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PUC Introduces Purchase of Receivables "Clawback" At Pennsylvania Utilities; Expands Hourly Priced Default Service

May 19, 2016

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

The Pennsylvania PUC adopted without modification at settlement in the FirstEnergy Pennsylvania utilities' default service proceedings for the period June 1, 2017 to May 31, 2021 which, among other things, introduces, on a pilot basis, a clawback mechanism to the purchase of receivables program, and lowers the cutoff for hourly priced default service

POR Clawback

Under the adopted settlement, the POR clawback pilot would be in effect for two years, with a two-prong test trigger to institute a clawback (versus the single trigger originally proposed)

Under the settlement POR clawback, the first prong of the clawback trigger would be if the EGS's average percentage of write-offs as a percentage of revenues over the twelve-month period ending August 31st of each year exceeds 200% of the average percentage of total EGS write-offs as a percentage of revenues per operating company. The second prong of the trigger would identify, of those EGSs identified in the first prong of the test, EGSs whose average price charged over the same twelve-month period exceeds 150% of the average price-to-compare for the prior twelve-month period.

For those EGSs identified by both prongs of the test, an annual clawback charge would be assessed beginning September 2016, equal to the difference between that EGS's actual write-offs and 200% of the average EGS percentage of write-offs per operating company.

To the extent the EDCs propose to continue the pilot beyond two years, the EDCs agree not to propose a decrease to the 200% threshold in the first prong of the test to below 150% prior to 2021. Other parties may propose changes to the trigger thresholds, however.

Default Service Design, Procurement

The adopted default service program at FirstEnergy Pennsylvania utilities' for the period June 1, 2017 to May 31, 2021 lowers the threshold for hourly priced default service and retains the use of three-month contracts as part of the default service procurement portfolio for small C&I customers.

The settlement provides that the FirstEnergy-PA utilities (Met-Ed, Penelec, Penn Power, and West Penn Power) will lower the hourly pricing threshold to 100 kW effective June 1, 2021. However, the EDCs will lower the hourly pricing threshold to 100 kW effective June 1, 2019 for any EDC where smart meters will be used for hourly pricing billing purposes by that date

The current hourly pricing threshold is 400 kW.

In addition to any adder established through an auction to select default service suppliers serving customers at hourly pricing, hourly priced default service will include an additional $4/MWh adder

For commercial customers (under 400 kW until the expansion of hourly pricing to 100 kW), the PUC's order retains the current procurement mix of fixed priced full requirements contracts, which includes a mix of 3-month (28%), 12-month (36%) and 24-month (36%) terms. The FirstEnergy utilities had originally proposed to eliminate the 3-month contracts from the portfolio.

Click here for a schedule of procurement dates for the commercial and residential customers.

Residential customers default service will be served on full requirements contracts with a fixed price comprising 95% of the tranche, and with 5% of the tranche priced at PJM spot prices plus a $20/MWh adder.

Under the PUC's order, 50% of the residential default service portfolio will be 12-month contracts, and 50% will be 24-month contracts.

Residential and commercial Prices to Compare will continue to be adjusted quarterly.

While the PUC's order contemplates the use of the same product mix for the entirety of the default service term, stakeholders may propose, after the first two years of the default service term, a change in procurement or product mix.

Chairman Gladys Brown noted the lack of long-term contracts in the default service plan, and said as previously entered long-term contracts expire, "it will be incumbent upon the EDCs and this Commission to carefully consider long-term contracts of four to twenty year terms."

Continuing current practice, default service suppliers (and retail suppliers) will be responsible for NITS, but they will not be responsible for Regional Transmission Expansion Plan charges (RTEP), Expansion Cost Recovery Charges (ECRC), Reliability Must Run/generation deactivation charges (RMR), historical out of market tie line, generation, and retail customer metering adjustments, and unaccounted for energy (UFE).

The load cap for the procurements will be set at 75%, up from the current 50%

Docket P-2015-2511333 et. al.

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