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New Bill Supported By Load Groups, AARP Would Require Utilities To Provide Default Service Under "Market Rate Offer"

May 25, 2017

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

A newly filed bill in the Ohio House of Representatives (H. B. No. 247) would require that the electric distribution utilities provide the standard service offer (SSO) under a "market rate offer" (MRO) as defined in the bill, eliminating the ability of EDCs to rely on the electric security plan (ESP) mechanisms currently used to provide SSO.

Currently, all Ohio EDCs provide SSO under ESPs, which are notable for addressing a variety of rate recovery and tariff provisions in addition to the procurement and pricing of SSO. Current statute allows the establishment of an MRO, and while there have been a few MRO applications, no MRO has been approved for SSO.

Currently, all of the ESPs rely on competitive auctions to obtain SSO supplies; however, such procurement is not required under the ESP. Several of the original ESPs relied on administrative determined rates and utility-owned generation to serve and price SSO service.

Under H. B. No. 247, each EDC would be required to, "establish a standard service offer price for retail electric generation service that is delivered to the utility under a market-rate offer."

Apart from deleting current requirements that an initial MRO be blended with existing rates over time prior to moving to 100% market-based rates, H. B. No. 247 would generally not alter the structure of the MRO as it exists under current statute.

Notably, as is currently required, the market rate offer, "shall be determined through a competitive bidding process."

H. B. No. 247 would continue several current provisions concerning the MRO competitive bidding process relating to administration of any procurement; however, like the current statute, H. B. No. 247 would not define the products procured under the required competitive bidding process

More specifically, H. B. No. 247 would not define the nature of the products procured via the competitive bidding process (e.g. load following versus fixed blocks, etc.) nor would H. B. No. 247 require any specific term lengths or laddering/portfolio mix.

H. B. No. 247 would only require that the competitive bid process have a, "clear product definition."

Under H. B. No. 247, "All costs incurred by the electric distribution utility as a result of or related to the competitive bidding process or to procuring generation service to provide the standard service offer, including the costs of energy and capacity and the costs of all other products and services procured as a result of the competitive bidding process, shall be timely recovered through the standard service offer price, and, for that purpose, the commission shall approve a reconciliation mechanism, other recovery mechanism, or a combination of such mechanisms for the utility."

H. B. No. 247 would continue to provide that, "The public utilities commission by order may authorize any just and reasonable phase-in of any electric distribution utility price established under sections 4928.141 and 4928.142 of the Revised Code [e.g. the MRO], and inclusive of carrying charges, as the commission considers necessary to ensure price stability for consumers. If the commission's order includes such a phase-in, the order also shall provide for the creation of regulatory assets pursuant to generally accepted accounting principles, by authorizing the deferral of incurred costs equal to the amount not collected, plus carrying charges on that amount. Further, the order shall authorize the collection of those deferrals through a nonbypassable surcharge on any such rate or price so established for the electric distribution utility by the commission."

The bill would terminate the authority for utilities to rely on ESPs for the SSO. Previously authorized ESPs would be permitted to continue. No ESP authorized after June 1, 2017 would be permitted to extend beyond June 1, 2020.

Supporters of H. B. No. 247 include AARP Ohio (AARP), Northeast Ohio Public Energy Council (NOPEC), Office of the Ohio Consumers’ Counsel (OCC), The Ohio Manufacturers’ Association (OMA), and the Ohio Farm Bureau Federation (OFBF)

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