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Recommended Decision for PECO Default Service Would Require 12-Month Reconciliations
August 30, 2012
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A recommended decision regarding PECO's electric default service plan for the period June 1, 2013 through May 31, 2015 would adopt PECO's proposed use of a 12-month reconciliation period for default service rates, rather than the current quarterly reconciliations.
With respect to default service procurements, a Pennsylvania ALJ would adopt PECO's original proposal without modification.
For residential customers, the ALJ would adopt a blend of laddered one-year and two-year full requirements products, with six-month spacing between the commencement of contract delivery periods. Under the recommended decision, PECO would cease use of block energy purchases (once current contracts expire) and spot purchases to serve residential load. The ALJ rejected calls from various stakeholders to maintain the current use of spot and/or block purchases.
More specifically, for residential customers, PECO is to conduct a solicitation in November 2012 for 27 tranches of full requirements contracts with terms of six, twelve, and eighteen months with delivery of the associated default service supply to commence on June 1, 2013. A second solicitation for an additional 7 tranches with a 24-month term will be conducted in January 2013. These tranches will be combined with 14 existing full requirements contracts that commence delivery under PECO's current default service plan and continue beyond May 31, 2013.
The ALJ noted that by front-loading the residential procurements in November 2012 (as opposed to procuring an equal number of tranches in November 2012 and January 2013), PECO can reduce "rate uncertainty" for residential customers.
For small commercial customers (< 100 kW) and lighting customers, the recommended decision would rely on one-year full requirements products, each laddered with six-month spacing between commencement of delivery periods. Each of the contracts for the small commercial class will be procured approximately two to four months prior to delivery of the energy, with an initial transitional procurement of six month full requirements contracts to facilitate laddering.
For medium commercial customers whose peak demand is equal to or greater than 100 kW but less than or equal to 500 kW, the ALJ would adopt the use of six-month, fixed-price full requirements products without overlap. Each of the contracts for the medium commercial class would be procured approximately two to four months prior to delivery of the energy.
With respect commercial and industrial customers with peak demands greater than 500 kW, the ALJ would adopt PECO's proposal to eliminate spot-priced full requirements contracts entirely, and instead procure all default service supply for this class directly from the PJM energy markets.
Most notably, the ALJ would adopt PECO's proposal to use an annual reconciliation for over/under collections of default service costs and revenues for the residential, small commercial, and medium commercial classes, rather than quarterly reconciliations. The ALJ would reach this conclusion in the instant case despite the PUC currently examining several default service reconciliation issues, including the length of the reconciliation period, in a pending generic investigation.
Although reconciliations would be performed annually, default service rates for these classes would still be adjusted quarterly to reflect changes in the underlying cost of supply.
The ALJ found that the PUC should approve an annual reconciliation, "because PECO bills customers at different times throughout a month, and the revenue billed and received for a prior month may diverge significantly from the actual default service expenses incurred in the current month."
"This monthly 'billing lag' can result in significant fluctuations in the quarterly PTC [Price to Compare] which are unrelated to the actual costs of default service supply. While quarterly reconciliation might appear more reflective of wholesale supply costs, annual reconciliation means that fluctuations in default service prices will be smoothed out and result in clearer price signals for both customers and EGSs," the ALJ said.
The recommended decision would deny proposals to include a bypassable 5 mill/kWh charge to reflect, as proposed by retail suppliers, default service costs that are "inadequately reflected" in the Generation Supply Adjustment, and the cost of implementing PECO's proposed retail market enhancement programs.
"[T]he end-result of the proposed PTC Adder would be the artificial inflation of the PTC with corresponding inaccurate price signals and cross-subsidization of PECO's shopping customers by default service customers. No public benefit would be conveyed by the adoption of a measure for which no need has been shown and which would only serve to distort price signals," the ALJ said.
In other wholesale-related issues, the ALJ would adopt a load cap in the default service procurements of 50%, rather than 67%, citing the PUC's recent decision in the FirstEnergy EDCs' default service proceeding.
The ALJ would also deny proposals from retail suppliers to shift responsibility for the recovery of generation deactivation and other PJM charges from retail suppliers to PECO.
The ALJ would allow PECO to include in its bypassable Generation Supply Adjustment (GSA) capital costs incurred for IT upgrades required to implement the new default service plan.
Furthermore, the recommended decision would adopt PECO's plan to allocate the costs or benefits of Auction Revenue Rights (ARRs) between applicable default service classes, and the company, 50-50. Currently, all costs or benefits are passed through to customers. "PECO's proposal will minimize the risk of loss to customers and provide an incentive to PECO to select financially beneficial transmission paths," the ALJ said.
The scope of load for which PECO may exercise ARRs is limited only to the portion of the residential customer load that will continue to be served by legacy block and spot energy products (which will eventually roll-off under the new procurements described above), and the load of the relatively few customers remaining in PECO's Large Commercial and Industrial Class.
Retail Market Enhancements Regarding PECO's retail opt-in auction, the ALJ would deny retail suppliers' proposal to expand the program to include small commercial customers; and would also deny suppliers' recommendation to limit the program to non-shopping customers.
Service under the opt-in auction is to be for a term of six months, as the ALJ rejected proposals for a 12-month term. Under the recommended order, the price bid by retail suppliers under the opt-in auction shall be a fixed price that is at least 5% below the applicable Price to Compare for the quarterly period beginning June 1, 2013. The ALJ would also maintain the $50 bonus payment to participating customers, as proposed.
The ALJ would adopt a sealed-bid format for the retail opt-in auction.
The ALJ would also adopt PECO's proposed Bidder Application and Opt-In Supplier Agreement applicable to retail suppliers participating in the auction.
Regarding the Standard Offer Referral Program, the ALJ would adopt a 12-month term as proposed by PECO. Suppliers participating in the Standard Offer Referral Program would be required to offer generation service on a month-by-month basis for twelve complete billing cycles at a fixed price of 7% below the PTC at the time of customer enrollment.
The ALJ would find that Customer Assistance Program (CAP) customers should not be eligible for the retail market enhancement programs until the issue is addressed by a working group.
The ALJ would adopt PECO's proposal to recover costs of the opt-in auction, referral programs, and other retail market enhancements through the POR discount rate, at a rate of 0.3%.
The ALJ would not require PECO to implement "switch on connect" functionality, which would allow customers to take competitive supply at service initiation.
PECO will initiate a "seamless move" collaborative with interested suppliers to develop technical requirements and cost estimates for system changes required to permit residential and commercial customers to change their address of service and maintain competitive supply service. If more than 50% of participating EGSs express sufficient interest in the program, PECO will implement the appropriate changes.
PECO will cease offering a default service wind REC add-on program. In directing current REC customers to competitive renewable offers, the ALJ would adopt PECO's proposal to provide customers with a list of suppliers and direct customers to the state-run PA Power Switch site. The ALJ would reject proposals to direct customers to privately run sites, such as ChoosePAWind.com.
Docket P-2012-2283641
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The ALJ would adopt without modification several retail market enhancements as proposed by PECO.
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