Comment of the Staff of the Federal Trade Commission Before the Pennsylvania Public Utility Commission Concerning the Notice of Proposed Rulemaking Regarding Electricity Generation Customer Choice, 52 Pa. Code Chapter 54

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BEFORE THE PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Rulemaking Regarding Electricity Generation Customer Choice, 52 	L-2017-2628991
Pa. Code Chapter 54.
COMMENT OF THE STAFF OF THE FEDERAL TRADE COMMISSION
May 22, 2018
I. 	Introduction
The Pennsylvania Public Utility Commission (PUC) has issued a Notice of Proposed
Rulemaking (NOPR) titled “Rulemaking Regarding Electricity Generation Customer Choice, 52
Pa. Code Chapter 54.”1 The Federal Trade Commission (FTC) staff appreciates the opportunity
to submit this comment regarding certain competition and consumer protection issues raised by
the NOPR, as well as the variety of service choices that the NOPR would make available to
residential and small commercial customers.2
The FTC staff comment that follows generally commends the PUC for focusing on
improving customers’ ability to obtain the information they need to make fully informed
electricity service choices. This approach is particularly admirable and economically significant
because it preserves the ability of residential and small commercial customers to contract with
marketers for dynamic pricing rate plans.3 The NOPR’s proposals thus preserve an important
link between wholesale and retail electricity markets – a link severed by flat rate offers.
Preserving this link improves the efficiency and reliability of electricity service in Pennsylvania
and beyond.
1 Pennsylvania Public Utility Commission, Notice of Proposed Rulemaking, Electricity Generation Customer
Choice (Dec. 7, 2017), 48 Pa. Bulletin 1696 (Mar. 24, 2018), available at
https://www.pabulletin.com/secure/data/vol48/48-12/450 html.
2 This comment expresses the view of the FTC’s Office of the General Counsel, Office of Policy Planning, and
Bureau of Economics. The comment does not necessarily represent the views of the FTC or of any individual
Commissioner. The Commission, however, has voted to authorize the filing of this comment.
3 When we speak of “dynamic pricing” in the retail context, we mean a subset of retail variable rate plans in which
retail electricity prices vary based on changes in the wholesale costs of electricity and associated transmission
services. This term encompasses several retail variable rate alternatives, ranging from real-time dynamic pricing
that closely tracks variations in wholesale electricity prices and transmission conditions, to time-of-use prices that
typically change only once or twice on weekdays between on-peak and off-peak demand periods. Some forms of
dynamic pricing involve billing credits awarded on the basis of a customer’s reduction in electricity consumption in
periods when the power system is stressed by conditions of unusually high demand and/or unusually low supply.
When customers change their consumption in response to more accurate price signals, it helps to balance demand
and supply on the power system, thus reducing the need to use high-cost generation to achieve all of the adjustments
to fluctuations in demand. Increased retail price sensitivity to wholesale price changes can also help mitigate market
power in wholesale electricity markets.

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Over the past 25 years, the electric power industry has experienced a profound
competitive transformation. The Federal Energy Regulatory Commission (FERC) and state
regulatory authorities decided to reduce or eliminate entry barriers in parts of the industry
previously deemed “off limits” to competition – decisions that in turn have led to or facilitated
many competitive developments in formerly monopolized electricity markets. Prime examples
include independent generators; independent transmission developers; independent retail power
marketers; and small, customer-owned, on-site generators.
The retail sale of electricity is one of the stages of production in the electric power
industry in Pennsylvania that is no longer organized in the form of franchised monopoly
territories. Instead, electricity customers in Pennsylvania can choose among the offers of
multiple independent retail electricity marketers.4 In turn, these independent marketers can
either own generation facilities or contract with generators to supply the power that customers
use. This competition among marketers in Pennsylvania takes place under rules and regulations
largely determined by the PUC. The present NOPR contains proposals to update the rules and
regulations that frame retail electricity competition for residential and small commercial
electricity customers.5
The NOPR contains proposals, among others, to increase the alignment between
marketing rules in the retail electricity and retail natural gas sectors. In addition, the NOPR sets
forth revised disclosure requirements for the retail offers and contracts that marketers use in
making sales to residential and small commercial electricity customers. The proposals in the
NOPR are, at least in part, a reaction to apparent consumer confusion and discontent in the
aftermath of the stressful period of extreme cold weather in the Northeast early in 2014,
commonly known as the “Polar Vortex,” when wholesale electricity prices were unusually high.
