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Pa. Consumer Advocates, Industrials: Relieving Retail Suppliers of Compliance Obligation For 7% Surprise Increase in RPS Interferes With Retail Contracts

August 31, 2016

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

The Pennsylvania Office of Consumer Advocate, Office of Small Business Advocate, and industrial customers, in separately filed comments, have opposed a proposal to relieve Pennsylvania retail electric suppliers from complying with a surprise 7% increase in the non-solar Tier I AEPS (Alternative Energy Portfolio Standards) obligations, arguing that such relief interferes with customers' retail supply contracts

Click here for background on the surprise 7% increase

As previously reported, the PUC proposed that one mechanism to address the surprise AEPS increase would be for the electric distribution companies to procure the AECs associated with the increase, with costs recovered via nonbypassable surcharge.

The OCA said that it is, "concerned that allowing EDCs to recover the costs of acquiring the additional non-solar Tier I credits through a non-bypassable charge to be paid by all ratepayers potentially interferes with existing contracts between EGSs and consumers. Presumably, consumers who have entered into contracts with EGSs for their energy supply have done so with the understanding that their contracts cover all costs related to the supply/generation portion of their electric bill. Many consumers who participate in the electric retail market enter into contracts with suppliers to limit exposure to unforeseen increases in energy prices. For these consumers, any additional charge for energy supply will be unfair and unexpected, and could result in consumers questioning the value of contracting for energy supply when the Commission can unilaterally add additional supply charges to their bills."

The OCA said that the EDC nonbypassable solution, "inappropriately shifts the responsibility of complying with the AEPS Act solely onto the EDCs despite EGSs having the affirmative duty to comply with the AEPS Act through the acquisition of alternative energy credits."

OSBA likewise said, in opposing the EDC nonbypassable option, "For EGSs, the matter of AEC cost recovery is a contract issue with their customers. If an EGS's contract permits the cost of procuring AECs to be recovered from customers on a pass-through basis, then the cost of the adjustment AECs can simply be passed through to customers. If no such contract pass-through language exists, then the EGS has voluntarily absorbed the risks associated with AEC requirements and should be prepared to absorb the cost of the adjustment AECs for the 2016 compliance year as a cost of doing business."

A coalition of several industrial customer alliances similarly said, "EDC procurement of AECs with cost recovery through nonbypassable charges is wholly inappropriate and inconsistent with the retail market structure in Pennsylvania. Most importantly, this solution may result in customers paying for costs that could not otherwise be passed through under their current contracts with EGSs. Electric supply contracts are competitive agreements and the resulting contract between a supplier and a large C&I customer is often the product of back-and-forth negotiations ... Simply put, some EGSs may or may not be able to pass this cost increase through to their customers. The nonbypassable charge solution threatens to take away the benefit of the bargain that was struck by the EGS and the customer in negotiating an electric generation supply agreement."

Several additional EDCs also opposed the EDC nonbypassable option, echoing comments made by Duquesne Light (see story here), including arguing that the PUC lacks authority under the statute to relieve EGSs of their AEPS obligation in such a manner.

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