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Duke Energy Ohio Agrees to Electric POR with Zero Discount in Pending MRO Application

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February 8, 2011

Duke Energy Ohio has agreed, as part of its market rate offer (MRO) application, to institute an electric Purchase of Receivables program, should the MRO application be approved (10-2586-EL-SSO).

PUCO Staff and several other parties, however, continued to argue in post-hearing briefs that PUCO should reject the MRO application as deficient, mainly due to its use of an accelerated blending of market and electric security plan rates versus what Staff argues is required by statute. Such positions were previously reported by Matters in reporting on parties' pre-filed testimony (see 12/29).

Duke Energy Ohio's willingness to institute a non-recourse POR program with no discount is a new development, however, resulting from hearings and confirmed in briefing.

Under Duke Energy Ohio's proposal, nonbypassable Rider UE-GEN (uncollectibles expense) would recover bad debt expense associated with its default service load, as well competitive suppliers' accounts receivable. Duke Energy Ohio would purchase suppliers' accounts receivable at no discount, and render payment to such providers on the 20th day following the month in which the billing occurs.

While supported by retail suppliers, Duke Energy Ohio's POR proposal, or more specifically, the use of Rider UE-GEN (regardless of whether it includes purchased receivables or just default service uncollectibles), is opposed by Staff and Ohio Partners for Affordable Energy. Staff argues that PUCO cannot approve Rider UE-GEN through an MRO proceeding since it is not explicitly listed in statute as an adjustment allowable for MRO rates. OPAE further argued that since Rider UE-GEN reflects generation costs, it cannot be applied as a nonbypassable distribution rider.

Dominion Retail replied that, "[u]ncollectible expense is not a cost of providing generation service," and rather reflects a cost incurred due to billing, and thus is not impacted by the statutory limit on the types of adjustments allowed to generation rates under the MRO cited by Staff.

The Retail Energy Supply Association alternatively argued that because uncollectible expenses would be a cost incurred by Duke Energy Ohio, "as a result of or related to the competitive bidding process or in procuring generation service to provide the standard service offer, the Commission should recognize and approve Rider UE-GEN in this proceeding pursuant to Section 4928.142(C), Revised Code," which allows for cost recovery of all such costs incurred to provide the standard service offer.

As noted above, several parties including Staff, Industrial Energy Users-Ohio, and the Ohio Manufacturers' Association have urged PUCO to reject the entire MRO application for its failure to blend market rates over a five-year period (Duke Energy Ohio has proposed moving to market rates after two years). The Ohio Consumers' Counsel supports approval of the MRO with several modifications, including a five-year blending process, while the Ohio Energy Group urged rejection but is amenable to approval if a 5-10 year blending process is used.

In briefs, parties also continued to debate the bypassabiltiy of Rider SCR (reconciliation of actual generation costs versus revenue, which would become nonbypassable if exceeding 5% of supply costs) and Rider RECON (which would be nonbypassable and would true-up the costs and revenue for certain riders being eliminated or zeroed out under Duke Energy Ohio's market rate offer, namely, Rider PTC-FPP and Rider SRA-SRT).

As previously reported in covering direct testimony (12/24, 12/29), Staff and retail suppliers favor making Riders SCR and RECON bypassable, since they relate to generation, but Duke Energy Ohio continues to propose that both riders be nonbypassable under the conditions described above.

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