In addition to preserving the ability of residential and small commercial customers to
choose dynamic pricing plans – which we support – the NOPR proposes various disclosures,
some of which the PUC may wish to revise in order to make them more compatible with
potential innovations in retail electricity rate offers.
The NOPR also requests comments on whether a proposed limitation on early
termination fees could result in unintended consequences. In our view, the proposed limitation
on early termination fees reduces customers’ switching costs, but may also introduce additional
risks for marketers and the generators that they own or with which they contract. One alternative
for the PUC to consider is to make switching orders (received after issuance of contract
expiration notices) effective at the end of the contract period unless the customer explicitly
indicates that the switch should take place earlier (which will result in the customer’s payment of
an early termination fee).
4 Customers may also choose to take default service or the PUC’s standard offer program, launched in 2013.
Pennsylvania PUC, “Innovation and Savings: The PUC’s Standard Offer,” available at
http://www.puc.state.pa.us/General/pdf/PAPS-Standard Offer Program.pdf.
5 The proposals set forth in the NOPR would not apply to larger commercial and industrial customers, which already
typically buy power under dynamic pricing rate plans. (See note 3 supra for further discussion of retail dynamic
pricing.)

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II. 	Interest and Experience of the FTC
The FTC is an independent agency of the United States Government responsible for
maintaining competition and safeguarding the interests of consumers. The FTC accomplishes
these goals through law enforcement, policy research, and advocacy. For example, in the field of
consumer protection, the FTC enforces (among other statutes) Section 5 of the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or practices. In its competition
mission, the FTC enforces Section 5’s prohibition of unfair methods of competition, including
anticompetitive mergers, agreements in restraint of trade, and unlawful monopolization. The
FTC may also challenge mergers and other anticompetitive conduct under provisions of the
Clayton Act. With regard to advocacy, the FTC often analyzes regulatory or legislative
proposals that may affect competition, allocative efficiency, or consumer protection. It also
engages in considerable consumer education through its Division of Consumer and Business
Education.6
The energy sector, including the electric power industry, has been an important focus of
the FTC’s merger review and other antitrust enforcement, competition advocacy, and consumer
protection efforts.7 The FTC and its staff have filed numerous comments advocating
competition and consumer protection principles with state utility commissions, state legislatures,
the Department of Energy (DOE), and the Federal Energy Regulatory Commission (FERC).8 In
particular, we have filed a number of advocacy comments concerning demand response (DR)
and dynamic pricing, as well as their interactions with retail competition.9 The FTC staff also
6 For an overview of the FTC’s education efforts, see the FTC staff’s comment to the Consumer Financial Protection
Bureau concerning “Request for Information on Effective Financial Education,” Docket No. CFPB-2012-0030
(Nov. 2, 2012), available at http://www.ftc.gov/os/2012/11/1211cfpb.pdf.
7 See, e.g., Opening Remarks of the FTC Chairman at the FTC Conference on Energy Markets in the 21 st Century:
Competition Policy in Perspective (Apr. 10, 2007), accessible at http://www.ftc.gov/news-events/events-
calendar/2007/04/energy-markets-21st-century-competition-policy-perspective. FTC merger cases involving
electric power markets have included DTE Energy/MCN Energy (2001) (consent order), accessible at
http://www.ftc.gov/enforcement/cases-and-proceedings/cases/2001/05/dte-energy-company-and-mcn-energy-group-
inc; and PacifiCorp/Peabody Holding (1998) (consent agreement), available at
http://www.ftc.gov/sites/default/files/documents/cases/1998/02/9710091.agr htm.
8 A listing, in reverse chronological order, of FTC and FTC staff competition advocacy comments to federal and
state electricity regulatory agencies is available at http://www ftc.gov/policy/advocacy/advocacy-
filings?combine=&field matter number value=&field advocacy document terms tid=5290&field date value%5
Bmin%5D%5Bdate%5D=2013-10&field date value%5Bmax%5D%5Bdate%5D=&=Apply. The FTC staff and
the staff of the Antitrust Division of the Department of Justice submitted some comments to FERC jointly.
