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Duquesne Light Seeks To Introduce Longer-Term Contracts for Residential, Small C&I Default Service For Price Stability; May Seek Long-Term Contract To Support Solar Generation; Would Expand Hourly Pricing, Unbundle Certain Costs From Delivery To Default Service Rates

May 4, 2016

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Reporting by Paul Ring • ring@energychoicematters.com

Duquesne Light has filed with the Pennsylvania PUC a proposed default service plan (DSP VIII) for the period June 1, 2017 through May 31, 2021 that would rely on contracts with longer terms to serve residential and small C&I customers.

Currently, for residential (and lighting) and small C&I customers (under 25 kW), Duquesne Light exclusively relies on 12-month fixed price full requirements contracts to serve default service load. The contracts are laddered such that 50% of default service load is procured at one time, with 50% of the supply replaced every six months

Duquesne Light proposes to transition residential (and lighting) and small C&I customers to a laddered portfolio consisting of 12-month fixed price full requirements contracts (50%), and 24-month fixed price full requirements contracts (50%)

Duquesne Light said that the addition of 24-month contracts would provide, "greater price stability."

Residential and small C&I contracts would be procured within three months before the commencement of their delivery periods

For specifics on the laddering and delivery start dates, click here for a chart of the default service products

Residential (and lighting) and small C&I Prices to Compare would be adjusted fixed for six months, with semi-annual reconciliations

Duquesne Light said that it is evaluating the benefits of entering into long-term contracts (i.e., more than four years) to support the development of utility-scale solar projects (up to a total of 20 MW) in Pennsylvania. To the extent Duquesne Light enters such a contract, the solar alternative energy credits (AECs) could be used to help satisfy the solar requirements of serving residential default service customers, Duquesne Light said. The revenue requirements associated with any solar contracts and their administration will be recovered from residential default service customers

Duquesne Light said that it is, "not yet known," whether it would procure energy, capacity or ancillary services under the long-term solar contract, but to the extent products other than AECs are procured, they would be sold into the market, with credits/costs applied to residential default service customers

For medium C&I customers (initially 25 kW to 300 kW with a future lowering of the high-cutoff to 200 kW), Duquesne Light proposes to continue to serve such customers on non-laddered three-month full requirements supply contracts

Large C&I customers will be served on hourly priced default service.

Duquesne Light proposes to lower the hourly pricing threshold to 200 kW from 300 kW effective June 1, 2019

Duquesne Light proposes changes in the administration of the hourly priced default service program such that it bids out the right to serve hourly priced default service customers to competitive suppliers, under 12-month terms. Hourly priced customers would be charged day-ahead hourly price, plus pass-throughs of capacity and ancillaries and various adders.

Duquesne Light proposes to unbundle certain costs from delivery rates, to instead be recovered through default service rates. Specifically, Duquesne Light is proposing to move recovery of the costs for external legal and consulting services to prepare and obtain approval of the default service plan from base distribution rates to default service rates, and is also proposing to move recovery of the cash working capital costs associated with default service from base distribution rates to default service rates. Finally, if new costs arise related to default service, the company proposes that those costs also be recovered through applicable default service rates.

Duquesne Light proposes that such unbundling commence on the effective date of rates in its next base rate proceeding or June 1, 2020, whichever comes first.

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