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Huge Overcollection Of Default Service Costs At Pennsylvania Utility Leads To 60% Decrease In Default Service Rates

Default Service Rates Would Have Been Negative If Reconciliation Not Capped!

February 27, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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A reconciliation of overcollections from default service customers during the period November 2018 to January 2019 has led to a nearly 60% decrease in the residential electric default service rate at Pike County Light & Power, with similar large decreases for non-residential customers

Pike County filed with the Pennsylvania PUC its electric default service rates for the three-month period beginning March 1, 2019.

Pike's filed default service rates are as follows:

March 1, 2019 through May 31, 2019
               Market   Reconciliation   Total
               Price                     Rate
Residential    6.2060     (2.0000)     4.2060
GS Secondary   6.1420     (2.0000)     4.1420
GS Primary     6.1490     (2.0000)     4.1490
Municipal SL   4.3740     (2.0000)     2.3740
Private Light. 4.2190     (2.0000)     2.2190

Pike's filing of the new default service charges remains subject to PUC approval

For comparison, Pike's current default service rates are as follows:

December 1, 2018 through February 28, 2019
               Market   Reconciliation   Total
               Price                     Rate
Residential    10.4060    (0.3173)    10.0887
GS Secondary   10.3000    (0.3837)     9.9163
GS Primary     10.3090    (2.0000)     8.3090
Municipal SL    7.3340    (0.2659)     7.0681
Private Light.  7.0740    (0.2019)     6.8721

Note that, under the tariff, the reconciliation, known as the Electric Supply Adjustment Charge, shall not exceed a charge or a credit of 2.0 cents per kWh (including Gross Receipts Tax).

Even with the cap on the reconciliation, the resulting residential rate of about 4¢/kWh is about 30% below the forecast market price of electricity, and significantly below prices at other EDCs. The overcollection which will await further disposition under the capped reconciliation mechanism means default service rates at Pike County will continue to be skewed beyond May 31, 2019.

The reconciliations for the period March 1, 2019 through May 31, 2019 would have exceeded 2.0 cents per kWh if the cap had not been in place. In fact, for residential and GS Primary customers, the reconciliations would have exceeded the Market Price of Electric Supply (resulting in a net credit for electricity supply usage) but for the 2.0 cents cap

Specifically, but for the 2.0 cents cap, the reconciliation of prior overcollections would have resulted in the following credits to customers (in cents per kWh)

         (Uncapped, Including GRT)
Residential      (7.4478)
GS Secondary     (4.7431)
GS Primary       (7.8108)
Municipal SL     (3.8095)
Private Light.   (3.2218)

The credits not provided to customers through the March 1 default service rates will be held for future disposition.

The significant overcollections during the period November 2018 to January 2019 appear to stem from actual costs which were materially lower than the default service rates charged to customers (which are set in advance based on forecast NYISO market prices, plus any reconciliation)

For example, the actual cost to serve residential default service varied from 4.6 cents per kWh to 5.9 cents per kWh during the period November 2018 to January 2019 (compared to a 10¢/kWh rate charged to customers as noted above)

Across all customer classes, the aggregate cost of default service, including the application of any prior-period reconciliations, was about $591,000 for the period November 2018 to January 2019. However, revenues from all default service customers were about $1.1 million for the November 2018 to January 2019

Note that, since June 1, 2019, the residential default service charge at Pike County has been in the 9-10¢/kWh range. During such time, the reconciliation for the residential class had been a charge of about 1.7¢/kWh for the period June through November 2018, and a credit of (0.3173)¢/kWh for the recent period of November 2018 to January 2019

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