9 For example, the FTC staff discussed electricity dynamic pricing, DR, and competition issues in its Comment
Before the District of Columbia Public Service Commission in the Matter of the Investigation into the Potomac
Electric Power Company’s Residential Air Conditioner Direct Load Control Program and the Potomac Electric
Power Company’s District of Columbia Dynamic Pricing Program Proposal, Formal Cases 1086 and 1109 (Feb. 6,
2014), available at https://www.ftc.gov/sites/default/files/documents/advocacy documents/ftc-staff-reply-
comment-district-columbia-public-service-commission-concerning-proposed-program.1086-
1109/140117dcdynamicpricing.pdf; Comment Before the Public Service Commission of the State of Delaware in
the Matter of the Adoption of Rules and Regulations To Implement the Provisions of 26 DEL. C. CH. 10 Relating to
the Creation of a Competitive Market for Electric Supply Service, PSC Regulation Docket No. 49 (Nov. 13, 2013),
available at http://www.ftc.gov/sites/default/files/documents/advocacy documents/ftc-staff-comment-public-
service-commission-state-delaware-concerning-its-proposal-revised-its-rules/131114delawareretailelectric.pdf;
Comment Before the Public Utility Commission of Texas in the Rulemaking Regarding Demand Response in the

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has issued two reports on electric power industry restructuring issues at the wholesale and retail
levels.10 In addition, the FTC staff (along with staff from FERC, the Department of Justice, the
Department of Agriculture, and the Department of Energy) contributed to the work of the
Electric Energy Market Competition Task Force, which issued a Report to Congress in the
spring of 2007.11 And in 2016, the FTC held a workshop – attended by a wide variety of
stakeholders – about the competition and consumer protection issues associated with distributed
solar generation.12
III. 	52 Pa. Code §§ 54.5(c)(3), 54.5(c)(3)(i), 54.5(c)(3)(iv) : Variable Rate Offers That
Entail Dynamic Prices
The NOPR proposes three revisions to 52 Pa. Code § 54.5(c)(3) that are applicable to
variable rate offers. We commend these provisions of the NOPR: they preserve the ability of
residential and small business customers to contract for variable pricing services from marketers
(rather than banning variable price offers), and they do so without adding potentially crippling
disclosure or notification requirements. We are particularly interested in preserving the subset of
variable price offers that entail dynamic prices – the kind of pricing that links short-term
variations in retail prices to short-term variations in wholesale market prices. We note that the
procurement of electricity at the wholesale level is typically the largest component of the cost to
supply power at the retail level.
Electric Reliability Council of Texas (ERCOT) Market, Project No. 41061 (Mar. 11, 2013), available at
http://www.ftc.gov/sites/default/files/documents/advocacy documents/ftc-staff-comment-public-utility-commission-
texas-concerning-rulemaking-regarding-demand-response/1303texaspuccomment.pdf; Comment Before the New
York State Public Service Commission in the Proceeding To Assess Certain Aspects of the Residential and Small
Non-residential Retail Energy Markets in New York State, Cases 12-M-0476, 98-M-1343, and 06-M-0647 (Jan. 24,
2013), available at http://www.ftc.gov/sites/default/files/documents/advocacy documents/ftc-staff-comment-state-
new-york-public-service-commission-ny-psc-concerning-ny-pscs-review/130125nypsccomment.pdf; Comment
Before the Federal Energy Regulatory Commission in the Matter of Demand Response Compensation in Wholesale
Energy Markets, Docket No. RM10-17-000 (Oct. 13, 2010), available at
http://www.ftc.gov/sites/default/files/documents/advocacy documents/ftc-comment-federal-energy-regulatory-
commission-concerning-demand-response-compensation-organized rm10-17-000/1010wholesaleenegrymarkets.pdf;
Comment Before the Federal Energy Regulatory Commission in the Matter of Discussion Draft of Possible
Elements of a National Action Plan on Demand Response, Docket No. AD09-10-000 (Dec. 11, 2009), available at
http://www.ftc.gov/sites/default/files/documents/advocacy documents/federal-trade-commission-comment-federal-
energy-regulatory-commission-concerning-possible-elements/v100002ferc.pdf.
