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PSC Adopts Further Parameters For SOS, Retail Supplier Time Of Use Pilots

PSC "Very Disappointed" That Retail Stakeholders Did Not Generally Participate Second Phase

PSC "Strongly Encourages" Retail Suppliers To Bid On Pilots, Looks Forward To "Robust" Retail Supplier Response

May 8, 2018

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

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The Maryland PSC has issued a letter order adopting further parameters for Time of Use generation rate pilots to be offered to customers on SOS, and retail supply pilots that are to select retail suppliers via RFP

As previously reported, the PSC had directed that two generation pilots be developed, one for SOS customers, and one that would rely on retail suppliers for TOU service. Under a November 2017 PSC prior order, the pilots, which are to be in place for 24 months, were designed as follows:

Pilot No. 1: SOS (BGE, Pepco, Delmarva)

• The pilot shall be marketed initially to current SOS TOU customers, and shall be capped at a participant level that is large enough to realize a statistically significant sample size, such as 1,000 customers.

Pilot No. 2: Retail Supply

• The pilot shall limit the number of suppliers to 2 per service territory, and each of those individual classes of supplier customers shall be capped at a participant level that is large enough to realize a statistically significant sample size, such as 1,000 customers.

• Suppliers may enroll pilot customers who receive their electric supply from any source.

• Following workgroup consideration, the Workgroup Leaders shall also report to the Commission on how to ensure that suppliers pay their 'fair share' of marketing and recruitment costs.

• Following workgroup consideration, the Workgroup Leaders shall propose detailed RFP requirements, such as a clear process for submission and evaluation of bids, whether to require certain forms of security, and objective criteria for selecting bids. The Joint Utilities shall implement the RFP and select bids from competing suppliers, for the Commission’s approval. Objective criteria for bid selection should include, at a minimum, the record of the supplier in other states, the supplier’s experience with TOU rates, and the supplier’s ability to implement TOU pricing. Workgroup Leaders shall also ensure that the RFP requirements make clear that suppliers shall share aggregated data from the pilot with the Joint Utilities, the Commission, and as appropriate, other stakeholders.

In response, the working group proposed more details regarding implementation of the pilot programs, which the PSC addressed in a May 7 letter order

Regarding the size of the pilot, the PSC ruled that there shall be a total of 4,020 SOS pilot program participants per service territory. This total shall include approximately 1,608 low to moderate income (LMI) customers per service territory

Regarding rate design for the SOS pilot, the PSC directed that there will be a cost-based peak and off-peak SOS rate, that includes all capacity and transmission costs in the on-peak period rate. Furthermore, the PSC established peak-off-peak ratios for the SOS pilot for each service territory as follows:

• BGE: SOS supply ratio: 4.0/1

• Pepco: SOS supply ratio: 2.7/1

• Delmarva: SOS supply ratio: 2.6/1

As an example under current SOS pricing, BGE's pilot TOU SOS pricing would be $ 0.23874/kWh on-peak and $0.05948/kWh off-peak, compared to the current flat SOS rate of $0.08255/kWh

Departing from earlier direction, the SOS pilots may be marketed to all SOS customers generally, as the PSC said that the SOS pilots no longer need to be first marketed to current TOU customers, as such customers are not representative of the entire population

Concerning the supplier TOU pilots, the PSC said that retail suppliers did not generally participate in the second phase of the workgroup.

"The Commission is very disappointed that the retail supplier stakeholders did not generally participate in the second phase of the workgroup discussions. It is reasonable to believe that retail electric supply customers may be more price sensitive than SOS customers. It would be very important for the retail supply pilot to go forward and capture data to enable comparisons of the pilot results. The Commission strongly encourages retail suppliers to bid on the retail supply pilot offerings," the PSC said

A working group report had stated, "The workgroup notes that although the Retail Energy Supply Association ('RESA') and individual retail suppliers participated throughout the first phase of workgroup discussions prior to the Commission’s November 28, 2017 Order, the retail supplier stakeholders did not generally participate in this second phase of workgroup discussions. In written comments on a draft of this report, RESA stated its position that the dual-pilot program structure outlined in the Interim Order may not be feasible for RESA’s members or other retail suppliers, that this workgroup report does not resolve those structural infirmities, and that retail supplier participation may depend on subsequent Commission Orders and market conditions."

