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CHAOS: Ohio Says Dayton Power & Light Default Service Order Erroneous, Sets Meeting for Friday to Correct (Original Order Called for Blending of Market-Based Rates, But Stopped Short of 100% Auction-Based SSO)

September 5, 2013

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Copyright 2010-13
Reporting by Paul Ring •

The Public Utilities Commission of Ohio issued a notice this morning that its order issued on September 4 concerning Dayton Power & Light's electric security plan, governing default service, "does not reflect the decision that the Commission intended to issue, including the length of the ESP period."

As a result, the Commission will convene a special meeting to be held at 8:30 a.m. on Friday, September 6, 2013, to issue a corrected Order.

For reference purposes only, below is a summary of the order issued by PUCO on September 4. The provisions described below are subject to change based on the new order

The Public Utilities Commission of Ohio adopted an electric security plan for Dayton Power & Light for the term January 1, 2014 through December 31, 2016 which stops short of transitioning DP&L to 100% auction-sourced default service during the term of the ESP.

Specifically, PUCO ordered that a competitive auction shall be used to source a portion of the DP&L Standard Service Offer (SSO) energy supply as follows: 10% of SSO for the period January 1, 2014, to December 31, 2014; 40% of SSO for the period January 1, 2015, to December 31, 2015; and 70% for the period January 1, 2016, to December 31, 2016.

The Commission directed that, by November 1, 2013, DP&L should conduct an auction for 10 tranches of a 36-month product commencing January 1, 2014.

By November 1, 2014, DP&L should conduct an auction for 30 tranches of a 24-month product commencing January 1, 2015.

By November 1, 2015, DP&L should conduct an auction for 30 tranches of a 12-month product commencing January 1, 2016.

The term of the ESP is scheduled to end on December 31, 2016. Although it is contemplated that DP&L will have divested its generation as of December 31, 2016, no authorization was immediately granted, nor was a definitive move to 100% auction-based SSO approved for the period after 2016.

PUCO ordered that DP&L shall file its application for a subsequent SSO, pursuant to Section 4928.141, by March 1, 2016. If a subsequent SSO is not authorized by the Commission by November 1, 2016, DP&L shall procure, through the competitive auction process, 100 tranches of a full requirements product for a term that is not less than quarterly or more than annually to be deliverable on January 1, 2017, until a subsequent SSO is authorized.

"The Commission finds that this schedule for DP&L to implement full CBP [competitive bid plan] procurement will move DP&L rates to market while granting DP&L sufficient time to refinance its long term debt to facilitate the divestment of the Company's generation assets. The Commission notes that DP&L witness Jackson demonstrated that DP&L could not divest its generation assets before September 1, 2016," PUCO said.

However, the Commission also believes that DP&L has failed to demonstrate that it necessarily cannot divest its generation assets sooner than December 31, 2017. "Therefore, the ESP term will end on December 31, 2016, and the Commission expects DP&L to file a generation divestment plan that divests all of its generation assets by that date."

As it will still own generation assets during the term of the ESP, PUCO prohibited DP&L from participating in the competitive SSO auctions. Also, no one supplier will be able to bid upon or be awarded more than 80% of the tranches in any one auction

The Commission denied DP&L's requested switching tracker (ST), which was a nonbypassable charge which would have kept DP&L financially whole for increases in migration to competitive supply above a baseline.

"The Commission finds that the ST should be denied because it violates the policies of the state of Ohio, is anticompetitive, and would discourage further development of Ohio's retail electric services market."

The Commission did grant DP&L authority to implement a service stability rider (SSR), a nonbypassable stability charge for the purpose of maintaining DP&L's financial integrity so that it may continue to provide default service. DP&L may collect the SSR in the amount of $110 million for each of the years 2014 and 2015.

PUCO created an ability for DP&L to extend the SSR beyond 2015 (SSR Extension or SSR-E) subject to certain conditions.

Among other things, if DP&L wishes to avail itself of the SSR-E, DP&L must file, by December 31, 2013, an application to divest its generation assets. Such plan must propose that divestment be completed by December 31, 2016.