10 FTC Staff Report, Competition and Consumer Protection Perspectives on Electric Power Regulatory Reform:
Focus on Retail Competition (Sept. 2001), available at http://www ftc.gov/reports/competition-consumer-
protection-perspectives-electric-power-regulatory-reform-focus-retail; FTC Staff Report, Competition and
Consumer Protection Perspective on Electric Power Regulatory Reform (July 2000), available at
http://www.ftc.gov/reports/competition-consumer-protection-perspectives-electric-power-regulatory-reform
(containing edited compendium of excerpts from previous comments that the FTC and its staff provided to various
state and federal agencies).
11 That report is available at http://www.ferc.gov/legal/fed-sta/ene-pol-act/epact-final-rpt.pdf.
12 Something New Under the Sun: Competition & Consumer Protection Issues in Solar Energy,
https://www.ftc.gov/news-events/events-calendar/2016/06/something-new-under-sun-competition-consumer-
protection-issues.

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As we have noted in submissions to FERC and to a number of state electricity regulatory
authorities,13 one of the most significant technological developments in the electricity industry
over the past 25 years has been the wide deployment of smart meters that measure and report
power use in small time intervals and that also can communicate price and power system status
information to customers.14 Plans that use dynamic pricing – offered by retail electricity
marketers – can present many benefits to power customers, including enabling them to better
match their preferences for bill savings and increasing power system reliability. For example,
under dynamic pricing, customers have an economic incentive to lower their electricity bills by
shifting power use away from periods when the power system depends on more costly generation
resources or faces challenges to its reliability.
When technological developments and economically appropriate dynamic pricing
incentives are adopted, customers are in a position to help address the challenges of balancing
supply and demand in the power industry, either locally or on a wider geographic scale. When
customers are compensated for providing this help, the response is often substantial.15
Customer responses to higher power prices (or equivalent credits for reducing power use) can be
automated through equipment that cuts back or delays power use at pre-set price points or credit
levels.16 Alternatively, customers can manually adjust their air conditioners or other heavy
power uses when meters (or other communication sources) alert them either that prices are going
up or that they can earn credits for reducing power consumption.
Customer responses to retail price signals that accurately reflect wholesale market
conditions reduce system costs, support reliability, and provide environmental benefits.17 For
example, a DR program that entails reduction of power use during periods of high wholesale
prices can reduce overall system costs by utilizing lower-cost generation units and reducing the
13 Supra note 8.
14 Other important developments in the industry have included (1) a trend toward smaller, highly efficient generation
units; (2) the increased use of wind, solar, biofuel, and geothermal renewable energy sources for generation (some at
the utility level and some on the customer’s side of the meter); (3) the automation of generator dispatch and of
transmission and distribution operations; and (4) advances in energy storage technology.
15 For a bibliography of papers on DR prepared by Brattle Group, see Toni Enright and Ahmad Faruqui, “A
Bibliography on Dynamic Pricing and Time-of-Use Rates, Version 2.0” (Jan 1, 2013), accessible at
http://papers.ssrn.com/sol3/papers.cfm?abstract id=2178674. Dr. Faruqui (along with colleagues Sanem Sergici
and Eric Shultz) summarized several reviews of DR projects in “Consistency of Results in Dynamic Pricing
Experiments – Toward a Meta Analysis” (Jan. 29, 2013), available at
http://www.brattle.com/system/publications/pdfs/000/004/400/original/Consistency of Results in Dynamic Pricin
g Experiments Faruqui et al DistribuTECH 012913.pdf?1378772104.
16 Robert Letzler, “Using Incentive Preserving Rebates to Increase Acceptance of Critical Peak Electricity Pricing,”
Univ. of Cal. Energy Inst. Working Paper 162R (rev’d May 31, 2010), available at
http://www.ucei.berkeley.edu/PDF/csemwp162r.pdf; see also Baltimore Gas & Elec., “MADRI: All About Peak-
Time Rebates” (Feb. 2, 2012) (presentation to the Mid-Atlantic Distributed Resources Initiative Working Group),
available at http://sites.energetics.com/MADRI/pdfs/Hindes MADRI Feb 2 2012.pdf.
17 See, e.g., Charles J. Black, “Dynamic Pricing Evaluation for Washington” (Jan. 2011), available at
http://www.naruc.org/Publications/SERCAT Washington 2010.pdf; Ahmad Faruqui, “The Case for Dynamic
Pricing” (Aug. 23, 2010), available at
http://www.brattle.com/system/publications/pdfs/000/004/517/original/The Case for Dynamic Pricing Faruqui S
G Latin America Aug 23 2010.pdf?1378772111.

