SMECO Sees Staff Request as backdoor Attempt to Change SOS Procurement

April 8, 2011
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Maryland PSC Staff is "arbitrarily pushing SMECO towards an IOU pricing and procurement process" for Standard Offer Service, the Southern Maryland Electric Cooperative said in comments replying to a Staff request for hearing.

SMECO currently relies on a managed portfolio for SOS, with the retail rate consisting of a base SOS charge representing a 12 month forecast of costs, plus a monthly Purchased Power Cost Adjustment (PPCA) to reconcile any differences. SOS rates vary monthly.

In response to an earlier (since withdrawn) petition from SMECO to combine the base SOS charge with the PPCA, Staff raised several questions regarding whether a monthly variable rate remains appropriate for SMECO, and whether SMECO's SOS rate changes should be subject to hearing as done at the IOUs. Staff requested a hearing on the issues.

While Staff did not specifically address procurement, SMECO said that limiting SMECO's price changes to twice a year, similar to the IOUs, could lead to reconciliation balances which build to unacceptable levels, necessitating a change in the SOS purchasing program. The "substantial benefits" of the portfolio approach could be eliminated if monthly rate changes are not allowed, SMECO said.

Additionally, SMECO said that requiring a Commission before-the-fact review of procurements, as done with the IOU procurements, would hinder SMECO's ability to react quickly to favorable market pricing.

SMECO said that its process enables SOS prices to follow the market, smoothes large price increases or decreases, and generally prevents large over- or under-recoveries. SMECO noted that its portfolio approach is expressly authorized by legislation, and has produced favorable generation rates compared to Baltimore Gas & Electric and Pepco.

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