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Update: PUC Releases Methodology For New Pricing Index Which May Determine Small Customer Default Service Rates

October 7, 2016

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

With a bidder confidentiality period now expired, the Maine PUC has released an order setting Standard Offer rates for residential and medium non-residential customers at Maine Public Service (Emera Maine – Maine Public District).

Previously, the PUC had announced new default service prices through May 31, 2017 for Maine Public Service (click here for new rates), and, in doing so, said future rates would be based on an index. However, the specific mechanics of the index were not disclosed at such time

First, the index mechanism will only apply if an extension of the default service term, under the bid awarded to New Brunswick Energy Marketing Corporation is approved. Such extension would be for 31 months, from June 1, 2017 through December 31, 2019.

The extension is contingent on the approval of proposed changes to Market Rule 10. NB Marketing’s bidder conditions state that NMISA has recently proposed to its Board a revised Market Rule 10, which would allow generation resources located within the New Brunswick Balancing Authority Area to meet a supplier’s capacity obligation in the NMISA northern region without the need for the firm transmission into northern Maine. If, prior to March 31, 2017, NMISA obtains FERC approval for its revised Market Rule 10 (eliminating the need for firm transmission into NMISA northern region for capacity resources located within the New Brunswick Balancing Authority Area to meet NMISA’s entire capacity obligation) and the revised Market Rule 10 becomes effective on or prior to June 1, 2017, then the bid term and prices would extend 31 months for a total term of 38 months, ending December 31, 2019.

Generally under the extension, the prices for the 31-month extension period for the MPS residential and small non-residential class and the medium non-residential class are indexed to changes in wholesale market prices for the remainder of 2017, and to Standard Offer prices in the comparable Standard Offer classes at Central Maine Power Company and Bangor Hydro-Electric for calendar years 2018 and 2019.

More specifically, the MPS residential and small C&I customer Standard Offer rate for June 1, 2017 to December 31, 2017 if the extension is implemented will be $0.06683/kWh plus an "Energy Index Change".

The residential and small C&I Energy Index Change shall equal the difference between the around-the-clock MA Hub Energy Price ($/kWh), as published by the CME Group Clearport and converted to the around-the-clock price for the June 2017 through December 2017 term, from the close of business on the date FERC issues its final order approving the revised NMISA Market Rule 10 and the close of business on September 20, 2016. The energy indices used shall be the published CME settlements for ISO New England Mass Hub 5 MW Peak Calendar-Month Day-Ahead LMP Futures Contract (CME Clearport Product Code U6) and ISO New England Mass Hub Day-Ahead Off-Peak Calendar-Month 5 MW Futures Contract (CME Clearport Product Code H2). The published peak and offpeak prices on each applicable day (September 20, 2016 and date of final FERC order) shall be converted to the around-the-clock price (weighted average of peak and offpeak hours) for the June 2017 through December 2017 period. If such CME indices are not available, an equivalent published index price shall be used.

As an example, suppose the published CME MA Hub prices (converted to around-the-clock) for the June 2017 through December 2017 period equals $0.04000/kWh on September 20, 2016 and $0.035/kWh on the date of FERC's final Market Rule 10 order, then the effective standard offer service price for the June 2017 through December 2017 period would be $0.06183/kWh [$0.06683/kWh + ($0.035/kWh - $0.040/kWh)].

For residential and small C&I customers, the MPS Standard Offer rate for 2018, and then again in 2019, shall be set at 95% of the "Southern Maine Index Rate." The Southern Maine Index Rate equals the weighted average (based on total small class load for the preceding calendar year) Small Class Standard Offer Service rate set for each respective calendar year by the PUC for Bangor Hydro-Electric and Central Maine Power. The use of the Southern Maine Index as defined above is contingent on the PUC using historic approaches to set CMP and BHE default service rates.

For MPS medium non-residential customers, the indexing process will be similar, except that, for 2017, the charge added to the Energy Index Change will vary by month from June through December 2017

For 2018 and 2019, the MPS medium non-residential customers Standard Offer rate will be set at 92% of the Southern Maine Index Rate applicable to the medium class.

The specific 2017 monthly charges for the MPS medium C&I class that will be added to the energy index, plus more details on the overall process, can be found in the PUC's order (Attachment 1, click here).

Docket No. 2016-00111

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