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need for high-cost peaking generators to meet demand spikes. It can support reliability by
cutting power consumption when the system is at greatest risk of blackouts or is recovering from
a service interruption. It can provide environmental benefits by facilitating integration of
renewable energy sources and by avoiding the use of older, higher-cost generators with higher
pollutant emissions that operate during peak demand periods. This DR process is a critical
justification for grid modernization, including smart meters and other smart grid technologies.
Some recent developments appear to underscore the importance of gaining customer
assistance in balancing the power system. Electric vehicles (EVs) illustrate this point well.18
Recharging EVs off peak (overnight) helps flatten load profiles (reduce peaks and fill troughs in
consumption), so that the fixed costs of more fully utilized generation and distribution assets are
spread over more power volume, allowing a lower per-kilowatt unit rate. Conversely, recharging
EVs during peak demand periods could cause significant demand increases during the most
costly time of day for power generation and could stress the grid, to the detriment of reliability.
These harmful effects could occur either on a local distribution line or over a larger area.
Consequently, all consumers benefit if EV owners respond to incentives to avoid recharging their
EVs during peak demand periods for the grid, even if that is not always convenient for EV
owners. Both EV owners and electricity customers in general could obtain even more benefits if
EV owners scheduled their vehicle charging to coincide with abundant supply and uncongested
transmission conditions. For example, an EV owner could set the recharging equipment to draw
power only (or primarily) when the price net of credits is below a specified level.
Another reason for the PUC to be particularly attentive to preserving opportunities for
innovative dynamic prices is that, under flat-rate electricity pricing, contracts likely entail
considerable additional costs to society and higher electricity bills for customers. Flat-rate
electricity pricing at the retail level – in the face of volatile generation and transmission prices at
the wholesale level – severs the link between the cost of power generation and the consumption
of power. Without price signals that reflect the cost of consumption to the power system, retail
electric power customers can make consumption decisions that result in inefficiencies in the
power system, to the detriment of all electricity consumers.
Further, flat rates distort incentives to invest in methods to improve energy efficiency or
in devices to shift consumption to off-peak periods (when system costs and wholesale electricity
prices are lower). As with any market, pricing electricity closer to the marginal cost of supply
improves the overall efficiency of the consumption of the good and reduces deadweight losses.19
18 See, e.g., Ahmad Faruqui, Ryan Hledik, Armando Levy, and Alan Madian, Brattle Group Discussion Paper, “Will
Smart Prices Induce Smart Charging of Electric Vehicles?” (July 2011), accessible at
http://papers.ssrn.com/sol3/papers.cfm?abstract id=1915658.
19 For further discussion of opportunities to improve the performance of the electricity sector, see Executive Office
of the President, National Science and Technology Council, A Policy Framework for the 21st Century Grid:
Enabling Our Secure Energy Future, esp. § 4.2 (Demand Management) (June 13, 2011), available at
http://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/nstc-smart-grid-june2011.pdf. (In “Key Action 5,”
this report (at 31) states: “Federal, state, and local officials should strive to reduce the generation costs associated
with providing power to consumers or wholesale providers during periods of peak demand and encourage
participation in demand management programs. Innovative rate designs will be more feasible as smart grid
technologies become more widely available.”) See also Paul L. Joskow and Catherine D. Wolfram, “Dynamic

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When a customer with distributed generation (DG) facilities (e.g., rooftop solar panels) faces flat
rates, the rates discourage investment in energy storage devices that could help balance supply
and demand, especially when the power system is under stress and close to shedding load or
allowing a voltage sag in order to prevent a larger blackout.20
For the above reasons, the NOPR’s approach that allows variable (dynamic) pricing
options for residential and small commercial and industrial customers is beneficial not only to
customers that select such options but also to the whole electric system.
We agree that customers should be informed about how and when they will be notified
about price changes for variable price offers. We suggest adding a provision under which sellers
can refer customers to publicly available indices of electricity prices if such indices are key
factors in determining power bills. Further, we encourage the PUC to accommodate retailer
experimentation regarding variable rate plan disclosures. Such disclosures are likely to be
complicated because a customer’s expected payment depends not only on the amount of
electricity consumed during a pay period, but also on when during the day that electricity is
consumed. Moreover, an additional complication arises from the need to take into account DR
payments from the wholesale power markets or credits on power bills that are received in
exchange for reductions in power consumption during specific periods. Restrictions on
disclosures that do not permit customers to make an apples-to-apples price comparison could
harm customers by dissuading them from accepting variable price offers that increase their
ability to reduce their power bills.
