Maryland Bid Monitor Raises Concern on Decreased Participation in SOS RFPs

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November 1, 2010

Although the RFPs were judged to be sufficiently competitive, Boston Pacific renewed concerns about participation in the Maryland SOS auctions for residential and Type I supplies.

For the recently completed auction, approximately 3.8 MW was bid for every MW needed.  For the residential products alone the ratio was 2.6 to 1.  "These represent significant decreases from last April's bid, which saw 5.6 MW bid for every block needed overall and 5.9 MW bid for every Residential MW needed," said bid monitor Boston Pacific.

Concerns were raised over declining participation in the mass market blocks in late 2008 and early 2009, with the then-bid monitor The Liberty Consulting Group even suggesting that the Commission examine alternative procurement structures if the situation did not improve (4/27/09).  Since that time, participation had grown until this recent October auction.

"While we do not have concern about the competitiveness of prices in this particular session of the SOS RFP, this is an issue that should be monitored to assure competitive prices in future RFPs," Boston Pacific said.

Boston Pacific suggested several factors which may have affected participation in the current RFP.  

"First, there may be one-time events that meant some bidders did not bid this time around; by one-time events we mean, for example, preoccupation with or changes in ownership and strategy due to mergers and acquisitions.  Second, an increase in the number and scale of SOS-type RFPs, without a corresponding increase in the number of bidders, may mean bidders have to spread their supply across several RFPs.  Third, winning prices may be at or near a low-point so bidders see little potential for locking into a fixed price now and buying supply at lower prices later.  Fourth, the Great Recession combined with intense competition may have pushed profit margins very low, so that bidders are just less interested in bidding this time," Boston Pacific said.

In the RFP, eleven bidders participated in at least one of the product offerings, and seven bidders won some share of supply.  In the April procurement, there were 13 bidders and seven winners.

All winning prices came in below the Price Anomaly Threshold.  The PSC approved the results of the RFPs.

Though PSC Staff, as is customary in presenting auction results, as well as Baltimore Gas & Electric reported total bill impacts from the new supplies, new retail generation rates have not yet been filed, and per kilowatt-hour rates listed in a BGE news release reflect both distribution and generation.

   
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