Pennsylvania public utility commission public Meeting Held July 20, 2000 Commissioners Present

PUBLIC UTILITY COMMISSION

Robert K. Bloom, Vice Chairman

Nora Mead Brownell

Aaron Wilson, Jr.

Terrance J. Fitzpatrick
Petition of Mid-Atlantic Power Supply

Association for Waiver of Certain Regulations

at 52 Pa. Code Chapters 54 and 56 Regarding Docket No.

Inclusion of Gross Receipts Tax in Electric Generating P-00991783

Supply Companies’ Prices and Notice of Change

in Terms of Service

Before us is the Petition of the Mid-Atlantic Power Supply Association (MAPSA) for a waiver of certain of our regulations at 52 Pa. Code Chapters 54 and 56 with respect to the inclusion of gross receipts tax in electric generating supply companies’ prices and notice of change in the terms of service. In seeking this relief, MAPSA proposes three different solutions, which we believe require further development before they can be considered for implementation. Therefore, we shall provide MAPSA with an opportunity to submit a supplemental filing, more fully describing these proposed solutions. Moreover, as suggested in some of the responsive pleadings, we shall convene a stakeholders’ collaborative to fashion a remedy to the problems set forth in the Petition.

On December 15, 1999, MAPSA filed its Petition seeking a waiver of certain of our regulations. MAPSA states that it is an association of power marketers and independent power producers licensed as electric generation suppliers (EGSs) under our regulations pursuant to the Electricity Generation Customer Choice and Competition Act (Competition Act). 66 Pa. C.S. §§ 2801‑2812. MAPSA further states that it is representing the position of the “Association as a whole” and that individual members may not be in agreement with all of its views. Petition, p. 2.

Specifically, MAPSA requests that we waive the following sections of our regulations with respect to its members:

 52 Pa. Code § 54.4(b)(3)(vii). Requiring customer bills to reflect taxes.

 52 Pa. Code § 54.4(b)(5). Stating the requirements of section 56.15 regarding billing information shall apply to customer bills.

 52 Pa. Code § 54.5(b)(2). Requiring an EGS to provide its customers with written disclosure when it desires to change the terms of service.

 52 Pa. Code § 54.5(g). Requiring the EGS to notify customers in its disclosure statement that the customer will receive written notification in each of the three bills prior to a change in terms of service.

 52 Pa. Code § 56.15(4). Requires bills for metered residential utility service to set forth the amount of taxes included in the bill including a state tax adjustment surcharge, if applicable, and the state gross receipts tax.

MAPSA states that our regulations¹ require that EGS bills must contain a statement that Pennsylvania Gross Receipts Tax is included in the bill. Petition, p. 2. It argues that as long as EGS prices and EDC shopping credits reflect the same rate contained in Section 1101 of the Tax Reform Act, the uniform basis for price comparison requirement of the Competition Act (66 Pa. C.S. § 2807(d)(2)) is satisfied. The association asserts that changes in the GRT pursuant to the Revenue Neutral Reconciliation (RNR) provisions of the Competition Act (66 Pa. C.S. § 2810), combined with our regulations, allow EDCs to collect RNR increases through a separately listed State Tax Adjustment Surcharge (STAS) while EGSs must include such tax changes in their prices.

Moreover, MAPSA notes that a number of EDCs had requests pending at the time this Petition was filed to defer collections of the current RNR increase to a future STAS filing or to collect the increase through the Competitive Transition Charge (CTC). Petition, p. 3. Thus, posits MAPSA, electricity users cannot make an apples-to-apples comparison of electric rates when shopping for energy. The association goes on to argue that it believes we cannot legally approve any EDC request to collect its increased RNR tax liability in a STAS when the EGS companies must include the increased RNR tax liability within their price for electricity. Petition, pp. 3-4. MAPSA also argues that it is inappropriate for an EDC to collect a tax increase through its CTC.

In order to remedy this problem, MAPSA suggests that we adopt a single mechanism which both EDC and EGS companies could use to collect increases in taxes. Petition, pp. 4-5. MAPSA lists three possible solutions to the problem:

1. Remove the GRT from EDC prices to compare and from EGS prices.
2. Allow both EDC and EGS companies to collect the difference in GRT through a STAS or similar line item while maintaining the statutory 4.4 percent GRT in EDC shopping credits and EGS prices.
3. Permit EGS companies to list whatever amount the applicable GRT is in excess of that included in EDC’s shopping credit as a separate line item. Petition, p. 5.
Finally, MAPSA argues that EGS companies should be permitted to change the required GRT amount in prices or in a separate line item without providing three advance notifications to customers and to modify their disclosure statements accordingly. Id.

C. Positions of the Parties

OCA contends that there may be two possible solutions. First, the EDC could be put on the same footing as an EGS today by not allowing either to apply either a positive or negative STAS to the price to compare or to the published pricing offer. OCA Answer, pp. 2-3. The tax rate reflected in the price to compare would remain at the level it had when the EDC’s rate was capped on January 1, 1997. OCA submits that the tax would then become a cost of doing business for the EDC just as it is now for the EGS.