IV. 	2016 Natural Gas Supplier Disclosure Regulation Revisions: Parallel Rules for
Electricity and Natural Gas Marketing
We commend the PUC for its interest in providing parallel marketing rules for both
electricity and natural gas retailers. We agree that parallel rules are likely to lessen the confusion
that dissimilar rules can create for consumers, particularly those who buy electricity and natural
gas from different entities. From a competition policy perspective, parallel marketing rules are
highly appropriate for end uses in which electricity and natural gas compete head-to-head.21
Pricing of Electricity” (Jan. 2012), available at
http://faculty.haas.berkeley.edu/wolfram/Papers/AEA%20DYNAMIC%20PRICING.pdf.
20 For example, wind DG units generally produce power most abundantly during off-peak, windier hours. If retail
prices are flat, there is less incentive for a wind DG owner to store power produced in the off-peak hours (in order to
sell it during peak hours) than there would be if peak-hour prices considerably exceeded – and prices in off-peak
hours were less than – flat-rate prices.
21 The PUC may wish to be prepared to devote additional attention to maintaining a level playing field for direct
competition between electricity and natural gas in various end uses. Parallel marketing rules can be a major step in
that direction. We note that the Regulatory Assistance Project (RAP) and others have indicated that “beneficial
electrification” will be a major theme of research and policy initiatives in the near future, albeit with an initial focus
on the transportation sector. See Ken Colburn & Richard Sedano, RAP, “Utilities Can Get a ‘LEG’ Up with
Beneficial Electrification – But Regulators Also Have to be Ready” (Feb. 9, 2017),
http://www.raponline.org/blog/utilities-can-get-a-leg-up-with-beneficial-electrification-but-regulators-also-have-to-
be-ready/, as well as the November 2017 edition of Public Utilities Fortnightly 2.0.
Efficient electrification (the same concept as “beneficial electrification”) involves identifying energy end uses,
analyzing the efficiency of alternatives, and promoting switching to the more efficient energy source. Initial

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Parallel marketing rules for both industries maximize opportunities for effective competition
between electricity and natural gas.22 Parallel rules also would increase chances for additional
end-use competition between electricity and natural gas in the future. Fostering parallel
marketing rules for retail electric and natural gas sectors is particularly timely in view of ongoing
direct competition between electricity and natural gas for some end uses and increased national
interest in efficient electrification.
We agree that sellers of both natural gas and electricity should identify introductory
prices and distinguish introductory prices from subsequent prices. As discussed in Section VIII
below, we encourage the PUC to make sure that sellers can disclose truthful information about
other aspects of price or service offers in an informative manner.
V. 	52 Pa. Code § 54.3. Standards and Pricing Practices for Retail Electricity
Service: Early Termination Fees for Residential and Small Commercial
Customers
The NOPR proposes to eliminate early termination fees once the marketer has sent the
contract expiration notice required by 52 Pa. Code § 54.3(2). The NOPR describes the benefits
of this proposal (in the form of less confusion and less frustration) to customers who wish to
switch suppliers and seeks comments on the proposed rule’s possible unintended consequences.
The proposal aims to reduce switching costs for customers, with the intended
consequence of increasing competition among marketers. One potential unintended consequence
of reducing switching costs is that marketers might increase the minimum duration of customer
contracts.
The PUC may wish to engage marketers in a discussion of whether these and other
potential costs associated with the proposal are likely to occur, and then weigh the benefits
against the costs in reaching a determination on this element of the NOPR.
One alternative would be to keep the early termination fees in place but allow switching
orders received during the post-notification period to take effect automatically at the end of the
contract period, unless the customer indicates specifically that he or she is willing to pay the
early termination fee in order to switch before the end of the current contract. This approach
would avoid both the increased risk for marketers and generators and the customer frustration
associated with incurring an unexpected early termination fee.
attention has been on efficient electrification in the transportation sector, but interest is also developing in the
heating of buildings as well as the heating of air, liquids, or solids involved in commercial and industrial processes
in which electricity is more likely to compete with direct use of natural gas. In some areas of the United States,
natural gas is used heavily to generate electricity. In those areas, efficient electrification may result in complex
iterative adjustments between electricity and natural gas supplies.
