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The Commonwealth of Massachusetts Office of the Attorney General One Ashburton Place Boston, Massachusetts 02108 (617) 727-2200 (617) 727-4765 Tty

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The Commonwealth of Massachusetts Office of the Attorney General One Ashburton Place Boston, Massachusetts 02108 (617) 727-2200 (617) 727-4765 Tty THE COMMONWEALTH OF MASSACHUSETTS OFFICE OF THE ATTORNEY GENERAL ONE ASHBURTON PLACE BOSTON, MASSACHUSETTS 02108 (617) 727-2200 (617) 727-4765 TTY www.mass.gov/ago March 8, 2019 Mark D. Marini, Secretary Department of Public Utilities One South Station, 5th Floor Boston, MA 02110 Re: Investigation by the Department of Public Utilities into Initiatives to Promote and Protect Consumer Interests in the Retail Electric Competitive Supply Market, D.P.U. 19-07 Dear Secretary Marini: On January 18, 2019, the Department of Public Utilities (the “Department”) issued an order opening an investigation into initiatives to promote and protect consumer interests in the retail electric competitive supply market (the “Order”). In its Order, the Department determined that it could potentially “improve the protections provided to residential customers” who participate in the competitive supply market by strengthening the market in three specific areas. Specifically, the Department seeks to improve the market as follows: (1) Increase customer awareness of the electric competitive supply market and the value these markets can provide, thus allowing customers to make well-informed decisions; (2) Improve the Department’s ability to oversee and investigate competitive suppliers’ marketing practices; and (3) Investigate initiatives that would improve the operational efficiency of the electric competitive supply market to optimize the value that the market provides to customers. Order, at 4–5. The Department requested stakeholder input on these issues and others, and the Office of the Attorney General (the “AGO”) submits this correspondence as its comments.1 1 Discussion by the AGO of any business practice by competitive suppliers in the context of the Department’s investigation, or the silence of the AGO as to any such practice, should not be interpreted as an admission that such practice complies with G.L. c. 93A or the regulations promulgated thereunder. 1 EXECUTIVE SUMMARY The AGO has called for an end to the individual residential electric supply market based on the findings contained in the AGO’s March 2018 report, Are Consumers Benefiting from Competition? An Analysis of the Individual Residential Electric Supply Market in Massachusetts (“Report”).2 The Report analyzed rates actually charged to individual residential consumers in Massachusetts by competitive electric suppliers and found that, between July 2015 and June 2017, those consumers paid $176.8 million more for competitive supply than they would have paid for basic service from their utilities.3 The AGO recently analyzed data for a third year, and found additional consumer losses of $76.2 million, bringing the three-year total to $253 million in losses.4 In many instances, consumer losses can be attributed to competitive electric supplier bait and switch tactics.5 Those losses have unfortunately had a particularly egregious impact on economically vulnerable consumers. The Report found that the individual residential electric supply market has a disproportionately negative effect on low-income consumers and Massachusetts’ most economically disadvantaged communities, many of which are also predominantly communities of color, and/or have a large number of residents who face language barriers. For example, low- income consumers participate in the market at twice the rate of non-low-income consumers.6 Suppliers also consistently charge low-income consumers higher rates than non-low-income consumers.7 Moreover, statistical analysis revealed findings that suggest that some suppliers specifically target low-income neighborhoods for enrollment in competitive supply.8 2 Massachusetts Attorney General’s Office, Are Consumers Benefiting from Competition? An Analysis of the Individual Residential Electric Supply Market in Massachusetts, prepared by Susan M. Baldwin (March 2018) (the “Massachusetts 2018 Report”), Attachment A. 3 Id., at viii. All references in these comments to “utilities” or “utility” in the context of Massachusetts specifically refer to electric distribution companies, or “EDCs.” 4 The AGO’s analysis of data for July 2017 – June 2018 will be produced in a forthcoming supplemental report. 5 See generally Massachusetts 2018 Report, at 39; Susan M. Baldwin and Frank A. Felder, Residential Energy Supply Market: Unmet Promises and Needed Reforms, 32 ELECTRICITY J., Apr. 2019, at 31, 32 (“Although regulatory and legislative frameworks differ from state to state, the patterns of many suppliers’ marketing practices and prices . are similar. Many consumers complain about deceptive and aggressive marketing practices and unexpected spikes in their utility bills.”). 