The working group report had stated concerning the supplier RFPs that, "Workgroup participants reached consensus on general principles and specific recommendations for the RFP for the retail supplier pilots ... Because suppliers did not substantively participate in the workgroup discussions following the Interim Order, the workgroup cannot be confident that the supplier RFP will attract participating suppliers or that the resulting pilots run by suppliers will produce statistically significant results. The workgroup, therefore, has made its best efforts to ensure that the pilots run by the Joint Utilities will produce statistically significant results to inform the Commission in designing future TOU rates and assessing ratepayer interest and response. The workgroup also endeavored to ensure that any pilot run by a supplier would gather at least some additional information that may be helpful to the Commission and utilities when considering future TOU offerings."

The PSC approved the RFPs as proposed by the workgroup

"[T]he Commission remains hopeful that electricity suppliers will respond to the utility bids for supplier pilots," the PSC said

As approved by the PSC, for each utility service territory, the RFP will solicit (1) one TOU proposal as directed in a prior PSC order, with a 3 to 5 hour on-peak period during the summer and an optional peak during the winter (Pilot A); and (2) per the Commission’s direction to allow suppliers to offer innovative rate options, one TOU proposal that would request a different TOU rate option.

Under both retail supplier pilots, supply pricing must be the same for all 24 months.

Under the supplier pilots, suppliers may not include a fee for a customer that exits the pilot and may not include cancellation limitations (e.g. 30 day notice).

To continue serving a pilot customer after the term of the 24-month pilot, the supplier must acquire affirmative consent from the customer for a new contract with the supplier between 75 and 45 days prior to completion of the pilot. If a customer does not affirmatively consent to remain with the supplier, the customer will be returned to SOS or the supplier of their choice following the final meter reading of the pilot period

The RFP provides that suppliers shall be responsible for developing their own market research, marketing and enrollment material, customer recruitment, enrollment process and process for tracking participants throughout the entirety of the pilot. Each participating retail supplier will incur costs for participating in the pilot program. Each supplier is free to recruit and retain its own TOU pilot customers and bear the resulting cost of those activities. Each supplier is responsible for the costs to ensure that its internal IT systems can effectively serve customers on a TOU rate and that it can otherwise operate the program.

The RFP provides that the primary evaluation criterion for both offerings would be a load-weighted average price, and that the utility would provide a list of bids ranked in that order. Per the Commission’s direction, the RFP also requires that bidders submit objective information, particularly regarding the supplier’s record in other states and experience with TOU rates. These factors are deemed secondary criteria.

"Upon receiving bids in response to the RFP, the utilities are directed to rank the bids by a load-weighted average price as specified in Attachment A and provide a list to Commission Staff for selection and Commission approval," the PSC said

"The Commission looks forward to robust supplier participation in response to the RFP," the PSC said

The PSC did not approve the range of budget estimates provided by the Joint Utilities for the pilots. "In particular, the Commission has serious concerns about the estimated Marketing, Research, and Customer Education costs. The Commission hopes that the directions included in this Letter Order will enable to Joint Utilities to refine their proposed budgets, particularly regarding the Marketing, Research, and Customer Education category, which the Commission will scrutinize carefully when the utilities submit their updated Budget and Cost Estimates in accordance with the approved timeline," the PSC said

The pilots had been scheduled to start in November 2018, but the working group had premised such start date on a PSC order further setting the scope of the pilots being issued by March 15, 2018

Public Conference 44 (PC 44)

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