22 Emerging and increasing competition between electricity and natural gas for specific end uses could increase
concern about potential anticompetitive effects of mergers between electricity and natural gas utilities, as discussed
in the FTC’s DTE Energy/MCN Energy consent order (2001), cited in note 7, supra. Similar concerns could arise in
the case of a proposed merger between large retail energy marketers that both focus on end-use competition between
natural gas and electricity.

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Finally, customers should be informed if a retail electricity contract is assignable, and
should be further apprised when a contract is assigned to another retailer. Even if the contract
terms remain the same, the PUC may wish to consider mandating an opt-out provision (without
early termination penalties) if the customer is dissatisfied with the new supplier.23
VI. 	52 Pa. Code § 54.5(c)(2): Introductory Pricing Discounts and Premiums
The NOPR appropriately contains provisions requiring retailers to make clear whether
introductory rates are lower than the rates that will apply after the introductory period. We agree
that disclosures about temporary price discounts are important for customers in retail electricity
markets (and other energy markets) to make fully informed decisions. Developing accurate and
clear price comparisons may be an important step to support customization of retail electricity
offers and to support competition based on such customization. Customization can benefit
customers by better matching their preferences to available offers.
We are concerned, however, that the NOPR may focus too narrowly on problems with
initial price discounting (for making apple-to-apples price comparisons among offers). 	This
concern arises because innovations in retail electricity marketing are increasingly likely to
involve bundling of price and non-price elements, where the non-price elements also provide
value to customers. The challenge for marketers is to develop a reasonable and truthful way to
include the value of non-price elements in making price comparisons. A key example is when a
marketer’s electricity contract offer bundles electricity supply with a physical device that can
help reduce the customer’s power use and power bills. For instance, some marketers are
providing advanced thermostats or smart appliance devices to customers who sign supply
contracts.24 Energy management devices, for example, not only have a purchase price or a rental
price value but also present a means to provide bill savings to customers by helping them to
reduce electricity use or – in the case of dynamic (variable) pricing plans – to shift their
electricity consumption to low-price periods.25 In other instances, the contract may bundle
23 Such an opt-out provision could be conditioned on the PUC’s or the customer’s identification of some material
source of potential dissatisfaction associated with the assignment. Examples of justified objections could include:
that the new supplier has a substantially inferior customer satisfaction rating; that the new supplier’s generation mix
differs greatly from that of the original supplier; and that the new supplier has a substantially inferior financial
position that increases the risk (compared to the original supplier) that it will default on the contract.
24 “Direct Energy to Launch New Smart Home Bundles Energy Plans, Retail Energy X (Sept. 19, 2017), available at
http://www.retailenergyx.com/sy.cfm/3312/Direct-Energy-To-Launch-New-Smart-Home-Bundle-Energy-Plans;
Paul Ring, “Direct Energy Launches Energy Offers Bundles with Own Brand (Hive) Smart Thermostats in Texas,
Five Other States,” Energy Choice Matters (Apr. 13, 2017), available at
http://www.energychoicematters.com/stories/20170413b.html; Katherine Tweed, “Comcast and NRG Launch
Electricity Bundle in Pennsylvania,” GTM (Mar. 11, 2014), available at
https://www.greentechmedia.com/articles/read/comcast-and-energy-plus-launch-electricity-bundle-in-
pa#gs.rayuyWg.
25 In some cases, energy conservation or load shifting may reduce an electricity customer’s bill by more than
lowering the per-unit price. In order to fully inform a customer comparing two such different offers from marketers,
it may be necessary to develop a price-equivalent value for non-price devices or services that are bundled in retail
electricity offers. The PUC may wish to consult with marketers for suggestions about how to reasonably design
such comparisons.

