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In Binding Poll on PECO Default Service, PUC Rejects 12-Month Reconciliations, Modifies Recommendation on Large Customer Default Service

By: Energy Choice Matters |

The Pennsylvania PUC, in a binding poll yesterday, rejected a proposed 12-month reconciliation for default service costs at PECO, in addressing PECO’s default service plan for the period June 1, 2013 through May 31, 2015.

The binding poll will form the basis for a final written order. The specific language of what the PUC will adopt is thus not yet available, but in the poll the PUC agreed with positions of parties as stated in exceptions, or alternatively with the ALJ as set forth in the recommended decision.

Most notably, the PUC voted to accept the position of Dominion Retail, Inc. and Interstate Gas Supply, Inc. with respect to the reconciliation of default service costs.

As only reported by Matters, an ALJ had recommended the use of a 12-month reconciliation of default service costs — a departure from the current quarterly reconciliations.

Dominion Retail and Interstate Gas Supply had said in exceptions that a quarterly reconciliation presents a more market reflective price to customers, and the PUC voted to adopt quarterly reconciliations of default service costs and pricing.

The PUC adopted the ALJ’s recommendation with respect to residential, small commercial, and medium commercial customer default service procurements, but rejected the ALJ’s recommendation for large customer default service.

For residential customers, the PUC affirmed the ALJ’s recommended blend of laddered one-year and two-year full requirements products, with six-month spacing between the commencement of contract delivery periods. PECO shall cease the use of spot purchases and block energy purchases (once current contracts expire) to serve residential load.

More specifically, for residential customers, PECO is to conduct a solicitation in November 2012 for 27 tranches of full requirements contracts with terms of six, twelve, and eighteen months with delivery of the associated default service supply to commence on June 1, 2013. A second solicitation for an additional 7 tranches with a 24-month term will be conducted in January 2013. These tranches will be combined with 14 existing full requirements contracts that commence delivery under PECO’s current default service plan and continue beyond May 31, 2013.

For small commercial customers (< 100 kW) and lighting customers, the PUC approved one-year full requirements products, each laddered with six-month spacing between commencement of delivery periods. Each of the contracts for the small commercial class will be procured approximately two to four months prior to delivery of the energy, with an initial transitional procurement of six month full requirements contracts to facilitate laddering.

For medium commercial customers whose peak demand is equal to or greater than 100 kW but less than or equal to 500 kW, the PUC approved the use of six-month, fixed-price full requirements products without overlap. Each of the contracts for the medium commercial class will be procured approximately two to four months prior to delivery of the energy

However, the PUC rejected the ALJ’s recommendation to allow PECO to serve as the default supplier for large commercial and industrial customers, under which PECO would procure supplies for these customers directly from PJM.

The PUC instead adopted the position of the Retail Energy Supply Association. RESA had sought a continuation of competitive procurements, with spot pricing, to supply large customers, citing the potential for PECO to misallocate administrative costs associated with its role as the default supplier for these customers, and potential for the default service price to not properly reflect all default service costs.

The PUC affirmed the ALJ’s denial of a bypassable 5 mill/kWh adder to the Price to Compare proposed by retail suppliers, to reflect default service costs not yet unbundled from distribution rates. However, similar to the FirstEnergy EDC proceeding, Commissioner Pamela Witmer encouraged further study of this issue, in the PUC’s default service reconciliation investigation.

Regarding the retail opt-in auction proposed in the recommended decision, the PUC, again similar to the decision at the FirstEnergy EDCs, ordered instead that a 12-month retail opt-in “program” shall be offered, under which retail suppliers shall offer customers a $50 enrollment bonus, a 5% discount to the Price to Compare in effect at the time of enrollment in the opt-in program fixed for a period of four months, followed by a fixed price for the eight remaining months of the program term.

Specifics regarding customer enrollment in the program, allocation of customers to retail suppliers, and pricing for the eight-month term shall be addressed by a collaborative, which shall report to the PUC in 60 days. The PUC will review terms, conditions, and pricing of retail suppliers for the eight-month fixed price period of the program.

The PUC also adopted RESA’s position that small commercial customers (up to 25 kW) shall be eligible for the retail market enhancement programs, including the retail opt-in program.

Regarding cost recovery for retail market enhancements such as the opt-in program, the PUC delegated this issue to the working group, as Witmer said that the recommended decision’s finding that such costs should be recovered through the POR discount could act as a barrier to participation by retail suppliers.

The PUC also adopted a motion from Witmer directing that PECO develop a plan that allows its Customer Assistance Program (CAP) customers to purchase their generation supply from electric generation suppliers (EGSs) by January 1, 2014.

The PUC reversed the ALJ and denied PECO’s proposal to share the cost/benefits of managing Auction Revenue Rights with default service customers on a 50/50 basis. The PUC adopted the position of RESA that all costs/benefits of ARRs should flow to default service customers as done currently.