Cue Inigo Montoya.

A reporter for the Pittsburgh Post-Gazette has published a story stating that the FirstEnergy Pennsylvania utilities are proposing to "penalize" residential customers who do not take service from a competitive retail suppler.

The story from the Post-Gazette's Anya Litvak is referring to a $0.00144 per kWh bypassable adder for default service customers that the FirstEnergy EDCs have proposed as a retail market enhancement rate mechanism in their latest default service plan, which was exclusively first reported by EnergyChoiceMatters.com

The PG's story does note that nearly all (95%) of revenue from the adder would flow back to all distribution customers

While the EDCs do not describe the adder in the following terms and do not state that the adder is intended for such purposes specifically, retail suppliers have noted that Pennsylvania distribution rates are not fully unbundled insofar as certain overhead costs related to default service remain in distribution rates. As such, rather than being a "penalty," the adder may be seen as a proxy for costs which are solely attributable to default service customers but which are charged to all distribution customers. Rather than penalizing non-shopping customers, the adder is only reflecting (by proxy) actual cost causation, and can be seen as an attempt to correct the impact of subsidies (or the "penalty") that shopping customers currently pay to customers who receive default service from the utilities.

As noted by the Retail Energy Supply Association in 2011 comments to the PUC, "While many EDC assets, such as employees, facilities, systems and other infrastructure are used both in the provision of default service and distribution service, the EDCs have not undertaken an extensive cost unbundling review to separate these costs from regulated distribution costs and allocate these costs to default service rates. When a customer calls to inquire about his or her bill, the customer is receiving simultaneously a generation and distribution service. However, all of the costs related to the customer care function are recovered through nonbypassable distribution rates. Similarly, the EDC's general overhead expense, such as salaries, facility costs, etc., are all reflected in distribution rates ... misallocated default service costs force shopping customers to pay twice for many cost components (i.e., once to the EDC through their distribution rates and once to the EGS through their price for generation)."