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State Energy Office: Reflecting "Market Pricing" Should Not Be The Primary Goal of Default Service; Service Should Instead Avoid Volatility

April 17, 2015

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

Reflecting market pricing, "should not be the primary goal of default service," the New Hampshire Office of Energy and Planning (OEP) said in comments to the New Hampshire PUC in an investigation concerning the design of default service.

"OEP believes that the increasing availability of competitive supply options for all customers allows default service to be a more stable and predictable option that is not subject to the price volatility in the region. This could mean that in some circumstances, default service rates are higher than what is available on the market. Because default service was designed to minimize price volatility while also availing of pricing that reflects longer terms and off-season pricing, OEP believes that reflecting market pricing should not be the primary goal of default service," the Office said.

OEP disagreed with a proposal that all default service periods should be six months for all customers.

"Because the current six-month periods align with peak winter and summer seasons, the current approach has resulted in default service customers experiencing extreme price volatility," OEP said.

"OEP urges the Commission to act expeditiously to change default service procurement to reduce default service price volatility and to protect those customers who stay on default service from price shocks. One relatively simple change that could achieve these goals is to increase the length of the default service term in order to avoid the next 6-month default service period coinciding with winter price increases. This may be the only change that can be made in the coming months before the utilities must issue their next RFPs for default service," OEP said.

OEP, "urges the Commission to take action before the coming winter season in order to reduce price volatility and the economic impacts of this past winter for default service customers."

OEP said that laddering default service contracts should be further evaluated at Liberty Utilities and Unitil, arguing that using a laddering mechanism should not be dismissed solely due to concerns about the utilities' small load size.

IR 14-338

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