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PUC Zeroes-In on Market-Skewing Problem of Default Service, In Denying Rehearing of PECO CAP Rate Order
With respect to rate issues, the Pennsylvania PUC denied reconsideration of its order granting PECO electric Customer Assistance Program (CAP) customers eligibility to shop, with no cap on retail supplier rates, and in doing so, PUC Chairman Robert Powelson and Commissioner Pamela Witmer gave an excellent illustration of how the continued offering of default service by utilities skews the competitive retail market.
Specifically, in a statement, Powelson and Witmer addressed arguments that the retail supplier rates for CAP customers should be capped at the PECO Price to Compare
"A requirement that competitive generation offers must always be less than PECO's price to compare (PTC) would absolutely be a barrier to entry for any generation supplier attempting to serve this class of customers," the two Commissioners said.
"Our reasoning for this belief is simple: electric generation suppliers must be able to accurately price their products to be able to cover their costs of generation supply as well as other additional costs incurred in offering service. Electric distribution companies (EDCs), like PECO, have no such need. Instead, PECO can (and often does) incorrectly project their costs by millions of dollars, and still recover those costs from default service ratepayers at a later date. Therefore, the fluctuations in PECO's PTC often bear no rational relationship to changes in wholesale electricity market prices, but rather are frequently driven by its ability to reconcile past miscalculations in estimated costs," Powelson and Witmer said (emphasis added).
Some utilities are now even trying to recover these mis-forecasts and reconciliations through nonbypassable rates, not the Price to Compare.
"No competitive supplier, therefore, could guarantee that it could always offer generation service at rates lower than the PTC because there is no way to predict what a future PTC will be, even if an EGS had a foolproof way to accurately project its wholesale energy costs. And because EGS shareholders bear any losses, unlike EDCs, whose default service customers bear any EDC generation supply-related losses, it would likely be an imprudent business move to elect to serve PECO CAP customers," Powelson and Witmer said
Powelson and Witmer also objected to arguments that the PUC had statutory authority over retail supplier rates, and said that if such arguments were true, then the PUC must also have the ability to protect customers from excessive default service rates, and therefore may deny EDCs' collection of reconciled costs if such costs would increase CAP charges.
"Further, if the Commission has the ability under Section 1301 to limit EGS rates in order to protect customers from high universal service rates, we must also have that same authority over default service rates. We would therefore expect these same Petitioners, including PECO, to petition the Commission in the near future to put a hard cap on the price PECO can charge for default service so as to ensure that universal service rates do not become unjust and unreasonable as a result of PTC increases. This, of course, also must mean (the Exelon Board of Directors should pay particular attention to this part) that PECO believes the Commission has the authority to prohibit it from reconciling past under-recovered costs into a future default service rate if that reconciliation (and resulting PTC increase) would lead to higher universal service costs for customers (we are, of course, being facetious to point out the fallacy of this argument)," Powelson and Witmer said
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March 7, 2014
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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