Deferring PECO Generation Reconciliations to Annual Recovery Could Lead to Exit Fees for Migrating Customers, Suppliers Warn

April 26, 2011
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PECO's petition to modify its generation rate reconciliation process from a quarterly to an annual process could result in large deferrals that prompt PECO to impose an "exit fee" on customers seeking competitive supply, Direct Energy and the Retail Energy Supply Association said in separate answers opposing PECO's petition (P-2008-2062739).

As only noted in Matters, PECO sought to change to an annual reconciliation of generation costs and revenues, stating that it would smooth out seasonal variations in weather and shopping that produce large swings quarter to quarter, but which tend to net out on an annual basis (4/12).

However, Direct and RESA noted that by not reconciling generation costs quarterly, "significant" under-recovered costs could be accumulated.

This is important because PECO's tariff currently allows it to impose a migration rider on customers who leave default service, which requires these migrating customers to pay any reconciliation costs relating to the time during which they were default service customers

Currently, the migration rider, although contained in PECO's tariff, is not in effect for electric service, but PECO may seek Commission approval of the rider on 15 days notice.

"If the result of holding off recovery of the reconciliation for a twelve-month period is a significant payment owed to PECO, PECO may then be incentivized to implement its tariff to impose these costs on customers leaving default service which could be viewed by the customer as an 'exit fee,'" Direct Energy said.

"The imposition of a retroactive charge on shopping customers in the form of a charge for recovery of a year's worth of reconciliations will distort and confuse customers about the consequences of their decision to leave default service," RESA added. "It will also lead to confusion in the marketplace because the bottom-line amount paid by customers will be based, at least in part, on a year's worth of reconciliation data rather than the current price of energy," RESA said.

Aside from the migration rider issue, RESA and Direct also opposed PECO's petition on the grounds that annual deferrals would make rates less market reflective, contrary to PECO's default service plan.

Direct and RESA also argued that PECO has not presented any justification for the change, or explained how circumstances are any different from what was expected in the default service proceeding where parties agreed to quarterly reconciliations as part of a compromise settlement.

PECO's petition is supported by the Office of Consumer Advocate.

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