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PUC Approves Quarterly Contracts for Medium C&Is at Duquesne Light; But No Expansion of Hourly Pricing

January 16, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Pennsylvania PUC adopted a final order governing Duquesne Light's default service for the period June 1, 2015 to May 31, 2017 which adopts non-laddered quarterly contracts for medium C&Is, but retains laddered 12-month contracts for small C&Is.

For small C&I customers (under 25 kW), the PUC adopted Duquesne Light's proposal to serve these customers using the same procurement schedule and product types used to serve residential customers.

Specifically, Duquesne Light will serve small C&I customers through 12-month, laddered full requirements supply contracts from third party suppliers obtained through semi-annual competitive requests for proposals.

The table below shows the RFP Date, Procurement Amount, Contract Term and Delivery Period for each Small C&I procurement:

Date       Amount    Term       Delivery Period
Mar  2015   50%   12 Months   Jun 2015 - May 2016
Sept 2015   50%   12 Months   Dec 2015 - Nov 2016
Mar  2016   50%   12 Months   Jun 2016 - May 2017
Sept 2016   50%   12 Months   Dec 2016 - Nov 2017
 

Story Continues Below...

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The PUC rejected a proposal from the Retail Energy Supply Association to include shorter-term contracts in the small C&I portfolio, including a transition to more quarterly contracts by the end of the default service term.

"Duquesne has demonstrated convincingly that RESA's proposals for the Small C&I procurement plan would result in an unacceptable increase in rate instability for these particular customers," the PUC said.

"Additionally, we note that the RESA recommendation in this proceeding would amount to a transition in Small C&I procurements to where fifty percent of such procurements would be quarterly procurements by the last six months of Duquesne's DSP VII. We have previously considered the issue of quarterly procurements for Small C&I customers in our End State Order wherein we concluded that we would seek legislative changes that would clearly provide our authority to approve default service plans containing such products ... While we continue to believe that the Commission currently has the authority to establish shorter-term default service products in certain situations, in this proceeding we conclude that RESA has failed to establish that this transition should be implemented at this time for this Company and this Small C&I class," the PUC said.

For medium C&I customers (25 kW-300 kW), the PUC approved the use of non-laddered, quarterly full requirements contracts to supply these customers. Currently, non-laddered six-month contracts are used to serve these customers.

"[W]e are persuaded by the position of Duquesne that its proposed procurement plan for Medium C&I customers represents a reasoned transition to more market responsive default service rates for this class of customers as the Company transitions from non-laddered six-month contracts currently utilized under DSP VI to the proposal in this proceeding of non-laddered three-month procurements beginning in DSP VII," the PUC said.

The PUC rejected RESA's proposal to lower the hourly pricing cutoff to 100 kW (a threshold recently adopted at PPL and PECO), and limit the medium C&I class to customers between 25-100 kW.

"We conclude that the Duquesne proposal best represents the proper balancing between the competing goals of rate stability and default service rates that are more aligned with the existing market. As such, we are not convinced by the arguments of RESA that this class should be bifurcated and that the larger Medium C&I customers should be transitioned to hourly priced service in the context of this proceeding," the PUC said.

Duquesne Light's current hourly pricing program will continue for customers above 300 kW.

For residential customers, Duquesne Light will supply customers through 12-month, laddered full requirements supply contracts from third party suppliers obtained through semi-annual competitive requests for proposals. There will also be one 6-month full requirements contract at the beginning of the default service period.

The table below shows the RFP Date, Procurement Amount, Contract Term and Delivery Period for each residential procurement under the settlement:

Date       Amount    Term       Delivery Period
Oct  2014*  50%    6 Months   Jun 2015 - Nov 2015
Mar  2015   50%   12 Months   Jun 2015 - May 2016
Sept 2015   50%   12 Months   Dec 2015 - Nov 2016
Mar  2016   50%   12 Months   Jun 2016 - May 2017
Sept 2016   50%   12 Months   Dec 2016 - Nov 2017

*Note: Approval for this procurement obtained independently of default service proceeding

Duquesne Light will reconcile residential default service costs and revenues on a semi-annual basis.

The PUC denied proposals to make Network Integration Transmission Service (NITS), Regional Transmission Expansion (RTEP), Generation Deactivation Charges and Unaccounted for Energy (UFE) the responsibility of Duquesne Light for all distribution customers with recovery via nonbypassable surcharge. Retail suppliers will remain responsible for these charges.

Consistent with an earlier settlement (click here), Duquesne Light will, in the earlier of its next general rate increase filing or its default service plan filing for the period commencing June 1, 2017, propose to unbundle from base rates costs associated with the provision of default service, including default service proceeding and procurement costs, and cash working capital with regard to default service procurements. Duquesne Light will simultaneously propose a mechanism for recovery of such costs from default service customers. All parties reserve the right to comment on and oppose such proposal.

Additionally, the PUC approved Duquesne Light's proposed Time of Use program, for one year only, under which a single EGS would be selected to provide TOU generation service to default service customers. A collaborative would be established to consider adopting a TOU program allowing for multiple EGS participants for the period starting June 1, 2016.

Docket P-2014-2418242

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• Senior Energy Markets Pricing Analyst
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