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PUC Denies Consumers' Counsel Proposal To Require That All Large Gas Utilities Should Use Competitive Auctions For Default Service

January 3, 2018

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Copyright 2010-19
Reporting by Paul Ring •

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In adopting revisions to the natural gas GCR (Gas Cost Recovery) rules, the Public Utilities Commission of Ohio has denied a proposal from the Ohio Consumers' Counsel under which OCC had recommended that all large natural gas utilities should use a competitive, wholesale, auction to procure default service supplies

OCC's recommendation had been exclusively first reported by

Duke Energy Ohio is the only natural gas utility in Ohio with choice that uses a traditional GCR process for default service, rather than a competitive auction

OCC had recommended that, "All larger gas utilities (those serving 100,000 or more customers) in this state should procure and price natural gas supply for consumers through a wholesale auction and standard service offer ('SSO'), except that the PUCO may allow natural gas utilities that currently have a standard choice offer ('SCO') to continue with that offer."

In an order in the rulemaking proceeding, PUCO said that such OCC recommendation is contrary to R.C. 4905.302, which requires the Commission to promulgate a purchased gas adjustment rule that, consistent with the statute, establishes a uniform purchased gas adjustment clause to be included in the schedule of natural gas companies subject to the Commission's jurisdiction. "Nothing in R.C. 4905.302 precludes a natural company with more than 100,000 customers from utilizing the purchased gas adjustment clause as the means of supplying natural gas to its customers," PUCO said

PUCO said that OCC's recommendation is also inconsistent with R.C. 4929.04, which authorizes the Commission, only upon the application of a natural gas company, to exempt any commodity sales service or ancillary service from all provisions of R.C. Chapter 4905, including the purchased gas adjustment clause provisions in R.C. 4905.302. "The statute requires the Commission to afford due process and make certain findings before granting an exemption authorizing a natural gas company to use a method other than the purchased gas adjustment clause to procure supply," PUCO said

OCC had further recommended that large LDCs be required to use a "wholesale" auction for default service, rather than a retail auction

PUCO found that such recommendation is beyond the scope of the GCR rulemaking. "The issue of whether the large natural gas companies should implement wholesale rather than retail auctions for non-shopping customers has no bearing on the purchased gas adjustment clause rules that are under review in this case. Perhaps in acknowledgement of this fact, OCC failed to explain how the GCR pricing provisions in the rules pertain to large natural gas companies granted an exemption from R.C. 4905.302. OCC's preference for wholesale auctions is a matter that is best addressed on a case-by-case basis upon an exemption application filed pursuant to R.C. 4929.04 or a motion to modify an exemption order pursuant to R.C. 4929.08," PUCO said

OCC had also recommended that the management/performance (m/p) auditor be required to verify that a large natural gas company's GCR pricing is at least as favorable as the pricing that results from competitive wholesale auctions

PUCO denied this recommendation, noting that Ohio Adm.Code 4901:1-14-07(D)(2) already directs the m/p auditor to determine whether the natural gas company's procurement planning is sufficient to reasonably ensure reliable service at optimal prices.

"We find it inappropriate to supplement this provision with additional requirements that are not found in R.C. 4905.302, which expressly limits the scope of m/p audits to the matters specified in the statute," PUCO said

"Further, as Duke notes, a fair and meaningful comparison between the GCR pricing of one natural gas company and the auction-based pricing of other natural gas companies would be difficult to achieve in light of their geographical and operational differences," PUCO said

PUCO generally re-adopted the GCR rules with only uncontested minor changes which are intended to provide clarity and correct typographical errors

Case 18-1291-GA-ORD

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