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Settlement Would Raise Fees Associated With Competitive Generation Customer Choice Program At Arizona Utility, Continue Program That Was Threatened With Elimination

March 2, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A settlement among certain parties to Arizona Public Service's rate case would continue the competitive wholesale generation (buy-through) choice program at APS, at the current overall cap, but with higher fees to suppliers.

APS had originally proposed to eliminate the competitive generation buy-through program (Experimental Rate Rider Schedule AG-1, or referred to in the settlement as AG-X). While noting that the program was popular with customers, ACC Staff opposed continuing the program in its current form, and said that the program should only continue if it could be shown that costs are not shifted to other customers as a result of AG-1

The settlement would retain the program, with its current 200 MW cap (though removing rate class-specific caps, replaced with certain reservations for single-site customers), its minimum 10 MW eligibility requirement, and with higher fees.

Notably, the administrative management fee paid to APS would triple to $1.80 per MWh, and while the capacity reserve charge would be a lower $/kW-month amount, it would apply to 100% (rather than 15%) of demand, increasing costs to alternative suppliers

A new lottery would apply if the AG-1 program becomes oversubscribed.

The settlement would adopt the following provisions related to Rate AG-X.

a. The capacity reserve charge applicable to AG-X customers will be equal to $5.5398 per kW-month (60% of current FERC demand charge of $9.233 per kW), applied to 100% of the customer's billing demand.

b. This charge and other parameters will be re-evaluated in APS's next rate case, including whether AG-X should be evaluated as a separate customer class in the cost of service study.

c. AG-X customers must provide 1-year notice to return to APS's cost-of-service rates. At APS's option, customers seeking to return with less notice must pay market-based rates until the 1- year notice period is attained.

d. The Administrative Management Fee for the program will be increased to $1.80 per MWh.

e. A retail energy imbalance protocol specifically designed to measure how well an AG-X Generation Service Provider (GSP) is matching their retail buy-through customer load on an hourly basis will replace the FERC energy imbalance protocol. Energy Imbalance will be determined based on each GSP's aggregated hourly customer load.

       i. Within the range of +/- 15% each hour or +/- 2MW, whichever is greater, GSPs would pay based on Schedule 4 of APS's OATT, which now reflects the terms of the CAISO imbalance charges.

       ii. Greater than 15% each hour or +/- 2 MW, whichever is greater, in addition to the charges in i) GSPs would pay a penalty of $3 per MWh.

       iii. In addition to the imbalance provisions described above, GSPs with 20% of hourly deviations greater than 20% of the scheduled amount occurring in a calendar month will receive a notice of intent to terminate the GSP's eligibility in the program unless remedied. Imbalances of this magnitude and frequency will be deemed "Excessive." Should Excessive imbalances occur again in a subsequent month, within 12 months from the date of the notice, the GSP's eligibility may be terminated. To avoid termination, a GSP must demonstrate to APS that it is operating in good faith to match its resources to its load. In the event of GSP termination, the customer will be required to secure a replacement GSP within 60 days.

f. The PSA mitigation would remain in place. However the mitigation would be modified such that the resale of capacity and energy displaced by AG-X would be established at flat $1,250,000 per month of off-system sales margins and excluded from the PSA rather than using a pro-rata share of such margins.

g. AG-X to remain at 200 MW but the prior restrictions as to 100 MW from each of the E-32L and E-34/35 rate schedules be eliminated; however, 100 MW would be allocated to 20 MW single-site customers with load factors above 70%, unless not fully subscribed during the solicitation process.

h. Line losses for scheduling AG-X load will be modified to reflect transmission voltage service when applicable.

i. 10 MW minimum aggregation level retained. Current provisions on the size of single site loads eligible for aggregation remain in place.

j. New lottery if oversubscribed - otherwise, first come, first served. After the initial re-lottery, if necessary, customers who enter the program will not be required to participate in a subsequent lottery to remain in the program.

k . The AG-1 deferral will be recovered over 5 years from all non-residential customer classes, except the street and area lighting customer classes. The amount is allocated to each class based on adjusted Test Year kWh.

l. APS will not propose a deferral of unmitigated costs resulting from AG-X, if any, and APS will not request recovery of any unmitigated costs resulting from AG-X, if any, in its next rate case.

Settling parties include APS, ACC Staff, Arizonans for Electric Choice and Competition, Calpine Energy Solutions, Constellation NewEnergy, Direct Energy Business, RUCO, and other parties

Docket E-01345A-16-0036

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