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Shocking Report Recommends Moving Half of SOS To 10-Year Contracts -- No One Supports It

August 31, 2016

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

A consultant report that recommends moving nearly 50% of Delmarva (Delaware) small customer SOS to 10-year long-term contracts is not supported by any significant stakeholder filing comments on the report -- and is opposed by the Delaware Public Advocate (DPA), Delmarva, the Retail Energy Supply Association, and Exelon Generation

The report, examining various SOS structures, recommended a portfolio of: (1) laddered two-year fixed-price full requirements contracts that would represent 30% of the supply requirement; (2) two laddered 10-year fixed price, fixed quantity (block energy and capacity) contracts, with one contract procured every five years, that would represent 42% of the total supply requirement; and (3) spot market purchases that would represent the remaining 28% of the total supply requirement.

In separately filed comments, RESA and Delmarva both noted that the 10-year contracts would shift a significant amount of risk to customers, while damaging the retail market

Even the Delaware Public Advocate opposed the long-term contracts recommendation. The Public Advocate specifically noted that, with so much load under 10-year contracts, the full requirements contracts used for a portion of remaining load would carry hugely inflated risk premiums, due to the significant potential for large migration shifts to and away from SOS depending on whether the long-term contracts are in-the-money or underwater

Where parties differ is on the best structure for SOS.

Delmarva does not recommend any changes to the current three-year laddering process for small customers.

RESA, arguing that the current three-year laddering creates boom/bust scenarios which hamper retail choice, recommended transitioning to 1-year full requirements contracts for residential and small commercial (under 25 kW) customers. RESA proposed moving from 1-year contracts to quarterly contracts for medium and large C&Is (above 25 kW, except for hourly GS-T customers).

The Public Advocate recommended that the Commission move conservatively in modifying the SOS power supply portfolio. The DPA believes the Commission should consider changing the duration of the full requirements contracts from three years to two years, or perhaps making the portfolio a blend of two-year and three-year full requirements contracts

Docket 14-0283

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