By Keith Gushard
Meadville Tribune
MEADVILLE —
Meadville’s newly approved electricity aggregation ordinance is being challenged before the Pennsylvania Public Utility Commission by an electric supplier and a trade association.
In October, Meadville City Council approved an electricity aggregation ordinance to offer lower electric rates for residential and small business customers within the city when electric rate caps come off Jan. 1, 2011.
Meadville’s ordinance allows residential and small business customers to be bundled together and offered to an electrical generation supplier for a negotiated, cheaper rate unless the individual customer or business specifically opts out.
However, two entities — Dominion Retail, an electricity generation supplier, and Retail Energy Supply Association (RESA), a trade association representing electricity producers and suppliers — have filed separate petitions with the PUC wanting the ordinances declared illegal and void because of the opt-out provision.
No date has been set as yet for a hearing before the commission.
“It’s troubling,” Joe Chriest, Meadville’s city manager, said of the challenges that were filed. “We were blindsided by this. We don’t know where the PUC would have jurisdiction over what a municipality can provide.”
Meadville’s position is there is nothing in the state’s constitution or Pennsylvania’s Third Class City Code preventing a third-class city like Meadville from enacting such an ordinance.
“We want our residents to save money,” Chriest said.
Meadville has approximately 4,500 to 5,000 individual customers and small businesses that could be bundled together, Chriest said.
Pennsylvania Electric Co. (Penelec), which serves Meadville and other communities in Crawford County, has said it plans to raise rates 16 percent when the cap on its electric rates comes off.
Under Meadville’s ordinance, First Energy Solutions (FES) would be the electric provider in an “opt-out aggregation agreement,” meaning it will provide electricity for Meadville and its residents. Only those who actively opt out of FES won’t be included.
The agreement with FES would reduce the electric increases to residents by 6 percent for residents and 4 percent for small businesses, Chriest said. It means a 10 percent for residents and 12 percent for small businesses.
However, the city hasn’t executed the agreement with FES as yet pending what may now happen with the PUC, Chriest said.
Penelec and FES are separate companies owned by First Energy Corp. of Akron, Ohio.
Two other northwestern Pennsylvania communities, Edinboro and Warren, also have passed ordinances that name FES as the provider in “opt-out aggregation agreements.”
Dominion names Meadville’s ordinance in its petition while RESA mentions both Meadville’s and Edinboro’s ordinances, but neither petition names Warren.
Meadville’s ordinance, states the “supplier shall provide each consumer with written notice that the consumer’s account will be automatically included in the municipal aggregation program unless the consumer affirmatively opts out of the municipal aggregation program.”
The Warren and Edinboro ordinances have the same language as Meadville, according to a recent story in the Times Observer newspaper of Warren.
It’s the opt-out clause that caused the problem for RESA and Dominion.
“This provision is the crux of the illegal nature of the program,” according to Dominion’s petition against Meadville’s ordinance. “That customers are to be switched without affirmatively consenting to the switch.”
“It appears that opt-out municipal aggregation programs are prohibited by the third class city laws applicable to Meadville in particular,” the petition said. “In short, the ordinance is patently illegal and should be so declared.”
“The opt-out aggregation process appears to violate several requirements imposed by existing Public Utility Code and PUC rules and regulations,” according to RESA.
RESA’s petition also quoted from a Pennsylvania Supreme Court decision in Chester v. Philadelphia Electric Co. from 1966, saying “our Supreme Court explained that local governments cannot be allowed to establish their own regulations for electric service because such regulations ‘could become so twisted and knotted as to affect adversely the welfare of the entire state.’ ”
Dominion’s petition claims that under the ordinances, consumers who have already signed new contracts with suppliers will have their service switched to FES if they don’t take action to opt out.
The Dominion filing said “third class cities are granted the right to supply the city with electricity using their own systems... that is not the same thing as acting in concert with another proprietary business entity to provide service through the jurisdictional facilities of a regulated public utility.”
Chriest said Meadville isn’t operating a business, but just trying to save residents and small commercial customers an opportunity to enjoy negotiated savings.
“There’s no money changing hands,” Chriest said. “All we’re doing is allowing them to interact with our residents.”
Those same sentiments were echoed by Mary Ann Nau, Warren’s assistant city manager, in an interview with the Times Observer.
There is a proposed bill in the Pennsylvania House of Representatives that, if passed, would allow municipalities to be municipal aggregators on opt-in or opt-out basis.
A hearing on the bill is scheduled before the House Consumer Affairs Committee scheduled for Nov. 17 in Harrisburg.
Nau told the Times Observer she plans to represent Warren and any other communities that authorize her representation at that hearing.
Chriest said Meadville intends to ask Nau to speak on its behalf at the hearing.
Keith Gushard can be reached at 724-6370 or by e-mail at kgushard@meadvilletribune.com.
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A public hearing on a bill to allow Pennsylvania municipalities to be municipal aggregators of electric customers on opt-in or opt-out basis is scheduled before the House Consumer Affairs Committee on Nov. 17 in Harrisburg.
