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Pennsylvania to Investigate Nonbypassable Charges for Default Service
July 20, 2012
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Copyright 2010-
The Pennsylvania PUC will open an investigation (M-2012-2314313) regarding the reconciliation of electric default service costs, including the use of nonbypassable riders to recover such reconciliations.
The PUC, in ruling on a PPL proposal for such a nonbypassable rider (see related story today), adopted a motion from Commissioner James Cawley to open a generic investigation of electric default service reconciliation, to address, "all issues regarding default service reconciliation riders."
"[T]raditional methods of reconciliation accounting and of allocating costs to rate classes as well as significant customer participation in the retail market have caused a great deal of volatility in default service pricing associated with the recovery of revenue/cost imbalances. In some instances, these imbalances have resulted in significant rate adjustments[,] referred to as 'E-factors,' have produced rate volatility and inaccurate price signals, and have complicated shopping decisions for consumers," Cawley said.
"The Commission's goals are to ensure that the industry's current prices reflect current costs as accurately as is feasible, that EDCs are able to fully recover their just and reasonable default service costs, and that default service customers pay the full cost of default service. To further these goals, the Commission seeks feedback from market participants on changes that this Commission should make to reconciliation riders in order to better ensure that costs and associated revenues are: (1) appropriately matched; (2) assigned to the appropriate class; and (3) recovered expeditiously and accurately, as required by Act 129. This will also help ensure that interest charges and credits are minimized," Cawley said.
Under Cawley's motion, the Commission will seek comments on the following questions:
• When would it be appropriate to use a Competitive Transition Rider (CTR) for the purposes of addressing default service collection issues? [the Competitive Transition Rider was a proposed, completely nonbypassable charge sought by PPL for default service reconciliations for the entire period after rate cap expiration but prior to May 31, 2012]
• Should E-factors be included in the Price to Compare, as is the current practice?
• Should costs and revenues be reconciled on a quarterly, or longer basis, or on some combination of quarterly and some other period? How often should adjustments to E-factors be made?
• Should recognition of revenues for monthly reconciliation purposes include "unbilled revenues" for service provided during the month? If not, are there other methods of accounting for revenues that more appropriately match revenues and costs on a monthly basis?
• Should transmission and generation reconciliation amounts be netted? If so, how?
• Should default service basic and optional (Time of Use/Real time pricing) services be reconciled together or separately for each rate class?
• How should/could working capital costs be recovered for default service?
• Should the Commission alter how interest is charged/credited on under/over collections? Is the current rate of interest reflective of market rates of interest? How can these interest provisions be improved?
• Can the process for assigning PJM capacity costs or other demand or customer based costs between rate classes be improved? If so, please describe how best to assign costs for various services to the appropriate rate classes, and provide examples.
Although not cited in Cawley's motion, the PUC's order in the specific PPL migration rider and reconciliation case states that the generic investigation will also include a review of conditionally nonbypassable migration riders for default service reconciliation (also known as a reconciliation rider), which had been sought by PPL, and are used by the Pennsylvania gas utilities.
These migration riders, which reflect prior default service costs (or credits) are nonbypassable for the period of time the customer was on default service for the period being reconciled (in other words, if a customer on default service for the 3 months being reconciled under the migration rider leaves default service for competitive supply, the customer would still be required to pay [or receive] the migration rider for the following 3 months even after leaving default service).
Copyright 2010-
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