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Segment of Industrials Support Duke Energy "Price Stabilization" Rider; But Also Want Opt-Out for Large Customers (Says Rider a Benefit Due to Soaring PJM Capacity Prices)

September 29, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

A segment of Ohio industrial customers has voiced support for Duke Energy Ohio's proposed Price Stabilization Rider, while at the same time proposing that very large customers (and only those customers) be permitted to make an election to avoid the rider.

Specifically, the Ohio Energy Group (OEG), a group of large industrial customers, supported the Price Stabilization Rider in concept, provided various modifications proposed by OEG are adopted.

As initially proposed, the Price Stabilization Rider would be used to pass-through the costs or benefits of Duke Energy Ohio's share of the Ohio Valley Electric Corporation generating assets to customers on a nonbypassable basis. Duke's share of the generation would be sold into the PJM market, with gains or losses passed through via the rider.

"I think that such a rider would have the effect of stabilizing or providing certainty regarding retail electric service rates for the Company's customers," OEG's witness said.

In particular, OEG's witness said that Duke's estimated benefits from the rider are conservative, given impending retirements in PJM and expected hikes in capacity prices

"[C]oal plant retirements will put upward pressure on the capacity and energy market prices; so I think that OVEC's all-in generation costs are likely to be at or below market prices in the near future," OEG's witness said.

"I believe that the PJM RPM capacity prices are likely to trend higher than either of these utilities' forecasts. Given the amount of capacity that is being retired in PJM, I think that will provide upward pressure on capacity prices and will increase the net benefits of the OVEC hedge beyond what may have been forecasted in these ESP proceedings," OEG's witness said.

While OEG supports the rider, it also wants to provide large customers the ability to opt-out. "I propose that any customer with more than 10 MW of load per single site should be given the chance to self-insure and not participate in the OVEC hedge. This would be a one-time election at the very beginning. Such customers would either be in or out of the hedge for the entire nine and a half years. There would be no allowance for moving in or out after the start of the OVEC hedge.," OEG's witness proposed.

In contrast, competitive suppliers generally opposed the rider

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