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Pennsylvania Rejects Conditionally Nonbypassable Migration Rider at PPL

July 20, 2012

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Copyright 2010-12 Energy Choice Matters

Reversing a recommended decision from an ALJ, the Pennsylvania PUC rejected PPL Electric Utilities' proposal to impose a conditionally nonbypassable migration rider (called a reconciliation rider by PPL) on customers (P-2011-2256365).

Similar to the Pennsylvania gas utilities, PPL's migration rider would subject customers, who contributed to a prior-period default service over/under-collection, to the reconciliation of such costs regardless of whether they are currently taking default service.

In other words, customers leaving default service for competitive supply would still be required to pay (or receive) the reconciliation charge (credit) for the period being reconciled and for amount of time they were previously on default service during the relevant period, despite no longer buying default supply from PPL.

As only reported by Matters, an ALJ had recommended adoption of this migration rider, stating that removing default service reconciliation costs from the bypassable Price to Compare and making them conditionally nonbypassable under the migration rider would, "more accurately reflect the actual cost to acquire default service." Currently, reconciliations of default service costs are fully bypassable.

However, the PUC reversed the ALJ's recommendation, finding that, "[b]ased upon our review and analysis of the evidence of record, we are not convinced that the changes proposed by PPL to its currently effective default service reconciliation mechanism are necessary or appropriate at this time."

"We find that PPL has failed to meet its burden of proof that the significant changes it has proposed to its existing default service reconciliation mechanism are required. We disagree with the conclusion of the ALJ that PPL has successfully shown a need for the RR [reconciliation rider] at this time," the PUC said.

The PUC agreed that, "the traditional methods of reconciliation accounting associated with default service costs in this post-rate cap era may have resulted in excessive rate volatility and inaccurate price signals for electricity consumers in Pennsylvania," and opted to open a generic investigation of issues related to default service reconciliations, including the use of nonbypassable riders.

The PUC also maintained quarterly reconciliations of default service costs at PPL, rejecting the recommended 12-month reconciliation. "We also reject the recommendation of the ALJ to require PPL to reconcile the GSC-1 rate class annually. On this issue we do not share, at this time, the opinion of the ALJ and PPL, that the quarterly reconciliation of default service costs was a major contributing factor to the significant rate increase to the small C&I customers," the PUC said.

Additionally, the Commission rejected PPL's sought Competitive Transition Rider. Unlike the conditionally bypassable migration rider, the Competitive Transition Rider would have been completely nonbypassable, and would have recovered all default service reconciliations for the period January 1, 2010 (when rate caps ended) to May 31, 2012. The PUC affirmed the ALJ's finding that PPL failed to sustain its burden of proving that the Competitive Transition Rider is necessary, as the company failed to provide evidence that there would be a substantial variance that cannot be recovered through its currently existing reconciliation mechanism.

As the PUC will conduct the above-noted generic proceeding on migration riders and Competitive Transition Riders, the PUC's denial of both mechanisms in the instant case was without prejudice.

Additionally, as the PUC denied PPL's migration rider, PPL's proposal to include Time of Use generation rate under-recoveries in the rider was rendered moot. The PUC said that the disposition and recovery of such TOU under-recoveries shall be addressed in the pending Revised TOU Proceeding at Docket No. R-2011-2264771.

In a separate but related proceeding (M-2011-2243137) regarding the specific calculation of PPL's GSC-1 reconciliation, the PUC affirmed that PPL's accounting of default service reconciliations conformed to existing PUC practices; though the PUC noted problems with the current practice and reiterated that is was opening the above-noted generic investigation of default service reconciliation to address such issues. The PUC also again rejected the use of a 12-month reconciliation for GSC-1 default service costs, noting that this issue will be addressed in the generic investigation.

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