixed-rate contracts or variable-rate contracts that guarantee a certain percentage off the standard service offer rate.

The Commission states on page 11 of the Order that “in all CRES contracts, whether residential, commercial, or industrial, fixed should mean fixed.” On a going forward basis, the Commission held:

CRES providers may not include a pass-through clause in a contract labeled as “fixed rate.” While CRES providers may continue to offer products containing pass-through provisions, they must be labeled appropriately as variable or introductory rates. The Commission does not find that use of an alternative label would increase customer understanding.1

The Commission indicated that its ruling was on a going-forward basis and did not affect existing contracts. But it noted that a customer holding an existing contract with a pass-through clause could pursue a complaint at the Commission against the CRES provider.2

The Commission held CRES providers may continue to use regulatory-out clauses in very limited circumstances, so long as the “out” is clearly delineated in plain language.3 Specifically, the Commission stated that if a customer affirmatively consents to the new terms, the contract would remain in place with the new terms. Without affirmative consent, however, a customer is permitted out of the contract to pursue another CRES provider or the default service without being subjected to an ETF.4 If a CRES provider elects to use a regulatory-out clause, any acronyms must be defined within the contract and the clause must specify the circumstances under which it could be invoked.5

Lastly, the Commission directed Staff to draft proposed rules consistent with its findings and the definitions it analyzed in reaching its conclusions, and it found that a rule making proceeding should be commenced.6  It clarified that “CRES providers shall have until January 1, 2016, to bring all marketing for contracts being marketed into compliance with the ‘fixed-means-fixed’ guidelines set forth in this Finding.”7

However, several parties sought rehearing due to the Order containing language in need of clarification. On January 13, 2016, the Commission granted rehearing for the limited purpose of providing itself more time to consider the issues raised so that CRES providers have further clarification in complying with the November’s Order’s guidelines. A Clarifying Order is anticipated shortly.

Until the Commission provides the necessary clarification on rehearing, suppliers should operate under the following guidance:

The Order only applies to CRES and not Certified Retail Natural Gas Service (CRNGS) providers;
Contracts need to be amended to be consistent with the Order;
The Order does not affect contracts entered into before January 1, 2016. However, if a contract was marketed in a manner that implied a fixed price, then suppliers should not enforce any pass-through provision in the contracts;

 

1Order at 11-12.
2Order at 12.
3Order at 12.
4Order at 12.
5Order at 13.
6Order at 14.
7Order at 13.

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