Institute of Regulatory Policy Studies, Springfield, Illinois -October 23, 2019

Susan L. Satter, Chief, Public Utilities Bureau, Office of the Illinois Attorney General Kwame Raoul

Office Phone: (312) 814-1104; Email: SSatter@atg.state.il.us

20 Years of Electric Retail Choice

The Small Customer Experience

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Where Have We Been? Where Are We Going?

•Market price reductions in 2012-2014•Comparison of ARES prices to utility default price,

or “Price-to-Compare”•Municipal Aggregation• Individual marketing and pricing• ICC Part 412•The HEAT Act

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ComEd Service Area:Retail Choice Long-Term Savings and Costs

Source: ICC ORMD Annual Report 2019 at page 32 3

Ameren Service Area:Retail Choice Long-Term Savings and Costs

Source: ICC ORMD Annual Report 2019 at page 35 4

Residential Customers Pay More For Essential Heat and Light

• The ICC Office of Retail Market Development reported:

• Customers in the ComEd territory paid $87-208 more per month on average than if they had stayed with ComEd for electric supply.

• Compared to the utility supply charge, ComEd and Ameren customers of alternative suppliers paid:

• $227.9 million more for electric supply in 2018

• $874.2 million more for electric supply since 2015

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Illinois Average Savings/Costs

Year Average Savings ComEd Ameren

or Costs/Kwh PTC PTC

Including PEA

• June 2012 - May 2013 ~ 2.3 cents 7.855 cents 5.686 cents

• June 2013 - May 2014 ~0.19 cents 5.517 cents 4.726 cents

• June 2018 -May 2019 ~1.658 cents 7.284 cents 4.906 cents

• Current PTC (October 2019) 7.224 cents 4.715 cents

SAVINGS/COSTS ARE AVERAGES: ARES OFFERS VARY WIDELY

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What happened between 2012 and 2014?

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ComEd Price-to-Compare vs PJM National Total Price

ComEd PTC PJM National Total Price

PJM National total price is a real time price, not specific to the ComEd zone, and serves all customer classes. The ComEd PTR is based on the three year ladder, specific to the ComEd service area, serves small customers only.

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Role of Municipal Aggregation• In 2011-2012 IPA Act amended to address process for local

governments to buy electricity for their residents. 20 ILCS 3855/1-92.

• To date, about 750 communities have passed opt-out aggregation.

• About 220 communities are inactive.

• Current prices versus price to compare:

PTC 4.275-4.98 cents

5.031-5.996 cents

6.009-6.99cents

7.019-7.772 cents

PTC + PEA

Ameren 4.715 56 148 129 0 0

ComEd 7.224 0 5 118 44 24

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Sample Supplier Offer - 1

ComEd PTC: 7.224 cents. Price Protect 12 and 24 include $4.95 monthly charge; All offers renew at a variable rate after term ends: “The variable price will be determined at the discretion of Spark Energy based on a variety of factors, including cost of electricity obtained, other market related factors, taxes, fees and other charges and our costs, expenses and margins or other business factors.” 9

Sample Supplier Offer - 2

ComEd RPS charge: 0.189 cents/kwh

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Supplier Price Comparisons

Spark @7.4

cents/kwh +

$4.95

Clean

Choice @

12

cents/kwh

ComEd PTC

@ 7.224

50 kwh $8.65 $6.00 $3.612

100 kwh $12.35 $12.00 $7.224

200 kwh $19.75 $24.00 $14.45

500 kwh $41.95 $60.00 $36.12

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Alternative Suppliers Target Low-Income Customers in Chicago

Chicago neighborhoods with highest rates of homes switched to alternative suppliers (percentage by ZIP code)

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Median Income in Targeted Chicago Neighborhoods

High prices are effectively transferring wealth out of the poorest areas.13

Why Do Customers Pay High Prices?

Differences between large and residential/small business customers

• Size of annual usage

• Monthly fluctuation

• Size of annual bill

• Electricity as portion of customer’s total budget

• Knowledge of energy market and pricing

• Understanding of bill components

• ARES and ARGS marketing strategies

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ARES and ARGS Marketing Strategies

•Focus on low-income areas where customers have tighter budgets and are interested in savings.• Savings claims, even when prices higher than PTC.•Automatic renewals to variable rates, with no, after

the fact, or difficult to find notice of new, higher prices.•Aggressive door-to-door sales.• Slamming – “show me your bill.”

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ICC Attention to ARES:NOI and Revisions to Part 412

• ICC NOI 2014

• ICC Docket 15-0512 to revise Part 412 initiated 9/2015

• Concluded with changes from JCAR – 10/2017, effective 4/2018

• Rules Include: Uniform Disclosure Statement § 412.115 Rate disclosure requirements § 412.165 Contract renewal requirements § 412.240 In-person, telephone, online, and direct mail marketing requirements,

§§412.120, 120, 140, 150 and 160 Training for sales agents § 412.170Dispute resolution § 412.320

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The Home Energy Affordability & Transparency (HEAT)Act

• Passed by the Illinois House and Senate in May 2019, signed in August, 2019

• Amends the Consumer Fraud Act and the Public Utilities Act

• Builds on Part 412

• Effective January 1, 2020

Applies to Gas and Electricity Providers

Low-income protections

Price to Compare Disclosure Requirements

Express consent for contract renewals

Explicit marketing limitations17

The HEAT Act Low-Income Provisions• Protects low-income consumers from higher charges for

essential heat and light by prohibiting alternative suppliers from enrolling customers who have received LIHEAP or PIPP in the last 12 months.

• Requires utilities to verify LIHEAP or PIPP participation.

• Allows alternative suppliers to seek approval from the ICC that would allow the supplier to market “savings guarantee” plans to LIHEAP/PIPP customers.

• Intended to expand the number of customers who can utilize LIHEAP and PIPP for a greater portion of their heating costs.

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The HEAT Act Price Disclosure Requirements

• Requires all alternative suppliers to report all rates charged to residential customers in the prior year.

• Requires that alternative suppliers disclose all rates available to consumers online, so customers are not limited to the rates presented by the sales agent.

• Requires that suppliers disclose the utility default price, or “price-to-compare,” in marketing materials and during telemarketing.

• Requires that utilities include the price-to-compare on all utility bills.

• The price-to-compare is a reasonable proxy for market rate.

• Including the price-to-compare on all bills educates consumers.

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The HEAT Act: Cancellation and Renewal

• Eliminates termination fees for cancellation for residential and small commercial customers.

• Requires clear and conspicuous disclosure of automatic-contract renewal provisions at the time of enrollment.

• Requires notice with side-by-side comparisons of per unit prices before and after renewal.

• Requires customer’s express consent before switching from a fixed-rate contract to a variable-rate contract.

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HEAT Marketing Provisions

• Prices, terms and conditions shall be adequately disclosed in tele-marketing, in-person, online, and written marketing.

• Suppliers must use the language of the customer being solicited.

• Suppliers may not enter multi-family dwellings without the express consent of the building management.

• Training requirements and disclosures, especially for door-to-door sales.

• Third party verification procedures.

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Conclusion• ARES and ARGS markets have grown in the last 20 years, but

savings have not been consistent.

• After the first two years, customers paid significantly more than if they bought supply from their utility.

• Low-income consumers in Chicago targeted with higher charges, transferring millions of dollars out of these communities.

• Efforts to reform the industry have been ongoing for more than 5 years.

• Hopeful that the HEAT Act and ICC Part 412 Rules will rein in worst abuses.

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Thank you.

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