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UI Seeking Alternate Form of LRS Pricing, Asks DPUC for Confirmation of Goal of Standard Service

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October 5, 2010

United Illuminating has implemented a change under which it will solicit an alternative, indexed pricing methodology for Last Resort Service bids, and also asked the Connecticut DPUC to confirm that the foremost goal in Standard Service procurements is a competitive price, rather than adhering to a strict laddering schedule (06-01-08RE04).

UI's filing was prompted by its dwindling default service load, and the implications of such reduced load on procurements.  UI serves less than 50% of Standard Service eligible load and about 5% of Last Resort Service eligible load.  "Smaller loads as well as the risk of migration away from, or reverse migration back to, UI could make serving this load less attractive to potential suppliers - thereby increasing the potential for higher prices and reduced participation in UI power procurements," UI said.  

UI said that it has implemented the following change to its procurement of Last Resort Service.  In addition to soliciting fixed pricing for Last Resort Service on a quarterly basis, UI is also asking Last Resort Service bidders to provide prices that are linked to the Connecticut zone Locational Marginal Price published by ISO New England.  "UI believes that this change will increase supplier interest in serving UI's LRS load.  In its RFP documents, UI has noted its preference for a fixed price but has reserved the right to select an indexed price bid, or no bid at all," UI said.

Additionally, UI asked the DPUC to adopt in an interim order UI's recommended approach in cases where there are no competitive Last Resort Service bids.  In such cases, UI said that it would establish the Last Resort Service rate for the applicable quarter in an amount that it estimates will recover the Last Resort Service costs.  A true-up to actual Last Resort Service costs would occur in the normal course during the semi-annual Generation Services Charge/Federally Mandated Congestion Charges reconciliation proceeding.

UI further sought confirmation in the interim order of the DPUC's basic goal in Standard Service procurements, which UI believes to be a competitive price, rather than ensuring various quantities needed for laddering are procured.

UI noted that bids for various tranches of Standard Service can be very close to the proxy prices established by UI and the procurement monitors, or can deviate substantially.  "When bids exceed proxy prices by a substantial amount, it is difficult to balance the laddering objectives that are embedded in current power procurement methodology with the goal of selecting only competitive bids (those within a certain range of the proxy prices)," UI said.

UI asked that the Department confirm in its interim ruling that obtaining competitive rates is the primary objective of each power procurement.  "This would be in line with UI's current process of rejecting bids that are substantially above proxy and reduce the uncertainty surrounding any future rejection by UI of all bids in the event that no competitive offers are received.  This approach could result in less laddering of tranches than is currently the case," UI said.  

UI also sought to consolidate and reduce paperwork currently required to be submitted to the DPUC in seeking approval of the results of each solicitation.

   
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