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PUC Expands Mechanisms Available For Utilities Moving To Exit The Merchant Function

December 13, 2018

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

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The Public Utilities Commission of Ohio has adopted revisions to the rules governing alternate rate plans and merchant function exits for natural gas utilities.

While there are no significant policy changes, the adopted revisions expand the mechanisms a utility may use as it transitions to a potential merchant exit.

Specifically, the prior rules, in discussing merchant function exit transitions, referenced the use of "auctions" or "retail auctions". The adopted revisions maintain the use of the term auction, but also allow the use of a, "competitive procurement process," -- a broader term which does not necessarily mean a retail auction.

For example, in the rules governing "exemptions" from the obligation to provide commodity sales service (a precursor to any potential move to exit the merchant function), the prior rules referenced whether the utility would implement an, "auction," for the provision of default commodity sales service

Under the revisions approved by PUCO, reference is instead made to whether the utility proposes to implement, "an auction or other competitive procurement process for provision of default commodity sales service."

With regards to formal exit-the-merchant-function applications, the prior rules had held that the applicant shall demonstrate that the retail natural gas suppliers providing default commodity sales service to the natural gas company's choice-eligible customers have done so reliably for at least two consecutive heating seasons through a, "competitive retail auction process."

Under the revised rules, an exit-the-merchant-function applicant shall demonstrate that the retail natural gas suppliers providing default commodity sales service to the natural gas company's choice-eligible customers have done so reliably for at least two consecutive heating seasons through a, "competitive procurement process."

In adopting the revisions, PUCO stated, "We recognize that, to date, auctions to procure default supply have been used by the large natural gas companies granted a statutory exemption from the obligation to provide the commodity sales service. However, nothing in R.C. 4929.04 precludes a natural gas company from proposing another method of procurement, and any such proposals will be considered by the Commission pursuant to the statute."

PUCO declined to adopt various changes sought by parties

RESA had sought to include in the rule a requirement that any costs associated with a merchant function exit be recovered from choice-eligible default customers, rather than shopping customers or suppliers. PUCO held that such a determination on cost recovery would be premature. "Cost recovery is an issue that is better addressed on a case-by-case basis rather than as a general matter," PUCO said

RESA notes that Ohio Adm.Code 4901:1-19-10 imposes restrictions, relating to various consumer protection, on retail natural gas suppliers that have been assigned a choice-eligible customer (such as under an SCO auction), such as capping the assigned customer's rate at the supplier's posted standard variable rate, and prohibiting early termination fees for such assigned customers.

RESA had sought to add language to the rule clarifying that such restrictions only applies during a period in which a supplier is assigned a choice-eligible customer and not during a period in which the customer may be voluntarily contracting with the supplier.

PUCO ruled that such language is unnecessary and that the consumer protections "clearly" only apply when the customer is being served as part of the assignment process

"The consumer protection requirements set forth in Ohio Adm.Code 4901:1-19-10 clearly apply only where a retail natural gas supplier has been assigned a choice-eligible customer pursuant to an exemption or exit-the-merchant-function plan," PUCO said

PUCO maintained language providing that any alternative rate plans or exit-the-merchant-function applications shall be shown to be, "just and reasonable." While RESA said that this standard was not contained in statute, PUCO said that, "R.C. 4929.04 does not limit the factors that the Commission may consider in reviewing an application filed under the statute."

PUCO also declined to adopt certain revisions sought by consumer advocates, such as eliminating all exit-the-merchant-function plan provisions from Ohio Adm.Code Chapter 4901:1-19.

PUCO said that, "R.C. 4929.04 clearly authorizes the Commission, upon the application of a natural gas company, to exempt any commodity sales service or ancillary service from all provisions of R.C. Chapters 4905,4909, and 4935, with certain exceptions; from specified sections of R.C. Chapter 4933; and from any rule or order issued under those chapters or sections, including the obligation under R.C. 4905.22 to provide the commodity sales service or ancillary service, and subject to certain requirements."

"Regarding OCC's and OPAE's position that the natural gas company's standard offer should be the sole default service available to customers, the Commission notes, again, that exit-the-merchant-function plans may be authorized under R.C. 4929.04," PUCO said

"We note, however, that any specific concerns that OCC and OPAE have with respect to Dominion's MVR or any other default service option, including the pricing of such service, should be resolved through a case-by-case determination rather than through our review of the general rules that govern the filing and consideration of applications submitted by a natural gas company under R.C. 4929.04. Any such application will be thoroughly evaluated by the Commission to ensure that it fully complies with the requirements of R.C. 4929.04 and Ohio Adm.Code Chapter 4901:1-19," PUCO said

Case No. 17-1945-GA-ORD

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