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electricity supply with unrelated services, such as gift cards or entertainment discounts that the
customer receives at some point after the supply contract is signed.26 We encourage the PUC to
allow marketers to explore how best to incorporate the value of bundled goods or services for
purposes of developing accurate and clear apples-to-apples price comparisons. A policy that
requires marketers to value these bundled goods or services at zero does not allow for an apples-
to-apples comparison.27
VII. 	52 Pa. Code § 54.5(c)(4): Marketing/Sales Activities: Treatment of Non-
Volumetric Charges
The NOPR points out that few offers from electricity marketers today involve explicit
block rates under which the price changes based on the level of consumption. To adjust for the
diminishing role of block rates in how offers are now framed, the NOPR proposes to allow any
offers without volume discounts or penalties to omit bill comparisons covering a variety of
consumption levels. At the same time, the NOPR’s discussion of 52 Pa. Code § 54.5(c)(11)
cautions that an apples-to-apples price comparison requires a disclosure of all fees.
We agree with the NOPR’s proposal to require offers that include non-volumetric charges
to continue to disclose the total billing amounts corresponding to different consumption levels.
The reason is that the effect of these non-volumetric fees on prices is akin to the impact of block
rates. To help ensure that customers understand the implications of non-volumetric charges, an
additional or alternative approach could be to classify offers that include non-volumetric charges
as variable rate plans, in which the average net per-unit price varies based on the level of
consumption.
VIII. 	52 Pa. Code § 54.5(c)(11): General Commentary on Minimum Disclosures v.
Restrictions on Disclosures
To the extent that customers depend on disclosures governed by the PUC’s marketing
rules, it is important for marketers to be allowed to explain their offers with sufficient detail to
alert customers to the salient features of the offers. Limitations on truthful disclosures run the
risk of cutting off information that customers need in order to make fully informed decisions.
For this reason, we encourage the PUC to continue framing its disclosure requirements as
minimum disclosure requirements, rather than as rules that limit truthful disclosures to specific
categories that may not be sufficient to describe some offers. Although the requirements in the
26 An additional complication for price comparisons can arise if equipment is lent or leased to (rather than purchased
by) the customer. The customer buys equipment, issues may include the point during the contract at which
ownership transfers; allocating the benefits of receiving durable equipment when some of the benefits may occur
after termination of the contract; and adjusting the value of the equipment based on how the customer uses it. In the
case of leased or rented equipment, the issues may include damage or late fees; whether the fees are based on the
degree of use of the equipment; and how equipment upgrades are handled.
27 We encourage the PUC conduct a periodic review of the rules concerning apples-to-apples comparisons among
marketers’ offers. This review could be important as additional types of offers emerge in the marketplace. It might
be challenging to devise an apples-to-apples comparison that would cover such an approach. We hope that the PUC
revises its rules to permit companies’ experimentation with such offers and the disclosures likely to persuade
customers to switch.

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NOPR are not onerous, we nevertheless encourage the PUC to continue with this generally
positive approach to additional truthful voluntary disclosures about contract offers for residential
and small commercial customers.
We note that retail marketers in other industries have introduced alternative pricing
approaches and service bundles that customers may prefer if such approaches are applied to retail
electricity sales. We encourage the PUC to facilitate truthful disclosures about such novel forms
of retail electricity offers. In general, differentiation among electricity services can help
customers better match their preferences for specific electricity services to the electricity services
that they actually receive.
IX. 	Updating Electricity Marketing Rules
We applaud the PUC’s practice of periodically updating marketing rules in both sectors
to keep pace with new products, new services, and new marketing approaches. At the same time,
changing marketing rules frequently can impose costs by creating perceptions of high regulatory
risk that could discourage entry and damp innovation. Further, it can be difficult to understand
the effects on competition and on consumers if rules change too quickly for suppliers to fully
adjust their marketing practices, procurement arrangements, and back-office operations.
On the other hand, updates to rules can have the countervailing benefit of reducing the
risk that antiquated rules will continue to impede effective competition or raise costs without
corresponding benefits. We encourage the Pennsylvania PUC to weigh these cost/benefit factors
in deciding to make specific rules changes and in determining the frequency and depth of such
reviews. Overall, we commend the PUC for its consistent focus on helping customers in both the
electricity and natural gas retail sectors to make well-informed decisions rather than imposing
particular views of what choices electricity customers should be allowed to make.
X. 	Conclusion
The FTC staff appreciates the opportunity to submit this comment. If you have any
questions or comments, please feel free to contact John H. Seesel, Office of the General Counsel,
at (202) 326-2702, or Derek Moore, Office of Policy Planning, at (202) 326-3367.