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Pa. PUC Approves Default Service Procurement Plan For FirstEnergy EDCs

Hourly Pricing Cutoff Lowered

September 6, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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The Pennsylvania PUC approved, without modification related to procurement matters, the FirstEnergy utilities' default service procurement plan be adopted as proposed, covering the term June 1, 2019, through May 31, 2023.

As previously reported, the PUC addressed in the proceeding several other issues, including imposing a price cap on CAP customer shopping (see story here) and denying a proposed bypassable default service adder (see story here)

With regards to default service procurement, the PUC adopted the plan as filed, denying a recommendation from the OCA to have a portion of the residential contracts extend 12 months beyond the plan's end date (to avoid a "hard stop").

Under the PUC's order, residential customers will be served under a blend of 5% variable priced products and 95% fixed-price 12 and 24-month products. The fixed price products (for residential and also for commercial under 100 kW noted below) will be full requirements contracts procured via competitive descending clock auctions

The 5% variable priced products for the residential supply will be priced at the real time hourly load locational marginal price (LMP) for the Delivery Point plus a fixed adder of $20.00 per megawatt-hour (MWh). This additional adder is intended to capture an estimate of costs of other supply components associated with meeting this full-requirements obligation, including capacity, ancillary services, NITS, AEPS compliance, and other costs

Generally speaking, apart from the 5% variable, one-half of residential default service will be served under 12 month contracts, and one-half under 24 month contracts (% varies during the term from 45-55% for both contract types), procured anywhere from 2 to 8 months in advance of delivery

The EDCs will serve commercial (under 100 kW) customers on a blend of fixed-price 3, 12 and 24-month products, with each contract term length serving (roughly) about one-third of load

See the adopted schedule and laddering of the default service procurements and products here

Prices to Compare for residential and small commercial customers will change each quarter

The PUC adopted without modification the products included in the full requirements products as proposed by the companies (see our prior story for a detailed description)

The PUC adopted the FirstEnergy EDCs' plan to lower the hourly pricing cutoff to 100 kW, including the EDCs' proposed methodology for calculating whether a customer exceeds the hourly pricing threshold

Under the order, the FirstEnergy EDCs shall conduct an annual review (on April 1) of each commercial customer’s measured demand for the previous year (April 1 to March 31). If the actual measured demand in any of the twelve months is less than 100 kW, then the non-shopping commercial customer will receive default service under the provisions of the applicable fixed priced PTC Rider. Otherwise, the commercial customer will receive default service under the provisions of the applicable hourly priced service rider. Any changes will become effective June 1 of every year and the hourly or non-hourly designation for a commercial customer will remain in effect for 12 months.

This mechanism of determining whether a customer is above or below the 100 kW hourly pricing cutoff was adopted over RESA's alternative mechanisms for determining commercial eligibility for fixed price default service, which would have required that the customer have two consecutive months in a twelve-month period below the threshold, or, in the alternative, would have based a customer’s migration on the customer’s peak load contribution (PLC).

The PUC accepted, without substantive modifications, settlements concerning various aspects of the default service plan, including continuation of the Purchase of Receivables (POR) clawback charge

See a discussion of the POR clawback settlement here, which the PUC adopted without substantive modification (the PUC clarified that the customer arrearage info shared with an EGS shall be only for the EGS's own customers).

The PUC also adopted without modification a settlement addressing Non-Commodity Billing, Non-Market Based Charges, and Time-of-Use Rates as filed without modification. See details of this settlement here

P-2017-2637855 et. al.

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