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Retail Supplier Says Sought Changes In Allocation Of Transmission Charges Would Stifle Retail Competition

January 15, 2018

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

A new methodology for assigning charges for network service and other charges under the PJM Tariff filed by Dominion Energy Virginia at FERC would, "limit[] the ability of load-serving entities ('LSEs') and retail customers to reduce costs by managing their load, thereby promoting inefficiency and interfering with retail competition, and improperly allocate[] costs in a manner that is inconsistent with Commission precedent," Calpine Energy Solutions, LLC ("Calpine", or "Solutions") said in a protest filed at FERC

Dominion Energy Virginia proposes to add a new Attachment M-2 to the PJM Interconnection, L.L.C. Open Access Transmission Tariff to revise Dominion’s Network Service Peak Load ('NSPL') contribution methodology.

Calpine said in its comments to FERC that, "the methodology proposed in the December 21 Filing is untested and at odds with the methodology used by other transmission owners in PJM."

As described by Calpine, Dominion currently assigns charges for network service and other charges under the PJM Tariff by dividing the annual transmission revenue requirement by the load in the Dominion Zone at the annual coincident peak (the 1-CP calculation). According to Calpine, Dominion has stated that, "[b]ecause the billing determinants are calculated using this single snapshot of customer demand, i.e., at the time of the annual peak) [sic], it is possible for LSEs to forecast the annual peak and intentionally reduce their load in that hour," which could "significantly reduce or even eliminate that customer’s responsibility for Network Service charges for an entire year."

As described by Calpine, the December 21 Filing proposes to revise Dominion’s Network Service Peak Load (NSPL) contribution methodology to include an average demand calculation to serve as a backstop on each customer’s 1-CP load calculation. As described by Calpine, under the new Attachment M-2, while 1-CP will remain the formula rate divisor, if an LSE’s actual total hourly load coincident with the Dominion Zone NSPL is lower than its average demand, the average demand will be used to set the NSPL contribution for cost allocation purposes.

Calpine said that this change is, "clearly not just and reasonable as it promotes inefficiencies, stifles retail competition, and improperly shifts costs in a manner that is not consistent with Commission precedent."

"As a CSP [competitive service provider] in Virginia, Solutions is very sensitive to the needs of its retail customers, and has worked diligently to bring risk and load management services to such retail customers. Solutions’ ability to benefit its customers through innovative products and services that manage the individual, unique loads of such customers would be significantly impacted if Dominion were permitted to change its NSPL methodology as proposed in the December 21 Filing. Currently, from the perspective of an LSE with retail load obligations, Network Integration Transmission Service ('NITS') and Transmission Enhancement Charges ('TEC') in PJM, as part of network service, are allocated based on each LSE’s aggregated daily NSPL load contribution. Each utility assigns an NSPL allocation to each account. So Solutions’ NSPL on any given day behind a utility, is the sum of all NSPLs for all of the accounts served by Solutions behind that utility. There are, however, a small number of utilities that use an individual LSE’s average load during the 5 peak hours ('5-CP') to allocate charges for NITS and TEC," Calpine said

"Under the new Attachment M-2, Dominion is proposing a scheme to change how it calculates the NSPL contribution, resulting in a scenario that artificially ignores peak demand by allocating Network Service charges based on the higher of an LSE’s 1-CP load contribution, or its average load. In effect, this means that, from a Network Service charge perspective, an LSE and its retail customers would see little to no benefits from shifting their demand to non-peak periods. Instead, to the extent that an individual LSE’s load is reduced during the annual system peak, the benefit of the curtailment would be spread throughout the Dominion Zone. This mutes the price signals that encourage customers to curtail their consumption, and is contrary to the Commission’s recognition that 'a market functions effectively only when both supply and demand can meaningfully participate,'" Calpine said

"Dominion tries to cast any attempt by an LSE to reduce peak consumption as some kind of nefarious act, claiming that its proposed change is necessary to 'protect . . . customers from one or more other customers intentionally avoiding the system peak in order to avoid charges . . . .' As an initial matter, it bears emphasis that Dominion has not identified any instances where this has occurred, and in fact, James Daniel Jackson, Jr., Dominion’s witness, acknowledges that Dominion 'is making this filing on a prophylactic basis.' More importantly, Dominion downplays the fact that an LSE that reduces its peak consumption is not only benefitting itself, but the system as a whole. While Mr. Jackson acknowledges that '[a]s a general matter, reducing load at the peak can be beneficial,' he then claims that any reductions should be at the directive of 'the transmission provider . . . during emergency or pre-emergency conditions.' Contrary to Mr. Jackson’s suggestion, however, reduced peak consumption is not beneficial only in emergencies, but generally lowers system costs and improves system reliability, to the benefit of all customers. By contrast, Dominion’s proposed average methodology removes market discipline and incentives for LSEs to efficiently manage their own loads, thereby promoting inefficiencies and resulting in the need for increased transmission investment," Calpine said

"Dominion’s proposed methodology should also be rejected because it will impede and discourage retail competition in Virginia. Solutions and other CSPs have recently stepped up efforts to work with large retail customers to provide them with competitive retail solutions, consistent with Virginia’s statutes. Dominion has, however, opposed efforts by retail customers to utilize these opportunities, claiming that 'permitting a group of customers to simply aggregate and leave the incumbent electric utility’s system – without any additional justification – would have the potential effect of eroding a significant portion of the utility’s jurisdictional customer base.' Although state regulatory issues are not before this Commission, Dominion should not be permitted to use this proceeding, or exploit its transmission facilities, as a way of reducing the incentives for retail customers to switch providers. Indeed, retail competition would be impeded if Dominion were permitted to change its NSPL contribution methodology as proposed and thereby limit efforts by CSPs in Virginia to compete to provide services and products at the lowest competitive price," Calpine said

Microsoft Corporation also protested the proposed change in comments to FERC, stating, "by impacting all Load Serving Entities ('LSEs') within the Dominion Zone, the filing would limit the benefits available to Microsoft, and all other customers, afforded by the provision of competitive retail service."

Docket No. ER18-493

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