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Pennsylvania Utilities Select Suppliers For Retail-Like Default Service Program

May 5, 2016

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

Citizens' Electric Company and Wellsboro Electric Company in Pennsylvania have awarded default service contracts to a single supplier in each service area to serve the entirety of each EDC's non-hourly default service load for the period June 1, 2016 to May 31, 2018

As previously reported, the Pennsylvania PUC had approved a plan at Citizens and Wellsboro for the period June 1, 2015 to May 31, 2018 under which all non-hourly default service customers were to be awarded to a single winning supplier at each utility, with pricing based on a blended six-month fixed index of wholesale prices (set on various trigger dates), plus a fixed retail adder as determined through the RFP (click here for more specifics on product design).

While still a wholesale product, the default service program did offer several retail-like attributes, such as awarding the entirety of the load to a single supplier, instead of using slice-of-system tranches. When the design was first approved by the PUC, then-Commissioner James Cawley commended the EDCs for the innovative default service design, and encouraged retail suppliers to participate in the RFP, stating, "I encourage EGSs to step up to the plate here and bid, so as to demonstrate that they can effectively serve a constructive role in facilitating the provision of default service under more innovative default service designs."

However, there were only two bids in response to the initial RFP, and the PUC deemed the RFP non-competitive and did not approve an award of a contract. The lack of participation was attributed to the timing of the RFP, the novelty of the product, and M&A activity which reduced potential bidders as certain bidders were sitting out RFPs pending corporate restructuring.

While the EDCs continued their portfolio approach to default service through May 31, 2016 in the absence of an award via the RFP, consistent with their approved default service plan, they again in March 2016 sought suppliers under the new single-supplier default service paradigm for a two-year period ending May 31, 2018. The product was modified slightly to remove PJM Regional Transmission Expansion Plan/Transmission Enhancement Cost Recovery (RTEP) from those costs to be recovered under the supplier adder, and to recover such costs on a pass-through basis instead.

For the new RFP covering the period June 1, 2016 through May 31, 2018, the PUC approved the results of the solicitation, and the EDCs awarded their non-hourly default service load to a single supplier at each utility for the two-year period.

The EDCs told EnergyChoiceMatters.com that the winning bidder at Citizens' was MP2 and that the winning bidder at Wellsboro was NextEra.

At Citizens', the resulting base non-hourly default service rate for June 1, 2016 through November 30, 2016 was 7.161 cents per kWh. Note that this rate does not include an updated reconciliation amount which will impact the final GSSR-1 default service rate

At Wellsboro, the resulting base non-hourly default service rate for June 1, 2016 through November 30, 2016 was 7.335 cents per kWh. Note that this rate does not include an updated reconciliation amount which will impact the final GSSR-1 default service rate

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