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Retail Supplier Supports FERC Complaint Over AEP Ohio Nonbypassable Transmission Charge, RESA Cautions Nonbypassable Treatment Appropriate For Some Regulated Charges

December 10, 2015

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

Noble Americas Energy Solutions LLC has filed comments in support of a complaint from Industrial Energy Users-Ohio filed at FERC in which the industrials argued that the treatment of certain transmission charges, including Network Integration Transmission Service (NITS), as nonbypassable at AEP Ohio violates the PJM OATT and FERC's Order No. 888 requirements.

See RetailEnergyX.com for background on the complaint

AEP-Ohio's transmission rider, the Basic Transmission Cost Recovery Rider (BTCR), approved by the Public Utilities Commission of Ohio, requires LSEs, Ohio CRES providers, and retail customers that seek to contract directly with PJM for transmission service to enter into agreements and Declarations of Authority that transfer billing responsibility for transmission services to AEP-Ohio. The agreements effectively render the BTCR as billed by AEP-Ohio nonbypassable, Noble noted

Essentially, AEP Ohio, via the BTCR, assumes the NITS obligation on behalf of all customers, under the reasoning that the charge is regulated and not hedgeable. Retail suppliers are relieved of paying for NITS

Aside from the nonbypassability, industrials have protested the billing determinants used for AEP Ohio's BTCR, versus what would be used under direct service from PJM

"The type of nonbypassable surcharge implemented by AEP-Ohio is inconsistent with competition in the wholesale and retail power markets because of its price and market suppressive effects. Its effects are unduly discriminatory, as the BTCR makes impossible for CRES providers, like Noble, to offer its existing innovative products and compete in the market with the incumbent utility, here AEP-Ohio," Noble said

"Non-bypassable charges circumvent and ignore existing market structures, shift the risk to the customer, deprive consumers of the benefits of their bargains, negatively affect the incentives to CRES providers to build products and services now and in the future and result in harm to existing LSE’s that have in good faith followed the rules and the PJM Tariff. This predatory attempt to shift risk and assign costs directly harms retail choice. By placing PJM wholesale transmission charges into a nonbypassable retail rate, AEP-Ohio has directly and materially interfered with the ability of CRES providers, including Noble, to offer retail market products and services to customers. Further, the rate has endangered and interfered with Noble’s existing contracts with customers," Noble said

"Noble has built a sophisticated, proprietary summary billing system which will be rendered unusable in Ohio as a result of AEP-Ohio’s implementation of the BTCR. Noble provides direct billing to its customers through a competitive product that is highly tailored to the individual customer. By requiring Noble to enter into agreements or Declarations of Authority which transfer billing responsibility for PJM transmission charges to AEP-Ohio, regardless of the competitive billing service which Noble is providing to its customers, AEP-Ohio has interfered with Noble’s contractual relationship with its customers, to Noble’s and the retail customers’ detriment. Such effects are unduly discriminatory, resulting in higher prices to consumers, and go to the heart of the FPA’s prohibition against unduly discriminatory and preferential charges," Noble said

The Retail Energy Supply Association noted in comments that, during the PUCO's consideration of the BTCR, RESA members had raised some of the same concerns cited by industrials with respect to the calculation of the BTCR, billing determinants, and the use of a methodology that differs from that used in the PJM Tariff. "[N]onbypassable charges should be calculated and assessed based on the same methodology utilized in creating the rate that forms the foundation for the charge," RESA said

RESA noted, however, that it is not generally opposed to implementation of non-bypassable charges that reflect charges such as those at issue -- "wholesale transmission-related rate components that cannot be predicted with certainty, that could change without notice and cannot be mitigated."

"Such non-bypassable charges can provide benefits to retail customers served by a CRES because, for example, the CRES will not have to build into the price of its product a component that takes into account the uncertainty created by the risk that the charge may change during a retail customer’s contract term," RESA noted

"However, any charge, whether non-bypassable or not should be consistent with the rate design that underlies the charge. In this case, NITS, derivation of the rate design of the BTCR is now pending before the Ohio Commission, and the Ohio Commission should retain the jurisdiction to issue its determination. In the event that the [federal] Commission determines that this matter is within its jurisdiction over unbundled retail transmission, RESA believes that the BTCR should reflect the 1 CP methodology," RESA said

EL16-10

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