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Dominion East Ohio Files Stipulation to Cease Use of SSO Auction

December 29, 2011

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Copyright 2010-11 Energy Choice Matters

Dominion East Ohio has filed a stipulation with PUCO Staff and retail gas suppliers to cease the current Standard Service Offer (SSO) auctions.

Instead, current SSO customers would be included in the Standard Choice Offer (SCO) auctions, similar to the treatment at Vectren Energy Delivery and (starting in 2012) Columbia Gas.

Originally, as part of Phase 2 of its exit from the merchant function, Dominion East Ohio received approval to hold both an SSO and SCO auction, starting in 2009. SSO service is for Percentage of Income Payment Plan (PIPP) and Choice-ineligible customers, and is also available on a transitional basis only, if a customer is dropped by a supplier and does not immediately enroll with a new supplier, or if a customer is starting new service and has not elected a supplier.

The SSO auction is for wholesale supply, with customers' load served by Dominion East Ohio.

The SCO auction originally included all customers not eligible for SSO service and who are not already on competitive supply. Unlike wholesale SSO service, under the SCO auction retail suppliers bid for the right to serve individual customer accounts for a 12-month term.

The SCO auction starts as a descending clock auction, and continues until the price floor equal to the SSO price (obtained immediately prior in the SSO auction) is hit. At this time, the SCO auction process calls for an ascending clock auction under which retail suppliers are to bid for the right to serve customers at the floor price. Any such revenue is then distributed among all customers.

However, if there is no over-subscription of SCO tranches when the floor is hit, the ascending clock auction is not necessary and does not occur. In fact, the ascending clock auction has only occurred once, in 2009, the first year of the auction.

Stipulating parties said that the failure of the SCO auction to proceed to the ascending clock round in the past two years shows that the original premise that, "the significant benefits of avoided customer acquisition costs," would be, "reflected in the [SCO] auction result and further reduce customer costs," is no longer valid.

"Combining the SSO and SCO auctions benefits DEO's ratepayers in several ways and is in the public interest. A combined SSO and SCO auction would ease the administrative burden of holding two separate auctions and lead to lower auction services costs. A single auction also eliminates the possibility of different SSO and SCO auction outcomes, which could result in considerable customer confusion. Because the tranches to be served by the winning bidders contain a more diverse portfolio of customers, the risk to suppliers of customers moving between SSO and SCO service is reduced, which, other things being equal, could result in more aggressive bidding due to that reduction in risk," stipulating parties said.

Stipulating parties also noted that an SCO-only auction has been in place at Vectren Energy Delivery and in the process of being implemented at Columbia.

For those reasons, stipulating parties asked that, effective with the auction to be conducted in the first quarter of 2012, the SSO auction be combined with the current SCO auction. As the next SSO and SCO auctions are scheduled for February 28, 2012, stipulating parties asked that PUCO issue a final order on their request by February 1, 2012.

In their motion filed December 28, stipulating parties requested no other changes specific to the SCO auction other than combining it with the SSO auction, but did make passing reference to "changes necessary to combine the auctions," though it was unclear if these were simply procedural and operational changes, or are substantive.

Obviously, implicit in the end of the SSO auction is that the SCO auction would no longer be subject to a price floor, and thus would not proceed to the ascending clock portion of the current mechanism. What is not clear is how the current SSO customers will be allocated to SCO tranches; specifically, whether the additional customers included will result in additional tranches available for bid, or alternatively whether the tranche size will increase.

Stipulating parties did state that they are currently engaged in discussions concerning possible additional modifications to PUCO's prior exemption order allowing the creation of the SSO and SCO auctions. Any resulting changes will be requested in a separate motion, parties said.

Stipulating parties warranted that the Ohio Consumers' Counsel, Ohio Partners for Affordable Energy and Industrial Energy Users-Ohio will file a letter with PUCO indicating that they neither support nor object to the stipulation.

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