FTC Staff Advises Delaware Public Service Commission on Dynamic Pricing in Retail Electricity Markets

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Federal Trade Commission staff submitted a response to a request from the Public Service Commission of the State of Delaware for comments on a proposal to revise its rules for certifying and regulating electricity suppliers.

The FTC staff comment encourages the Public Service Commission to consider the potential costs associated with a proposal to require electricity suppliers to give customers at least five days’ advance notice of price changes.  The comment identifies alternatives to a five-day notice period that would provide consumers with the benefits of dynamic pricing via devices such as “smart meters” while assuring they have accurate and timely electricity price information. 

The potential benefits of dynamic pricing include more accurate prices, more opportunities for customers to save on electric bills, and an increased ability for power system operators to maintain the reliability of electric service both locally and regionally. 

Although price information is critical to the efficient functioning of markets, a five-day notice requirement would preclude some of the most beneficial variable price offers, from the perspectives of both retail electricity customers and power system operators.  The comment states that “[o]ne alternative would be to include an exemption to give customers the option to use a device or service that displays the price on an ongoing basis, or issues alerts when the price is outside a range designated by the customer.  Another alternative would be simply to replace the five-calendar-day advance notice with a requirement of one day’s notice, which would be a significant improvement over five days’ notice by allowing variable retail pricing based on the PJM Interconnection’s day-ahead market prices.  If the PSC chooses to implement either of these alternatives to the five-day notice, it could also require special prominence for disclosures pertaining to price variability and early termination charges in residential retail electricity sales contracts involving variable rates.

The Commission vote approving the comment was 4-0. (FTC File No. V130011; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702.)

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