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Ohio Asks Whether Default Service Should Continue, in Opening Retail Electric Market Investigation; Utility Affiliation Also a Concern

December 12, 2012

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Copyright 2010-12 Energy Choice Matters

The Public Utilities Commission of Ohio has initiated an investigation of the state's retail electric market, asking, among other things, whether default service should continue in its current form.

Aside from the ongoing changes from functional to structural separation of generation and distribution occurring at several utilities, PUCO cited, in particular, capacity constraints in certain regions of the state, due to generation retirements, as prompting a need to review the market. As a result of a constraint in the May 2012 Base Residual Auction, "the price for capacity significantly increased in parts of Ohio including separation of a new Locational Deliverability Area (LDA) in northeast Ohio," PUCO noted.

"Ownership and control of the remaining capacity in the new LDA as well as available injection rights, which could facilitate new generation, are held by a limited number of corporate entities," PUCO observed.

"In the face of these challenges, the Commission finds that an investigation is appropriate regarding the health/strength/vitality of Ohio's retail electric service market and actions that the Commission may take to enhance the health/strength/vitality of that market; and in so doing, mitigate, among other things, the potential impact of capacity constraints on Ohio ratepayers," PUCO said.

"It is the Commission's responsibility to encourage market access for retail electric service, including both supply- and demand-side products, and to protect consumers against market deficiencies and market power. As such, the Commission is seeking comments regarding the extent to which barriers may exist to a consumer's means to choose a retail electric service that meets their needs," PUCO said.

Among other things, PUCO asked:

(a) Does the existing retail electric service market design present barriers that prevent customers from obtaining, and suppliers from offering, benefits of a fully functional competitive retail electric service market? To the extent barriers exist, do they vary by customer class?

(b) Does default service provide an unfair advantage to the incumbent provider and/or its generation affiliate(s)?

(c) Should default service continue in its current form?

(d) Does Ohio's current default service model impede competition, raise barriers, or otherwise prevent customers from choosing electricity products and services tailored to their individual needs?

(e) Should Ohio continue a hybrid model that includes an electric security plan (ESP) and Market Rate Offer (MRO) option?

(f) How can Ohio's electric default service model be improved to remove barriers to achieve a properly functioning and robust competitive retail electric service electricity market?

(g) Are there additional market design changes that should be implemented to eliminate any status quo bias benefit for default service?

(h) What modifications are needed to the existing default service model to remove any inherent procurement (or other cost) advantages for the utility?

(i) What changes can the Commission implement on its own under the existing default service model to improve the current state of retail electric service competition in Ohio?

(j) What legislative changes, if any, including changes to the current default service model, are necessary to better support a fully workable and competitive retail electric service market?

(k) What potential barriers, if any, are being created by the implementation of a provider's smart meter plans? Should competitive suppliers be permitted to deploy smart meters to customers? Should the Commission consider standardizing installations to promote data availability and access?

(l) Should the Commission consider standardized billing for electric utilities?

(m) Do third party providers of energy efficiency products, renewables, demand response or other alternative energy products have adequate market access? If not, how could this be enhanced?

(n) Does an electric utility have an obligation to control the size and shape of its native load so as to improve energy prices and reduce capacity costs?

Additionally, PUCO asked:

• Is there a potential for consumers to be misled by a utility's corporate separation structure?

• Are shared services within a 'structural separation' configuration causing market manipulation and undue preference?

• Should generation and competitive suppliers be required to completely divest from transmission and distribution entities, maintain their own shareholders and, therefore, operate completely separate from an affiliate structure?

Case No. 12-3151-EL-COI

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