6 All references in these comments to the “competitive supply market” or “market” specifically refer to the “individual residential electric supply market,” unless otherwise noted. 7 Id., at 18. 8 Specifically, a consumer who resides in a low-income community is more likely to participate in the competitive supply market, even if that particular consumer is not low-income herself. Id., at 33–34. For example, a low-income customer from Dorchester or Roxbury is much more likely to participate in the market as compared to a low-income customer from Beacon Hill or the Seaport. See Massachusetts 2018 Report, Figure 3.13 (displaying zip codes for Boston, Worcester, and Springfield, including: 02121 - Dorchester; 02119 - Roxbury; 02114 - Beacon Hill; and 02110 - Seaport). 2 The Report’s findings are alarming. The market is not benefiting consumers—rather, the market is harming consumers, especially those who live in vulnerable communities where the greatest losses occur. Moreover, based on the experiences of other states that have attempted to address the harm created by this market, there is no evidence that additional consumer protection measures will do anything other than mitigate the damage, as various regulatory interventions have proven unable to cure the fundamental misalignment of market incentives.9 Thus, the AGO believes the best way forward is to end the individual residential electric supply market.10 Until the Legislature passes legislation ending the individual residential electric supply in Massachusetts, the AGO will support any efforts that are likely to mitigate some of the harm it causes to Massachusetts consumers. The AGO welcomes the opportunity to work with the Department and other stakeholders to strengthen consumer protection measures in the Commonwealth’s competitive supply market. In these comments, the AGO outlines specific initiatives the Department can take to most effectively mitigate consumer harm. Accordingly, the AGO makes the following proposals for the Department’s consideration: I. The Department should update the Competitive Supply Website to provide much greater transparency in the competitive supply market, including: A. Posting a consumer advisory on the Website’s home page; B. Making historical rate information by supplier public and easily accessible to consumers; and C. Publishing complaint data by supplier. II. The Department should take a more active role as gatekeeper for the competitive supply market in Massachusetts: A. The Department should publicly and actively investigate suppliers who may be engaging in misconduct and penalize suppliers, as appropriate; B. The Department should hold public proceedings for its reviews of competitive supplier applications for new licenses and license renewals; C. The Department should require suppliers to provide detailed data regarding the types of marketing channels through which they have signed up customers because the aggregated data will likely allow the Department and other stakeholders to tailor consumer education programs and target enforcement accordingly; and 9 See Massachusetts 2018 Report, at 41 (discussing in more detail the fundamental misalignment of incentives in the individual residential electric supply market). 10 In January 2019, the Attorney General filed legislation that would prohibit suppliers from entering into contracts with individual residential electric customers after January 1, 2020. See An Act Relative to Protecting Residential Electric Customers (S. 195 and H. 311). 3 D. The Department should not expand the role of third-party verification calls, because third-party verification calls do not effectively prevent harm to consumers. III. The Department should further investigate how the competitive supply market creates inefficiencies in the low-income assistance programs, including: the low- income discount rate, the Arrearage Management Programs, and the low-income accounts protected from shut-off due to a qualifying hardship. A. The Department should determine appropriate measures to provide greater protections to low-income ratepayers in the competitive supply market; and B. The Department should not eliminate the requirement for a customer account number for enrollment purposes. Finally, the AGO provides several suggestions regarding how the Department and stakeholders can begin assessing what protections may be appropriate for small C&I customers and customers of the gas competitive supply market.11 I. THE DEPARTMENT SHOULD USE THE WEBSITE TO MAKE THE COMPETITIVE SUPPLY MARKET IN MASSACHUSETTS MORE TRANSPARENT. (Questions 1 and 4) Until the Legislature passes legislation ending the individual residential electric supply in Massachusetts, the AGO supports efforts to improve consumer education through the use of the Department’s Competitive Supply Website. However, in order to ensure the Website adequately informs
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