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Pa. PUC Approves Penn Power Default Service Plan Which Includes POR Requirement

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October 22, 2010

The Pennsylvania PUC approved, without modifications to the provisions impacting retail access, a settlement regarding default service at Penn Power which will, among other things, require Penn Power to institute a non-recourse Purchase of Receivables program (P-2010-2157862).

As only reported in Matters (7/28/10), a percentage discount would not be applied to purchased receivables; however, a charge not to exceed $0.15 would be applied per supplier bill rendered per month to recover administrative and consumer protection program costs.

The POR program would start on the earlier of June 1, 2011 or upon Commission approval of a revised supplier tariff containing the POR program.  Penn Power will only purchase receivables for service rendered on or after June 1, 2011, the start of the next default service period.

Receivables purchased by Penn Power must be associated only with basic electricity supply, which is defined to be energy (including renewable energy) and renewable energy or alternative energy credits (RECs/AECs) procured by a supplier, provided that the RECs/AECs are bundled with the associated delivered energy.  For residential customers, basic electricity supply does not include early contract cancellation fees, late fees, or security deposits imposed by a supplier

POR will be mandatory for any supplier that uses utility consolidated billing.  The settlement is not explicit as to whether suppliers may dual bill some customers in a class while using consolidated billing with POR for other customers in the same class.  Tariff language was not included as part of the settlement. A revised supplier tariff including POR is to be filed within six weeks after a final order adopting the settlement.

Penn Power will fully unbundle the uncollectible accounts expense associated with default service.  The amount that will be taken out of distribution rates will be based upon a per kWh charge of 0.047 cents per kWh for residential customers, 0.004 cents per kWh for commercial customers, and $0.00 per kWh for industrial customers.

The unbundled uncollectible accounts expense associated with default service and competitive supplier service will be recovered through the Default Service Support Rider, which will be nonbypassable and nonreconcilable.

Penn Power will offer rate ready and bill ready utility consolidated billing and dual billing capability to suppliers, as well as budget billing to customers on the POR program.

Other Retail Market Provisions
As previously reported, the settlement includes a referral-type program under which Penn Power will send letters notifying residential and small commercial customers of available supplier offers for electric generation service, with a goal of sending letters twice each calendar year.  The letters shall be sent in envelopes bearing Penn Power's name and established corporate logo, and the letter will be printed on Penn Power's letterhead.

The content of the letters will be developed and paid for by participating suppliers.  Penn Power will contribute $225,000 to cover the mailings, with costs recovered through the nonbypassable Default Service Support Rider from residential and small commercial customers.  All costs above $225,000 will be paid by the participating suppliers.

Penn Power will post updated lists of shopping and non-shopping customers, as well as supplier-specific "Sync Lists," on the secure portion of its supplier support web site.

Default Service Procurements
Penn Power will procure 75% of residential supplies through descending clock auctions for full requirements service.  Such auctions will be integrated into the auctions used for affiliates Met-Ed and Penelec.

The default service plan runs from June 1, 2011 through May 31, 2013.

The residential full requirements products will be a mix of 12- and 24-month contracts, procured anywhere from three to five months ahead of delivery.  Auctions will be conducted twice each year, in January and March.

For the remaining 25% of residential supply, Penn Power will conduct RFPs for block energy, balanced with PJM spot purchases and sales.  Penn Power will be responsible for capacity, ancillary services, and alternative energy credits for these blocks. Penn Power will target serving 80% of this carve-out (e.g. 20% of all residential load) through block energy products.

Commercial customer default service will be supplied exclusively through full requirements contracts, with 90% of such contracts including a fixed price.  The remaining 10% of supply will be priced at the hourly real-time zone price for the Penn Power Zone, plus an adder to cover the estimated price of capacity, renewable portfolio compliance, ancillary services, and any other products necessary for delivery of real-time supply.

Commercial full requirements contracts will be exclusively 12-months in length, and procured three to five months before delivery, in auctions held in January and March of the delivery year.

The hourly default service price for industrial customers will include the Penn Power Zone real-time hourly locational marginal price, and the auction clearing price for provision of all other products required to serve the associated load, including capacity, renewable energy credits, and ancillary services.

Winning full requirements suppliers will be responsible for alternative energy compliance except with respect to solar photovoltaic requirements.  Penn Power will conduct an RFP for solar RECs to cover compliance for both default service and competitive supply customers, with solar compliance costs recovered through a nonbypassable rider.

Full requirements suppliers will not provide Network Integration Transmission Service (NITS), which will be provided by Penn Power.

The residential class shall include all customers served under Rate Schedules RS (including the Optional Controlled Service Rider), RH (including the Water Heating Option), WH-Residential, and GS customers served under the Special Provision for Volunteer Fire Companies, Non-Profit Senior Citizen Centers, Non-Profit Rescue Squads and Non-Profit Ambulance Services.

The commercial class shall include customers served under Rate Schedules GS (excluding GS Special Rule GSDS), GS Optional Controlled Service Rider, PNP, GM (including the Optional Controlled Service Rider), PLS, SV, SVD, SM, OH (with and without cooling capabilities), and WH Non-Residential.

Residential and commercial default service rates will be a kilowatt-hour based charge, adjusted quarterly to reflect changes in the underlying weighted average cost of default service supply, taxes, and a quarterly reconciliation rate component.  The settlement eliminates current rate differentials within the respective residential and commercial classes, except for an optional residential Time Of Day option required under Act 129 (limited to 5,000 customers).

The industrial class consists of customers served under Rate Schedules GP, GT, and GS-Special Rule GSDS.

Administrative costs of default service shall be bypassable, and shall only be recovered from customers taking default service.

A nonbypassable Default Service Support Rider will recover uncollectible accounts associated with default service and POR, various Midwest ISO exit-related charges and PJM integration fees, and customer education expenses.  The only modification the PUC made to the settlement was to make recovery of the MISO/PJM exit/integration fees conditional on FERC approval of such fees.

   
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