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PUC Adopts Changes To Retail Choice Program; Marketers Had Warned Some Of These Changes Will Harm Market

July 11, 2016

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

The Maine PUC adopted a series of changes to the retail natural gas choice program at Northern Utilities (Unitil)

First, for Capacity Assigned customers, the resources in Northern's portfolio will now be assigned to marketers based on 100% of customer demand, rather than at the 50% level reflected in the existing program.

The change from 50% to 100% will take effect November 1, 2019 to provide marketers an opportunity to plan for and adjust to this change

Marketers had argued that the 50% assignment level of the status quo retail choice regime should be preserved, and had warned that the change would be harmful to the competitive market

Capacity Assigned customers will continue to have retail choice for the entire commodity portion of their gas supply, and, because they will be paying for their share of Northern’s capacity resource portfolio, they will be able to migrate between the market and sales service without paying any re-entry charges for capacity.

Second, any customer that meets a defined set of eligibility criteria regarding usage levels and the requirement for a daily meter will be allowed to choose to be Capacity Exempt and, thus, will be assigned no capacity.

The eligibility criteria for Capacity Exempt status are summarized below:

• Customers must have a daily meter. Existing Exempt customers must install a daily meter by November 1, 2016; new customers that choose to be Exempt must install a daily meter at the time they begin taking service; currently Capacity Assigned customers that choose to become Capacity Exempt in the Open Season must install a daily meter before May 1, 2017.

• All existing Capacity Exempt customers may remain Capacity Exempt.

• New customers with usage in excess of 25,000 ccf per year can elect to be Exempt. For the purpose of this provision, usage is defined as ccf per year as measured at the individual customer’s meter.

• Existing Capacity Assigned customers that began taking service before November 1, 2005 and that meet the above criteria may choose to become Capacity Exempt during an open season that would conclude on November 1, 2016. The change from Capacity Assigned to Capacity Exempt would become effective on May 1, 2017.

Third, the Total Capacity Quantity (TCQ) factor used to assign capacity will be designed to allocate Northern’s resources to customers on a pro-rata, or load share, basis, and will be adjusted each year for customers whose design day demand has changed by 5% or more from its existing TCQ.

Fourth, the re-entry fees and stay-period requirements of the program will be revised to limit the extent to which costs could be shifted between Sales and Delivery Service customers. The Commission approved these changes as summarized below.

• Stay-in period: A delivery service customer that switches to sales service after May 1 must remain on sales service until the subsequent April 30. This is in recognition of the likelihood that Northern will have purchased gas to supply the customer during the upcoming winter period and to prohibit gaming of the system through unlimited and strategic switching.

• Re-entry Rate (for Returning Capacity Assigned Customers): Capacity Assigned customers will pay a re-entry rate upon their return to Sales Service. Prior to November 1, 2019, the re-entry rate will reflect the net incremental costs to serve the returning customers. Beginning on November 1, 2019 (the effective date for 100% Assignment), the re-entry rate will equal the Company’s standard cost-of-gas rate exclusive of any prior period credits or refunds, but inclusive of any prior period under-collections. Although this approach may seem asymmetrical in that returning customers share the cost of any prior period under-collection but do not share the benefit of any prior period over-collection or other credits or refunds, the PUC said that this approach results in a re-entry rate that is always greater than or equal to the standard cost-of-gas rate, and will provide a cushion to cover the risk that the incremental cost-of-gas to serve returning customers is higher than the average cost of gas. The re-entry rate will be set as part of each cost-of-gas proceeding.

• Conversion Rate (for Returning Capacity Exempt Customers): Capacity Exempt customers will pay a conversion rate upon their return to Sales Service. During the winter period, the conversion rate will be set to capture the incremental cost of providing supply to returning customers with gas that is not capacity-backed. The conversion rate during the winter period will always being greater than or equal to the winter low load factor cost of gas rate. During the summer period, the conversion rate will be the same as the re-entry rate. As with the re-entry rate, the conversion rate will be set during each cost-of-gas proceeding

Regarding the form of assignment, Northern will now release all upstream capacity that can be delivered to its system, except if contracts do not permit capacity release, and only the remainder would be Company-managed. The PUC said that this would address concerns expressed by the marketers related to capacity that cannot be delivered to Northern's system but which must be delivered through the Bay State system. "Although, as a general matter, it is preferable to release capacity to marketers to allow them to manage the capacity, Northern’s proposal appears reasonable given the unique nature of the Bay State component. Therefore, effective November 1, 2017, all upstream capacity resources that deliver to Northern’s system will be released unless prohibited by contract and the remaining resources will continue to be Company-managed," the PUC said

Docket No. 2014-00132

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