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Shock: Pennsylvania Judge Says PUC's Retail Market "End State" Order Not "Enforceable" Law (Judge Would Reject Expansion of Hourly Pricing As A Result)

October 31, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The much-hyped "end state" retail electric market order from the Pennsylvania PUC is not, standing alone, "enforceable law," and therefore cannot be used to justify a sought lowering of the hourly pricing threshold at PPL Electric Utilities, an ALJ has concluded in a recommended decision on PPL's default service plan for the period starting June 1, 2015

In its default service plan for the period beginning June 1, 2015, PPL has proposed expanding the threshold for mandatory hourly pricing for default service customers to 100 kW, from the current 500 kW.

In a recommended decision posted yesterday, an ALJ would reject this proposal as inconsistent with statute, and would find that reliance on the PUC's "end state" retail market order, which states a preference for hourly pricing for customers 100 kW and above, is insufficient to justify the change.

The ALJ noted that the PUC's end state order, "is not consistent with its duly published policy statement [on default service], creating a dilemma for the recommendation here."

The policy statement promotes the "prudent mix" standard taken from the statute for serving the customers up to 500 kW.

"For the Commission to adopt a standard other than the 'prudent mix' standard as a general rule (as opposed to the specific exception presented by the Pike County situation), thus expanding the standard provided in the statute, the Commission would be well advised to do so in a formal rulemaking proceeding. While the End State Order most likely does not reach the level of exceeding the Commission's administrative authority, neither is it, as an implementation order, standing alone, enforceable law," the ALJ said.

"The result is that the Commission has one policy statement published in the Pennsylvania Code, where anyone unfamiliar with the law in Pennsylvania would, nonetheless, be likely to search for and find it, and one order which amounts to a policy statement that has not been published in a service such as the Pennsylvania Code. Reliance upon the latter is antithetical to the Commission's usual practice of transparency. The result is that neither is legally binding and each acts as advisory to both the parties to a default service case and to the Commission itself. As such, the legal analysis turns back to the statute for authority," the ALJ said.

"It is clear that the statute favors the published policy statement [for a prudent mix], and that any change to that policy statement and the statute itself needs to be supported by substantial evidence," the ALJ said.

"While PPL Electric has set forth a plan to comply with the End State Order, it has provided no evidence to support a finding that its proposal to move these small commercial customers to hourly pricing is consistent with the goal of the statute to establish a default plan which provides the least cost over time by using a prudent mix of products. With the knowledge that this issue can be revisited in future DSP cases, I recommend that the proposal be rejected and the Company be directed to continue to serve the Small C&I customers consistent with the plan approved in the DSP II," the ALJ said.

It is unclear specifically what the ALJ is recommending for C&I customers in the 100-500 kW range now that hourly pricing has been rejected, other than such procurements must be "consistent with" DSP II, although from the proposed ordering paragraphs, it appears that such customers would simply be once again lumped into the under 100 kW class.

For customers under 100 kW, for service starting June 1, 2015, a settlement recommended for adoption by the ALJ would provide that customers would be served under 6 and 12-month full requirements contracts, according to this chart (click here)

This is a slight departure from DSP II, which relied on 9 and 12-month laddered full requirements contracts.

The ALJ also recommends denying a proposal to move certain non-market-based PJM charges (NITS, RMR, RTEP, etc.) from the bypassable Price to Compare into a nonbypassable rider (with PPL assuming the obligation for such costs for all distribution customers, relieving retail suppliers for responsibility of the charges), as the ALJ said that no persuasive evidence was provided to support a modification to the present method used by PPL Electric for the collection of such PJM charges.

As noted above, the ALJ would approve a settlement to address all other aspects of PPL's default service plan for the period beginning June 1, 2015. Click here for prior story for details of the settlement, such as residential procurement and frequency of price changes, which will now change only every six months, instead of three months.

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