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Backwards: Pennsylvania Utilities Propose Eliminating Three-Month Contracts In New Default Service Plan, Would Rely on 12, 24 Contracts Only

November 4, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Met-Ed, Penelec, Penn Power and West Penn Power have filed for approval of a default service procurement plan for the period June 1, 2017 through May 31, 2019 which for residential and commercial customers would feature a mix of 12- and 24-month fixed price contracts for default service, with no expansion of the customers subject to hourly pricing

For residential and commercial (under 400 kW) customers, 50% of default service would be served under 24-months contracts procured via three separate procurements held 8, 5, and 2 months before the start of the delivery period, respectively. The remaining 50% would be served under 12-month contracts via three separate procurements held 8, 5, and 2 months before the start of the delivery period, respectively.

Click here for a schedule of procurements

While this is in line with the FirstEnergy-PA utilities' current residential default service plan, it marks a departure for the commercial class, where three-month contracts are currently used to serve 28% of the commercial portfolio, along with 12 and 24-month contracts

"The 24-month term product will provide assured, stable pricing for fixed-price customers while the 12-month product will refresh the default service rate to make it more reflective of current market trends over the term of the DSPs. At the same time, the 12-month products will reduce residential and commercial customers' exposure to significant price volatility associated with shorter term products (e.g., spot and 3-month) due to short-term market anomalies as experienced during the 2014 Polar Vortex and the 2015 Siberian Express," the utilities said

Residential and commercial Prices to Compare will continue to be adjusted quarterly, with rate change filings to be made the latter of forty-five days prior to the effective date or seven days after the last supply auction.

As is the case now, the residential and commercial procurements will be for load following, full requirements supply.

Continuing current practice, default service suppliers (and retail suppliers) will be responsible for NITS, but they will not be responsible for Regional Transmission Expansion Plan charges (RTEP), Expansion Cost Recovery Charges (ECRC), Reliability Must Run/generation deactivation charges (RMR), historical out of market tie line, generation, and retail customer metering adjustments, and unaccounted for energy (UFE).

Default service suppliers in the Met-Ed, Penelec and Penn Power service territories will be responsible for meeting 100% of the non-solar Tier I and Tier II AEPS Act requirements. Met-Ed, Penelec and Penn Power will procure all necessary solar photovoltaic requirements on behalf of default service suppliers and competitive electric generation suppliers (EGSs) that serve load in their respective service areas. In the West Penn service territory, default service suppliers will be responsible for all Tier I and Tier II AEPS Act requirements (including solar photovoltaic requirements), less any Tier I alternative energy credits (AECs) and SPAECs that are allocated to the default service suppliers from existing long-term purchases made by West Penn.

For the industrial class, 100 percent of default service load will be acquired through an auction process in which suppliers bid on a 12-month, full requirements, load-following product whose energy price is set at the PJM real-time price. In addition to a fixed adder of $4/MWh intended to cover capacity, ancillary services, NITS, AEPS Act compliance, and other costs associated with meeting this full-requirements obligation, suppliers may bid an additional adder over the PJM real-time price to cover any remaining costs or provide a potential profit margin. Industrial class auctions for each EDC will be held in January 2017 and January 2018, and these procurements will occur at the same time as the auctions for the residential and commercial classes.

The FirstEnergy utilities propose increasing the auction load cap from 50% to 75%

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