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Utilities Propose to Switch from Portfolio to Load Following Default Service Contracts; Seeks Six-Month Fixed Price
Citizens' Electric Company of Lewisburg, PA and Wellsboro Electric Company have filed with the Pennsylvania PUC a proposed default service plan for the period June 1, 2015 to May 31, 2018, which would abandon the current portfolio procurement in favor of load following contracts.
Load following contracts would not be used to set prices, however, except for an adder.
Instead, for residential and small commercial customers, the generation rate would be a six-month fixed rate, based on PJM West Hub on-peak monthly forward pricing, plus a pass-through of NITS and capacity, plus a supplier-determined adder, which would reflect AEPS costs, ancillaries, congestion, losses, and volumetric and migration risk, plus reconciliations.
The six month pricing period would be June 1 to November 30 and December 1 to May 31. A fixed rate based on average on-peak monthly forward pricing would be established approximately 10 days before the start of each period. The default service plan would also allow "interim" adjustments to pricing if needed.
For customers above 400 kW, hourly default service pricing would be instituted.
While the utilities said that their stratified procurement plan, "consistently produced a default service product at rates lower than or comparable to the default service products offered by other EDCs," they proposed to move to load following contracts, "in light of Pennsylvania's maturing electricity retail market, the Commission's emphasis on market-reflective default service products, and expected EGS activity in at least the Citizens' service territory."
We would note that, had the PUC not approved the nonbypassable treatment of polar vortex spot/ancillary supply costs at the two utilities, their default service rates would be well-above the current rates at the utilities using load following contracts.
The load following contracts would consist of four principal cost components: (1) an energy component that will be priced using an index; (2) a Supplier Adder; (3) a direct pass through of Network Integrated Transmission Service (NITS) costs for default service customers; and (4) a direct pass through of locational reliability (capacity) costs for default service customers
The supplier adder will exclude the NITS and capacity costs recovered on a pass-through basis, but will include all other costs to deliver default service power to the wholesale meter for the Citizens' or Wellsboro Aggregate Bus, including congestion, marginal losses, AEPS Act compliance, and transmission losses, as well as all risks associated with default service customer usage variability, customer migration and deviations between the forward pricing and actual costs.
For residential and small commercial customers, the energy component price will be a fixed price, subject to 6-month adjustments based on the PJM West Hub on-peak monthly forward pricing at predetermined dates.
The energy supply rate charged by the wholesale suppliers will be the mathematical average of monthly on-peak per MWh strip pricing for all MWh delivered to the wholesale meter for the respective company's Aggregate Bus during the next 6-month procurement period.
Notable is that the utilities proposed to procure a single three-year load following contract at each company, to be served by a single supplier at each utility. The supplier adder would be fixed for all three years.
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June 9, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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