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Ohio Staff Propose Competitive Bidding To Supply Electric Assistance Program Customers

February 2, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Staff of the Public Utilities Commission of Ohio have proposed a competitive bid plan to serve the load of electric percentage of income payment plan customers.

R.C. 4928.54, as updated on September 29, 2015, states that the state's director of development services shall aggregate percentage of income payment plan program (PIPP) customers for the purpose of establishing a competitive procurement process for the supply of competitive retail electric service for those customers. The process shall be an auction.

Additionally, R.C. 4928.542 provides that the winning bid or bids selected through the PIPP competitive procurement process shall meet all of the following requirements:

(A) Be designed to provide reliable competitive retail electric service to percentage of income payment plan program customers;

(B) Reduce the cost of the percentage of income payment plan program relative to the otherwise applicable standard service offer established under sections 4928.141, 4928.142, and 4928.143 of the Revised Code;

(C) Result in the best value for persons paying the universal service rider under section 4928.52 of the Revised Code.

Notably, R.C. 4928.542(b) requires that the price paid to PIPP suppliers must be below the price paid to standard service offer (SSO) suppliers. This requirement furthers the goal stated in section (c) of providing the best value for those paying the universal service rider, which funds the PIPP program rebates.

PUCO Staff noted that January 5, 2016 Director Goodman of the Ohio Development Services Agency submitted a letter to the Chairman Porter of the PUCO requesting that the PUCO design, manage, and supervise this procurement process.

PUCO Staff's recommended option for the PIPP procurement is to establish a separate procurement for the PIPP load, as follows:

• Aggregation – Each utility would conduct a separate process in order to allow for easier transition away from the current contracts and to provide more flexibility in design choice for each utility.

• Timing – Bidding would happen on the same days as the SSO auctions.

• Procurement Plan – The schedule of bidding and bid plans would be the same as the utilities’ currently approved SSO procurement plans. Therefore, if a current plan called for 17 percent of SSO supply to be bid out under two-year contracts on a given day, the utility would also offer 17 percent of PIPP load under two-year contracts for the same time period.

• Effect on Existing Contracts – There would be no change to existing SSO supply contracts. Instead, PIPP supply would be transitioned off via these new procurements.

• Load separation – The PIPP load will be broken into 100 tranches, just like the SSO load. If the Ohio utilities decide that this makes the tranches too small to administer, then larger tranche sizes could be used.

• Load Caps – Load caps would be the same as currently used in the SSO auctions presuming that it is feasible to break the load into 100 tranches. If not, then the utility may define a load cap that is as similar as possible to those used in the SSO auctions given the number of PIPP tranches bid out.

• Product & Contract – The PIPP product would be a load-following full requirements product, akin to the SSO product. The contract will have equivalent provisions as the SSO contract, and be executed between the PIPP supplier and each utility. However, because PIPP tranches would be smaller than current SSO tranches, the Independent Credit Requirement (ICR) should be lowered for PIPP supply in a roughly proportional manner.

PUCO Staff recommends that the PIPP auction itself be a simple process. First, the descending-clock SSO auction would run as normal, with bidders offering tranches in a round-by-round process until supply equals demand and a winning market price is established. Then, the auction would enter the PIPP-bidding phase. This would be a set amount of time during which all qualified bidders could submit sealed offers for each tranche of PIPP load. Bidders would have to price each tranche below the average winning SSO price and the least-expensive offers would be taken to fill the PIPP need. The timing of the bid window could be flexible and extend as far as noon the following day, to ensure that PIPP-only bidders would get a chance to review the SSO price and formulate an offer. If the procurement did not attract enough supply to meet its target, the unfilled need could be satisfied through the next scheduled auction, a subsequent reserve auction, or through the market.

PUCO Staff recommends the adoption of the process described above, for all Ohio utilities, beginning with the March 14, 2016 and March 29, 2016 auctions for Duke Energy Ohio, Inc. and Ohio Power Company, respectively.

Staff also proposed an alternative option, which is not its preferred recommendation. The alternative would establish an administrative discount for PIPP customers. In this option, current procurement methods would be kept for SSO load: SSO suppliers would still compete for an obligation to supply SSO load via a descending clock auction. The only change that would be made is that suppliers fulfilling PIPP load would receive an administratively-set discounted rate for any PIPP load supplied

Case No. 16-247-EL-UNC

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