As the final condition for the Commission to authorize the SSR-E, DP&L must establish and begin implementation of a plan to modernize its billing system, as PUCO cited barriers to retail competition resulting from DP&L's current billing system. "At a minimum, the billing system modernization should include rate-ready billing, percentage off price-to-compare (PTC) pricing and the ability to support AMI. To begin implementation of its billing system modernization, DP&L should file with the Commission a billing system modernization plan approved by Staff by December 31, 2014, that includes, at a minimum, the above improvements to DP&L's billing system," PUCO said.

The Commission denied DP&L's nonbypassable version of the Alternative Energy Recovery Rider, which was meant to support DP&L's Yankee solar facility.

"DP&L has not made a detailed proposal to ensure that all customers in its service territory equally benefit in the benefits derived from the Yankee facility. Instead, the Commission is concerned that all customers could pay for the costs of Yankee, despite only DP&L SSO customers receiving the benefit of the solar renewable energy credits (S-RECs) produced by the facility."

Moreover, the Commission believes that Yankee should be included in DP&L's generation asset divestiture plan and divested with the rest of DP&L's generation assets.

"The Commission notes that nothing in this finding prohibits DP&L from recovering the cost of past renewable energy resources used to serve its SSO customers. DP&L is directed to consult with Staff to determine an appropriate methodology to recover through the AER the cost of past renewable energy resources used to serve its SSO customers," PUCO said.

The Commission created bypassable and nonbypassable reconciliation riders for SSO costs. The bypassable reconciliation rider shall recover true-ups of the riders for fuel, capacity, alternative energy compliance, and auction-sourced supply (subject to a circuit breaker making the charge nonbypassable), plus the costs of the SSO auction and auction consultant fees.

A nonbypassable reconciliation rider may be used to recover a deferred balance that exceeds 10 percent of the base amount of riders FUEL, RPM, AER, and CBT, as proposed by DP&L, subject to specific Commission approval.

DP&L's transmission charge shall be split into a market-based bypassable rider and a non-market-based non-bypassable rider (the latter being used to recover NITS, regional transmission expansion planning (RTEP), and other non-market-based FERC/RTO charges).

PUCO said that DP&L should file with the Commission a proposal at the end of the ESP term for appropriate collection of any uncollected Transmission Cost Recovery Rider (TCRR) balance, including whether the uncollected TCRR balance should be collected through a bypassable or nonbypassable TCRR true-up rider.

The Commission adopted six competitive retail market enhancements as proposed by DP&L. These are elimination of the minimum stay and return-to-firm provisions in the generation tariffs, implementation of a web-based portal for CRES providers to obtain DP&L customer information in more usable and manageable fashion, implementation of an auto-cancel feature to DP&L's bill-ready billing function, removal of the enrollment verification that requires a CRES provider to have the first two digits of the customer name on the account as well as the correct account number, support for historical interval usage data (HIU) data requests via Electronic Data Interchange (EDI), and provision to CRES providers a standardized sync list on a monthly basis. PUCO said costs of these enhancements should be addresses in DP&L's next rate case.

Additionally, PUCO said that, "[i]f an EDI process, standard, or interface, as well as any other competitive retail enhancement, has been adopted by every other EDU in Ohio, then DP&L shall also implement that EDI process, standard, interface, or competitive retail enhancement."

"The Commission notes that these competitive enhancements should be implemented as soon as practicable and may not be delayed until DP&L files the billing system modernization plan discussed above."

PUCO declined to require DP&L to implement purchase of receivables, noting that this issue is being addressed in its statewide retail market investigation.

With respect to proposed changes in customer metering, billing, enrollment, switching fees, and eligibility, which were proposed to enhance customer choice, PUCO said that these constraints are related to the distribution function of DP&L; therefore, these issues should be raised in DP&L's next distribution rate case.

In setting the bypassable FUEL rider, PUCO ordered DP&L to use the least cost stacking methodology, and to exclude the load of its competitive retail supplier affiliate in the calculation. PUCO said that using the system average cost methodology, as proposed by DP&L, "could drive up costs on SSO customers to grant DP&L and its affiliates a competitive advantage in the wholesale market."

PUCO denied a proposal from DP&L to phase-out its maximum charge provision. PUCO said that the maximum charge should be increased only by 2.5 percent per year over the term of the ESP. The first 2.5 percent increase to the charge should take place on January 1, 2014, and then on January 1 for each remaining year of the ESP. "The Commission notes that the maximum charge increase will be an increase to the charge and should apply to all new riders."

Case No. 12-426-EL-SSO

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