Retail Competition in Illinois – A Failed Experiment? Ron Jolly, Assistant Attorney General Office of Illinois Attorney General Lisa Madigan June 5, 2017 Disclaimer – This presentation represents the views of the author and not of the Illinois Attorney General’s Office.

Customers Do Not Understand Retail Competition In the Public Act creating retail competition, the Illinois General Assembly, anticipating that customers would not understand the new electricity market paradigm, included the following provision: “The restructuring of the electricity industry will create a new electricity market with new marketers and sellers offering new goods and services, many of which the average consumer will not be able to readily evaluate. It is the intent of the General Assembly that (i) electricity consumers be provided with sufficient and reliable information so that they are able to compare and make informed selections of products and …; and (ii) mechanisms be provided to enable consumers to protect themselves from marketing practices that are unfair or abusive.” Source – 220 ILCS 5/16-117(a). NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

Many Alternative Suppliers Have Exploited Customers’ Confusion In its Order initiating a docket to consider whether retail competition for residential and small commercial customers should be discontinued, the New York PSC stated: [T]he Commission has determined that the retail markets serving mass- market customers are not providing sufficient competition or innovation to properly serve consumers. Despite efforts to realign the retail market, customer abuses and overcharging persist…. Illinois’ retail competition experience has been distressingly similar. Many alternative suppliers engage in misleading and deceptive sales practices; many of those abusive practices occur in face-to-face settings. The result of the pervasive misleading and fraudulent sales tactics used by alternative suppliers is that customers pay increased electricity costs. Source – Case 15-M-0127; Case 12-M-0476; Case 98-M-1343 (Dec. 2, 2016) http://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?MatterCaseNo=15-M-0127&submit=Search NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 Recent Experience in Illinois Shows that Alternative Suppliers Rates Are Significantly Higher Than Incumbent Utility Rates ICC prepares annual reports regarding the retail market. 2015 Report showed alternative supplier customers in ComEd service area paid $73 million in excess electricity charges from June 2014 through May 2015. 2016 Report found that alternative supplier customers in ComEd service area paid more than $115 million in excess electricity charges from June 2015 through May 2016. Alternative supplier customers in Ameren’s service area paid more than $10 million in excess electricity charges from June 2015 through May 2016. Collectively, customers paid almost $200 million in excess charges in two-year period. Source ‒ https://www.icc.illinois.gov/reports/report.aspx?rt=22 NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 Current Rate Information Shows that the Vast Majority of Alternative Supplier Rates Are Higher than Incumbent Utility Rate The ICC’s website compares utility default rates to rates alternative suppliers voluntarily provide to the Commission. An informal May 30, 2017 review of alternative supplier offers in ComEd’s service area showed that of the 61 offers that allowed for a direct comparison to ComEd’s rate, only four were lower than the default rate. 57 of the alternative supplier offers were higher than ComEd’s rate. One fixed-rate offer was 4 cents greater than the ComEd 6.318 cents/kWh default rate. Several variable rates started at more than 10 cents/kWh. Source ‒ https://www.pluginillinois.org/offers.aspx?said=1 NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 The Illinois AG Is Engaged on Several Fronts to Protect Consumers From Abusive Sales Tactics. NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 Legal Actions The Illinois AG filed a lawsuit against Palmco Power IL, LLC in March, 2017. The lawsuit alleges that Palmco’s sales practices and pricing and contract structures violate the Illinois Consumer Fraud and Deceptive Practices Act. The Illinois AG has initiated investigations of six other alternative providers. Like the Palmco lawsuit, the AG’s investigations center on whether the sales practices of the six providers violate the Consumer Fraud and Deceptive Practices Act. NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 Regulatory Actions In 2015, the Illinois Commerce Commission initiated a docket to modify the existing rules governing alternative suppliers. The ICC Staff stated that the rules require strengthening to, among other things, protect customers “from misrepresentation, abuse and fraud.” The AG fully participated in the case, recommending numerous additional disclosures to consumers and limits and conditions on alternative suppliers’ sales tactics. Last week, the ICC approved its Second Notice Order rules, which are a significant improvement over the existing rules. The rules must now be reviewed by the Illinois General Assembly’s Joint Committee on Administrative Rules. Alternative suppliers have indicated their intent to lobby lawmakers in an effort to weaken the rules. Source - https://www.icc.illinois.gov/docket/files.aspx?no=15-0512&docId=234265 Source - http://www.chicagobusiness.com/article/20170527/ISSUE01/170529906/electricity-marketers-push-back-onillinois- marketing-rules NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 Consumer Outreach In October, 2016, Illinois Attorney General Lisa Madigan convened a meeting with low-income advocates to assist them in educating their constituents about the tools necessary to ensure that they are getting the best deal on energy products. The AG also spoke about tips consumers can use to avoid fraudulent and deceptive sales techniques. AG staff have ongoing conversations and interactions with low- income advocates and with advocates for other vulnerable populations to provide consumers information about the potential perils of enrolling with alternative providers. NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017

NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017 QUESTIONS NASUCA 2017 Mid-Year Meeting Illinois Attorney General - June 5, 2017