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Pennsylvania Adopts Settlement Requiring Utility To Study "Alternative Supply Options" (Bilateral Contracts, Hedges) For Default Service

August 12, 2016

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

The Pennsylvania PUC adopted without modification a settlement among certain parties approving the purchase of Pike County Light & Power (PCL&P) by Corning Natural Gas Holding Corporation that requires the utility to study the use of bilateral contracts and other alternative options for default service supply

Currently, Pike County electric default service is served entirely through NYISO spot market purchases, for all customer classes. The majority of customers in the service area are on competitive supply, due to a one-time, prior opt-out aggregation established in the service area, but the percent of customers on default service has been increasing over time due to, among other reasons, new customers being defaulted to default service

Specifically, the adopted settlement provides that, six months after closing, PCL&P shall, "start a study of alternative supply options for its gas and electric divisions."

"For the electric division, the options studied shall include, but are not limited to, the inclusion of bilateral contracts as defined in 66 Pa.C.S. § 2803, which 'may include the EEI Master Agreement for physical energy purchases and sales and the ISDA Master Agreement for financial energy purchases and sales.' The study shall also include, but not be limited to, other flexible options such as purchases of financial (or physical) hedges in small quantities from brokers," the settlement states

PCL&P shall consult with OCA and OSBA before the study begins with respect to its scope and the options to be studied. PCL&P, OCA and OSBA shall meet to discuss the results of the study within twelve months of closing.

In testimony, a post-transaction Corning had said that PCL&P will explore a full range of options for electric and gas supply. "PCL&P will use its deliberate approach to study the feasibility and economics of possible interconnection with PA utility (electric) and interstate gas transmission systems as alternatives to the ORU delivery service, and the feasibility of purchase from other suppliers including direct purchases from NYISO and PJM," Corning has said

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