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PUC's Cawley Again Invites Retail Suppliers To Bid To Act As Default Service Supplier

May 1, 2015

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

Pennsylvania PUC Commissioner James Cawley has again invited retail electric suppliers to compete to act as the single default service supplier at Citizens Electric Company and Wellsboro Electric Company.

As previously reported, the PUC has approved a plan at Citizens and Wellsboro under which all non-hourly default service customers were to be awarded to a single winning supplier at each utility, with pricing based on a blended six-month fixed index of wholesale prices (set on various trigger dates), plus a fixed retail adder as determined through the RFP (click here for more specifics on product design).

When the plan was approved by the PUC in February, Cawley encouraged retail suppliers to "step up" to bid for the tranche offered at each utility (click here for our prior story on Cawley's plea to retail suppliers)

In February, Cawley had said, "The proposal offers an opportunity for Electric Generation Suppliers (EGSs) or wholesale suppliers to serve the entire default service load of either company -- in excess of 5,000 customers each -- through a competitive process that provides indexed energy prices that can provide a reasonable level of security and lower volatility, yet also is reasonably market price reflective. Suppliers are likely to be interested in such a product, given the three-year duration and attractive tranche size," Cawley said.

"I encourage EGSs to step up to the plate here and bid, so as to demonstrate that they can effectively serve a constructive role in facilitating the provision of default service under more innovative default service designs," Cawley said.

However, when Citizens and Wellsboro conducted the RFP for the tranches, the results were deemed non-competitive by the PUC (click here for story), which triggered an alternative contingency default service plan that relies on a continued mix of managed block purchases for default service.

The PUC's secretarial letter was not specific as to why the RFP was deemed non-competitive, but it is likely because an insufficient number of bidders participated, as the utilities had warned in advance of the auction that they expected that they would receive less than three bids.

While not able to be confirmed due to the confidential nature of the auction, EnergyChoiceMatters.com understands that at least one company described to us as a "retail supplier" may have participated in the RFP, but it is unclear if this was a large integrated supplier who regularly participates in traditional default service and POLR auctions who also sells at retail, or was a retail-only supplier seeking to take a leap into the default supplier role.

A number of reasons have been cited for a lack of bidder participation (click here for prior story). These include M&A activity in the wholesale market (which led to PPL EnergyPlus successor Talen Energy not participating while internal restructuring was occurring). Some suppliers told the utilities that the short time-frame between the PUC's February order approving the plan, and the April RFP was a hindrance, particularly as the PUC adjusted the index to be used for pricing (adding a second trigger date with prices to be blended), as suppliers wanted more time to evaluate the novel nature of the product.

And, admittedly, while the product design would allow one retail supplier to win all of the customers at each respective utility through May 31, 2018, the supplier would be acting in a wholesale, not retail, role, with no direct line to the customer (no supplier name on bills, for example), so the auction is more analogous to the Ohio gas SSO auctions than the retail SCO auctions.

Speaking with EnergyChoiceMatters.com yesterday during National Energy Marketers Association National Restructuring conference, Cawley said of the lack of bidder participation that the PUC can't expect suppliers to enter the market if it's not economic to do so.

Cawley also cited the lack of Electronic Data Interchange at the two utilities as potentially hindering supplier interest.

Still, Cawley invited retail suppliers to again compete to act as the sole default service supplier at Citizens and Wellsboro, as the utilities will again seek to award their entire non-hourly load to a single bidder at each respective utility.

Specifically, the contingency block portfolio default service plan will only run through May 31, 2016, and the utilities will conduct another RFP to seek a single supplier at each respective utility to serve all non-hourly customers for a two-year term of June 1, 2016 to May 31, 2018, under the index pricing plus adder mechanism. Under the contingency plan, it is anticipated that the RFP for the two-year term beginning June 1, 2016 would be conducted in the first quarter of 2016

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