Jilted PNE Customers Could Get A $9.50 Consolation Check

Mar 27, 2013

Power New England, the electricity supplier that was kicked out of the regional market for not 

Credit ax2groin / Flickr Creative Commons

  paying its bills, has proposed a settlement with regulators. The company has agreed to reimburse customers for the confusion its hasty exit from the market caused. The settlement proposes cutting $9.50 checks  to the roughly 7,300 former PNE customers who were switched to Public Service of New Hampshire. In all the payments will cost PNE around $70,000.

Apart from the checks, PNE will also be mailing out a document that the director of the consumer affairs division at the Public Utilities commission, Amanda Noonan, says would “give some sort of description of the events” that led to the sudden switch to PSNH and would “give customers a better idea of how the market works.”

What Damages?

The settlement avoided possible penalties that PNE could have been forced to pay for some of the violations that the PUC alleged to have occurred last month. The alleged violations included not giving customers sufficient notice that they would be moved to a new electric supplier, among other things.

While PNE was in danger of paying fines, during the hearing on the proposed settlement the commissioners seemed uncertain if the terms of the settlement were appropriate. Commissioner Michael Harrington suggested it was unclear if customers had actually suffered damages.  He noted that while it’s true that the customers transferred were forced to pay higher electric bills, under the state's deregulation laws “customers should be responsible for consequences of their choice, and perhaps one of the consequences is they would have to pay the default service rates” charged by PSNH.

But the Consumer Advocate, Susan Chamberlin, asserted that damage had been done. While she called the financial compensation being mailed out “de minimis”, she said “I think the real harm was the confusion” that the situation caused consumers.

“It resulted in doubt about the reliability of their electric coverage and that’s a real harm even though it can’t be quantified,” Chamberlin went on.

PSNH was also on hand to deliver a public statement about the damages it suffered, which included $40,000 worth of extra administrative costs from transferring the approximately 8,500 

"I think the real harm was the confusion" caused to consumers

  customers to a new supplier. The statement from PSNH’s legal counsel also noted that PNE had “cast blame for their predicament and the impact to customers on PSNH” in filings and in the media.

“Down to the Penny”

Power New England found itself in this situation after being booted out of the electric market for not having enough cash on hand to pay for rising power bills. Those rising bills were caused by a pinched supply of natural gas. As the mercury drops, homes crank up their thermostats, which draws gas, but also power plants are firing up to produce more electricity, since some people heat with electricity. Currently there isn’t enough gas pipeline coming into New England to satisfy all of the demand on cold winter days, so restricted supply caused dramatic price spikes.

Before they ran out of money, PNE did try to switch their customers to another provider, Fairpoint, but the transfer didn’t go through for all 8,500 PNE customers. When the New England Independent System Operator (ISO-NE) – which operates the region’s grid – ejected them from the market, the 7,300 customer who hadn’t yet been switched to Fairpoint were moved to PSNH. This meant they were paying somewhere in the neighborhood of $10 a month more for electricity, since PSNH charges a higher rate.

But PNE and its associated broker Resident power – which “aggregates” customers for PNE – hope to make a come-back as power sellers. Bart Fromuth, the son of PNE’s owner and manager Resident Power says the troubled companies hope to be back on their feet soon.

“PNE has cured it’s financial default with the ISO, down to the penny,” says Fromuth, “So as long as the agreement is approved by the commissioners and the administrative issues are handled at ISO New England, PNE could be back up and running by mid to late next week.”

The Public Utilities Commision, which regulates New Hampshire electric providers, still has to approve the settlement. And PNE could face further action from PSNH, which says the whole affair cost it $40,000 dollars in administrative costs.

Learning Experience

The whole situation raises questions for the PUC about how well its rules are protecting the interests of consumers in the competitive market. Chamberlin – the consumer advocate – made sure to note that no customers lost power for even a minute, proving that rules are working on the most basic level.

But even so, the Amanda Noonan with the consumer affairs division says when the PUC developed the rules there was not residential market for competitive electricity. “We were developing rules based on how we thought a market was going to work,” she says, “and now we know how a market’s going to work and so we need to go back and tweak those rules.”

The experience was also likely a heads up for many power suppliers as well. The restricted supply of gas is likely to continue until 2016, when new pipelines are slated to come online. This means that while the types of dramatic price swing seen this winter are likely to continue for a few winters to come, it’s unlikely that any suppliers will be similarly caught by surprise going forward.