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Ohio Approves Changes Making Enhanced Firm Balancing Service Mandatory at Duke, Over Objections of Retail Suppliers

January 7, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Public Utilities Commission of Ohio has adopted, with modification, Duke Energy Ohio's proposal to modify the terms under which choice suppliers and aggregators receive firm balancing service or enhanced firm balancing service, including the utility's related request to modify the FRAS and GTS tariffs

Duke had proposed to make enhanced firm balancing service (EFBS) mandatory for choice suppliers and aggregators that have a maximum daily quantity (MDQ) greater than or equal to 20,000 dekatherms (dth)/day, while choice suppliers and aggregators with an MDQ over 1,000 dth/day and under 20,000 dth/day would continue to elect either type of balancing service

Duke had said that, due to growth in the choice program and a decrease in the number of choice suppliers and aggregators electing enhanced firm balancing service, the company was faced with insufficient firm transportation in relation to storage, and was forced to buy approximately 2,000,000 dth of spot gas, in order to keep its storage from being withdrawn too quickly and to avoid the pipeline penalties that would have otherwise occurred. During the winter of 2013-14, Duke's spot purchases amounted to 1,000,000 dth. Duke further explained that the costs associated with such spot purchases during cold periods or any losses on forced sales in warmer weather are charged to Duke's GCR mechanism and potentially recovered from GCR customers.

"The Commission agrees with Duke that this outcome would not result in fair, just, and reasonable rates for the Company's GCR customers, or an equitable sharing of storage costs between GCR and choice customers," PUCO said

"Under Duke's current balancing service options, we recognize that, for any given year, there may be sufficient elections under Rider EFBS, such that the Company is sufficiently able to manage its system within interstate pipeline tariff requirements. The Commission, however, does not believe that it is prudent to wait to act on the problem identified by Duke or to defer a decision to a later date, given that the evidence of record indicates that the Company has previously experienced difficulty in managing its capacity portfolio," PUCO said

However, PUCO did modify the threshold at which suppliers retain an election of the type of balancing service.

With respect to Duke's proposed mandatory 20,000 dth/day threshold for Rider EFBS, Exeter, an auditor reviewing Duke's GCR purchases, pointed out that choice suppliers may decide to intentionally reduce the number of customers that they serve, as a means to avoid being required to take service under Rider EFBS, which would again leave the utility with insufficient firm transportation capacity. While certain retail suppliers had instead proposed a 1,000 dth/day threshold, Exeter said that this threshold may result in disproportionate allocations of storage to smaller choice suppliers.

Exeter recommended that an aggregate daily demand threshold of 6,000 dth per day is an appropriate solution to avoid these issues and to ensure consistency with the aggregate daily demand quantity at which capacity is assigned to choice suppliers under Duke's firm transportation program.

PUCO found that Exeter's recommended 6,000 dth/day threshold, "is reasonable, properly balances the parties' positions, and should be adopted."

"The Commission, however, acknowledges RESA's concerns regarding the timing of changes to Duke's balancing services and the potential impact on suppliers' current contracts," PUCO said

"For this reason, we find it appropriate to adopt Staff's recommendation on an interim basis, such that, for the 2016-17 heating season, choice suppliers should take either the same level of service under Rider EFBS that they elected for 2015-16, or more if they prefer," PUCO said

"Consistent with Staff's recommendation, we note that any winter spot market purchases for 2016-17 should be thoroughly audited to ensure that GCR customers are not unduly impacted," PUCO said

Case 15-0050-GA-RDR

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