In OCA’s second scenario, each billing entity would “apply the EDC’s STAS charge to every bill and all charges on the bill, whether regulated or competitive.” OCA Answer, p. 3. The party which bills the customer then remits the charges to the appropriate party as adjusted for taxes. Price comparisons would still be done on the basis of shopping credits which would include the tax rate that was in effect when the rates were capped. The STAS would then be applied to all bills and to all bill elements equally by the billing entity. OCA notes, however, that this method could result in increases above the rate cap if it is necessary for the STAS to exceed zero. Id. Again, OCA states that, in order for the comparisons to be uniform, the STAS must equally if the tax rate decreases.

Finally, OCA suggests that we establish a rulemaking, generic proceeding, or a working group to address the issue of price comparisons.

The Industrial Energy Consumers of Pennsylvania (IECPA) filed a petition to intervene in this proceeding. IECPA states that it is a 42-member association of energy-intensive industrial customers of electricity and natural gas. IECPA sets forth the basis for its intervention and it discusses the Petition. Although IECPA does not expressly ask us to deny the Petition, it argues that the Competition Act does not contemplate EGSs having a regulatory mechanism for automatic recovery of GRT increases as MAPSA requests. IECPA Intervention, p. 4. It states that allowing EGSs to flow their tax liabilities directly to their customers is a “large step backwards” from a competitive market. Id. Moreover, allowing EGS companies to recover their tax liabilities from the customers will increase the need for Commission oversight of EGSs which will constitute a heavy administrative burden on the PUC and is contrary to the intent of Competition Act, IECPA argues.

PP&L, Inc. (PP&L), a Pennsylvania EDC, has filed two pleadings with respect to MAPSA’s Petition. The first is a Motion for a More Specific Pleading by MAPSA, or in the Alternative, to Dismiss the Petition (PP&L Motion). The second pleading is PP&L’s Answer to MAPSA’s Petition (PP&L Answer).

PP&L challenges MAPSA’s standing to file its Petition before the PUC. In its Motion, PP&L avers that MAPSA is neither a licensed EGS in Pennsylvania nor a customer of PP&L. PP&L Motion, p. 2. PP&L states that MAPSA has not alleged any interest of its own in its Petition, but rather it seeks standing as a representative capacity for its members. PP&L Motion, pp. 2-3. According to PP&L, MAPSA must explain the basis of its standing by identify its members and showing that those members will suffer immediate or threatened harm as a result of the subject proceeding. PP&L Motion, pp. 6-8.

In its Answer to the Petition, PP&L makes a similar argument to the effect that MAPSA has not established its standing to file its Petition. PP&L disputes a number of conclusions of law made by MAPSA as well as certain statements of fact, particularly with respect to a filing PP&L made in December 1999 at Docket No. P-00991780. PP&L states that it sought to defer for future recovery a portion of its RNR rates increase through an offsetting reduction in its CTC charges. Its proposal was subsequently approved by the Commission. It believes the Commission’s action was supported by law and our regulations and that the subsequent Order and Secretarial Letter were lawful. Finally, it is worthy of note to recognize that PP&L does state that it would not object to our instituting a STAS-like mechanism for EGSs which would identify separately the portion of the EGS price for electricity generation provides for recovery of changes in state tax liabilities resulting from the RNR, new state taxes or changes in state tax rates. PP&L Answer, pp. 5-6. PP&L’s support, however, is conditioned upon this mechanism reflecting both positive and negative changes in the state taxes.

As a preliminary matter, we shall first address the matter of standing. We do not agree with PP&L that MAPSA has made an insufficient showing of its standing. MAPSA has appeared before us many times in the past. As a trade association representing licensed EGSs, MAPSA has established the interest of its members in the operation of the price to compare in the retail market for electricity in Pennsylvania. Moreover, as a representative of participants in the competitive market electricity, we value the opinions and comments MAPSA has to offer. Recognizing MAPSA’s standing is no different than our recognition of trade associations which represent utilities subject to our jurisdiction. Therefore, we shall deny PP&L’s motion.

With regard to the merits of the Petition itself, we shall defer action for a brief time and adopt OCA’s suggestion that we convene a working group to try to seek a solution to the problem set forth by MAPSA. It is apparent from the answers to the Petition that, although most parties may disagree as to a remedy, most do agree that there is disparity in the price comparison process which could mislead electric customers.

We would prefer to see a collaborative group develop a workable means by which customers will be able to make meaningful price comparisons. To this end, we believe it would be helpful if MAPSA would elaborate on how its three suggestions would work and what the effect of each would be on EGS companies, EDCs and the customers of each. We, therefore, direct MAPSA to file this information in this docket within 14 calendar days of the date on which this order is entered.

As noted above, this collaborative is to be a brief process. We shall direct the Law Bureau to convene a working group of interested parties to attempt to fashion a remedy. The Law Bureau shall be assisted in this process by representatives of the Bureau of Fixed Utility Services and the Bureau of Consumer Services. If a consensus position is achieved, the staff shall forward a draft order for our consideration addressing that solution. If no consensus is possible, we shall act upon the Petition based upon the information in the record. In either event, we intend to act upon the consensus or the Petition at our Public Meeting on September 28, 2000.

THEREFORE, IT IS ORDERED:

1. That the Mid-Atlantic Power Supply Association is directed to file, within 14 calendar days of the date this Order is entered, a more definitive statement of its proposed remedy as described within this Order.

BY THE COMMISSION,

James J. McNulty