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PUC Rescinds Direction That Utility File Plan To Unbundle Default Service Costs From Distribution Rates

October 13, 2016

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

On rehearing, the Public Utilities Commission of Ohio has reversed its earlier finding and has withdrawn its prior direction that the FirstEnergy Ohio utilities propose to unbundle from distribution rates the costs that the FirstEnergy EDCs incur to support Standard Service Offer (SSO) service and to reflect those costs in the SSO price

In an April order on the FirstEnergy EDCs' electric security plan, PUCO established a placeholder rider (set at 0) to "unbundle" from distribution rates the costs that the FirstEnergy EDCs incur to support Standard Service Offer (SSO) service and to reflect those costs in the SSO price

"[T]his proposal may enhance competition in the Companies' service territories," PUCO said in April

In order to implement this provision, the FirstEnergy EDCs were directed to file an application in a separate proceeding. PUCO noted in its April order that, in such proceeding, the FirstEnergy EDCs would bear the burden of demonstrating that the application is just and reasonable.

In adopting this provision in its April order, PUCO said that it was adopting a recommendation made by IGS Energy.

While IGS had originally proposed unbundling in testimony, IGS had withdrawn its recommendation (and associated testimony) for true unbundling, in favor of a side-agreement with the FirstEnergy EDCs under which the EDCs agreed to certain other retail market enhancements.

Among other things (such as a customer referral program), the side agreement, contingent on a stability rider being approved, called for implementation of a bypassable retail competition incentive rider that acted as a proxy for unbundling but which did not require actual unbundling of distribution rates. This retail competition incentive rider would be charged to all non-Rate GT default service customers, with revenues collected under the rider returned to all non-Rate GT distribution customers (the rider would also exclude PIPP customers).

While part of PUCO's direction in the April order may have suggested the Commission was adopting the mechanism outlined in the side-agreement, PUCO's use of the term "unbundle" suggested that it was adopting a different process, more in line with IGS's original testimony.

Accordingly, the FirstEnergy EDCs and IGS Energy noted that approval of "unbundling" did not reflect their agreement. Additionally, other parties on rehearing opposed unbundling outside of a rate case

In compliance tariffs, the FirstEnergy EDCs submitted a bypassable Retail Competition Enhancement Rider (Rider RCE), set at zero, whose applicability mirrored the retail competition incentive rider called for under the IGS side-agreement.

PUCO addressed the issues on rehearing.

First, based on language in its rehearing order, although PUCO's April order had directed a filing concerning "unbundling," it appears that through such language PUCO was intending to adopt the retail competition incentive rider (seemingly to be implemented through the FirstEnergy EDCs' Rider RCE compliance tariff) agreed to by the FirstEnergy EDCs and IGS, as PUCO said, "The Commission notes that, although FirstEnergy may dispute the characterization. Rider RCE would effectively 'unbundle' distribution rates by assessing a charge on standard service customers and distributing the proceeds of that charge to all non-Rate GT customers."

In any event, whether Rider RCE was intended to reflect the IGS side-agreement or some other unbundling standard, PUCO in its rehearing order found that Rider RCE is unsupported and shall be withdrawn.

PUCO found that, absent the testimony of IGS's witness originally in support of unbundling (which was withdrawn when succeeded by the side-agreement noted above), "there is insufficient evidence to support the creation of Rider RCE, even on a placeholder, zero-cost basis."

PUCO therefore ordered that Rider RCE be eliminated

Case No. 14-1297-EL-SSO

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