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Pepco Now Says SOS Minimum Stay Provision For Non-residential Customers "Could" Be Eliminated

November 13, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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In comments on the structure of electricity SOS in the District of Columbia (part of a biennial review), Pepco said that, "the minimum stay restrictions for non-residential customers could be eliminated."

"The minimum stay provision was contemplated when the SOS regulations were enacted over 14 years ago. Since then, the market has evolved and matured. Large commercial SOS contracts were shortened from two years to one and, currently, a large majority of the total nonresidential load is supplied by retail suppliers: as of August 2018, 82.4% of the non-residential load was served by retail suppliers. With the possibility of three-day accelerated switching, as contemplated in the Commission's rulemaking on Chapter 3 of the Commission's rules, commercial customers would not have a reasonable amount of time to secure a new supplier prior to being locked into SOS for 12 months, which could potentially lead to increased complaints to Pepco and the Commission. Pepco would be interested in hearing the wholesale suppliers' views on extra risk due to the elimination of the minimum stay provision before fully supporting it," Pepco said in comments filed on November 9

While Pepco is still not recommending elimination of the minimum stay for commercial customers, Pepco's openness to its potential elimination contrasts with its position taken during the prior biennial review

In reply comments filed on September 13, 2016, Pepco had previously said, "The Minimum Stay Restrictions for Non-Residential Customers Should Remain in Place. The Commission should reject ExGen and NRG proposals to eliminate the 12-month minimum stay requirement. The minimum stay provision provides certainty to the suppliers when bidding on SOS supply. Eliminating the minimum stay provision would allow customers to arbitrage, which would likely result in additional risk premiums in the suppliers bids for SOS service."

Apart from Pepco's updated position on the non-residential minimum stay, given that the PSC only last year concluded its prior biennial process (see story here), stakeholders' positions are well-known and their filed comments generally did not otherwise reveal novel positions.

In short, the National Energy Marketers Association said that: the SOS adder should be retained; the minimum stay for commercial customers returning to SOS should be eliminated; and long term PPAs should not be used for SOS. Exelon Generation Company, LLC also filed comments seeking elimination of the minimum stay for commercial customers

In addition to addressing the non-residential minimum stay, Pepco filed comments stating that: the SOS Administrator (currently Pepco) should continue to earn the current margin on SOS; the SOS adder should not be eliminated; and long-term contracts for SOS are not in the best interest of customers

The D.C. Office of the People's Counsel filed comments stating that:

• Pepco's margin for administering the SOS program should continue to be collected as an annual fixed charge rather than a volumetric charge

• The SOS adder should not be reinstated

• The minimum stay provision provides the SOS Administrator with more certainty about the amount of load that will be taking SOS service over the ensuing twelve months; however, it may deter non-residential customers who are supplied energy from competitive suppliers from returning to SOS if they are wary of a year-long commitment. OPC recommended further investigation into this issue.

• OPC is not opposed to properly structured PPAs; however, customer protections must be put in place to ensure the risks do not outweigh the benefits as SOS customers would bare all costs associated with the acquisition.

Also see our related story today on the Sierra Club's comments: Green Group Seeks To Impose "Symmetric" Procurement Requirements On Retail Suppliers If Recommended Use of Long-Term PPAs Approved For SOS

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