AARP asked a Pennsylvania court to uphold the language and the intent of utility law designed to, among other things, protect against unexpected price spikes. Specifically, AARP urged a Commonwealth court to strike down a decision by the state’s Public Utility Commission (PUC). The court declined to do so.
AARP Pennsylvania advocated in the state legislature in favor of Act 129, an Act that protected utility consumers by ensuring that service providers acquire electric energy through a mix of resources designed to provide stable, reliable utility rates at the least cost to consumers over time. Among the provision of Act 129 was the requirement that, in the words of one administrative law judge, approvals by the Pa. Public Utility Commission (PUC) “[take] into account any benefits of price stability over time” and “implement energy procurement requirements designed to ensure that electricity obtained reduces the possibility of electric price instability.”
Despite this law, the PUC allowed one provider to procure 100 percent of its default service generation through hourly spot market purchases – one of the sources most subject to price volatility. The PUC declined to consider the importance of price stability and rejected a suggestion by consumer advocates that it require the Company to implement price hedge strategies to protect against energy price spikes.
Attorneys with AARP Foundation Litigation filed AARP’s friend-of-the-court brief in Popowsky v. Pa. PUC, along with the Pa. Utility Law Project (a project of the Pa. Legal Aid Network), arguing that the PUC erred in dismissing price stability as an essential component of a default service procurement portfolio, and emphasizing the importance of price stability measures to low-income households and older people living on fixed incomes. The brief argued that low income and older households live on shoestring budgets that do not have the flexibility to absorb price spikes, and noted that in Pa., a two adult/two child household requires income levels more than twice the federal poverty level to pay all essential expenses — including utility bills. Moreover, the brief pointed out, studies show that as the age of the head of the household increases, so does the energy burden, due to factors such as disability and health needs. Finally, the brief noted the dangers of failing to pay increased utility bills and consequent utility disconnection — which could trigger public health hazards if a primary heat source is removed and substituted with fires or other dangerous alternatives.
The commonwealth court declined to find the PUC in violation of Act 129, finding the Act to be ambiguous based upon the PUC’s position that the statute allows it not to use a mix of resources to obtain electricity for default service. Finding that the court must give great deference to the PUC and not reverse its decisions unless clearly erroneous, the court ruled: “While not discounting the importance of price stability, the PUC concluded that the additional benefits of a financial hedge would not be justified by the additional costs. Such a determination is within the PUC’s discretion and…is supported by substantial evidence. Therefore, it will not be disturbed by this Court.”
Two judges dissented, arguing that the PUC’s decision was at variance with Pa. law that requires the default power to include a “prudent mix” of spot market purchases and short and long term contracts. In the dissenter’s reading of the law, a “mix” precludes the PUC from using a single source for electricity.
What’s at Stake
According to the PUC, almost 15,000 households across Pa. entered the 2011 winter season without heat-related utility service. These households and other households living on the margins must often choose between rent, food, medicine, and utilities. Protecting these consumers from volatile price changes that their budgets cannot absorb can literally mean the difference between life and death. Laws designed to protect against price volatility are critical to protect these families.
Popowsky v. Pa. PUC was decided by the Commonwealth Court of Pennsylvania.