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Even People's Counsel Supports Shorter Duration of SOS Contracts
While the District of Columbia Office of People's Counsel continues to support a portfolio management approach to electricity SOS, to the extent the current wholesale load following model is maintained, OPC does support a shorter duration of contracts versus the current contracts
Now, OPC hasn't suddenly jumped on to support quarterly SOS pricing.
However, OPC said that three-year contracts (as used for residential and small C&I customers currently) should no longer be used.
"[B]ased on the current SOS process, OPC recommends two years for small commercial and residential customers. Three year contracts increase bidders' market risks and, therefore, likely lead to a higher risk premium included in the bids. This additional risk is seen in fuel and electricity futures markets where trading is typically thin to non-existent going out three years," OPC said
As noted, OPC's suggestion is predicated on a decision to maintain the current SOS model.
OPC prefers a portfolio management model that includes long-term contracts.
"OPC believes that the current SOS process could be supplanted by a portfolio management structure that combines long and short-term contracts with market purchases," OPC said
"In particular, long-term contracts for renewable energy would act as a hedge by locking in low, stable prices for energy and comply with the District's increasing renewable energy requirements. These contracts would also insulate ratepayers from fuel price volatility and environmental regulatory risk," OPC said
OPC's comments came in a PSC docket reviewing the structure of SOS (FC 1017)
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August 24, 2016
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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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