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PSC Orders That Portion Of Default Service Load Shall Be Procured Under Long-Term Contracts (Non-Load Following)

PSC Eliminates Minimum Stay Provision For Default Service

PSC Maintains Adder For Default Service Rates

April 12, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The District of Columbia PSC has issued an order in its biennial review of electricity SOS

The PSC eliminated the current minimum stay, which had only applied to commercial customers

The minimum stay provision had required that a commercial customer who leaves SOS, and who then procures service from a competitive electricity supplier, and who subsequently returns to SOS must then stay on SOS service for a minimum of 12 months. There is a 'grace period' for commercial customers whose competitive electricity suppliers default, which gives the customer three full billing cycles to choose another third-party supplier or change to Market Price Service (MPS) rates in order to avoid the minimum stay. In addition, commercial customers can switch from service provided by competitive electricity suppliers to MPS at any time. There is no minimum stay requirement with MPS as Pepco, rather than the wholesale suppliers of SOS, buys the energy from the spot market and provides this service to customers at cost.

Residential customers, by contrast, already are free to switch from SOS as they please.

The PSC said that commenters unanimously support eliminating the minimum stay provision and the elimination of the minimum stay will provide commercial customers with the same customer choice flexibility as residential customers.

"Having no evidence before it to the contrary, the Commission finds that there is no reason to retain the minimum stay provision. Therefore, the Commission will publish a NOPR revising the Commission’s SOS rules to eliminate the minimum stay provision," the PSC ordered

The PSC also declined to eliminate the bypassable SOS adder at this time. This is notable because, as only reported by EnergyChoiceMatters.com, the PSC in its previous biennial review initially eliminated the SOS adder (see story here), effective June 1, 2018, before reinstating the adder on reconsideration (see story here), with the adder to be more fully addressed in the instant SOS review

The PSC also declined, at this time, to modify the current method of calculating the margin that Pepco receives as SOS administrator or the manner in which working capital is treated.

The PSC did order that a portion of SOS be sourced from long-term PPAs which will not be load following contracts

"[T]he Commission believes that it is possible to manage the risks associated with long-term renewable energy PPAs provided that the initial procurement targets a small quantity, five (5) percent of SOS load being procured through such PPAs with a June 1, 2023, projected delivery date. The District’s SOS contracts run on a service year beginning June 1, so these PPAs could likely be executed by mid-2020 to meet the June 2023 in service date," the PSC said

Five (5) percent of the SOS load is approximately 158,000 MWh, and the Commission considers it possible that one utility-scale renewable energy generating facility could provide the entire five (5) percent.

The PSC specifically directed the SOS Working Group to be led by Pepco, as the SOS Administrator, to produce, by July 31, 2019, a draft request for proposals (RFP) for long-term renewable energy PPAs, including the RECs associated with the energy, for solar or wind power generating facilities located within PJM and draft revised SOS rules, if required, to accommodate this change in the SOS procurement portfolio. The SOS Working Group should decide whether the components of such PPAs should also include capacity, ancillary service, congestion, losses, load shaping, etc. The Working Group should suggest the term of the contract. The Working Group will also have to determine whether and how the current SOS WFRSA [wholesale full requirements agreement] and RFP for conventional power would need to be revised to accommodate the introduction of renewable energy PPAs into the SOS procurement portfolio

Pepco will be responsible for submitting the draft RFP and revised draft SOS rules on behalf of the Working Group. As the first step in this process, a planning meeting for the SOS Working Group, including Commission staff, will be convened within 30 days to discuss and plan the introduction of long-term renewable energy PPAs into the District’s SOS procurement portfolio.

The Working Group in designing the RFP for renewable energy PPAs should also consider how to mitigate the risks associated with long-term renewable energy PPAs.

The PSC said that, with respect to volumetric risk, the surplus or shortfall of generation due to the non-load following and intermittent nature of renewable energy PPAs, could be managed through spot sales or purchases by Pepco, as the SOS Administrator, or by wholesale electricity suppliers of SOS. These strategies could potentially reduce the volumetric risk associated with PPAs. The PSC noted that Pepco has experience buying power in the PJM spot market through its management of Market Price Service in the District. The SOS Working Group should also consider adding availability requirements and penalties in the PPA to reduce unit outages.

Pepco shall also prepare a report of the feasibility of using some part of the 100 MWs wind facility Exelon is required to develop pursuant to the merger commitment in the Exelon-Pepco merger to satisfy some or all of the target quantity of five (5) percent of the Standard Offer Service load through long-term renewable energy purchase power agreements and whether this renewable generation could be used to provide additional Standard Offer Service load beyond five (5) percent in the future

"Starting small in this manner would help minimize risks to ratepayers associated with PPAs that have been identified by commenters. Price risk would be significantly reduced as the impact of procuring five (5) percent of SOS load in this manner on SOS prices is very slight, especially as the CRI Feasibility Study and EIA are projecting lower prices with PPAs. Similarly, procuring five (5) percent of SOS load (which would be 1.4 percent of total load) may not lead to stranded costs of any significant magnitude or adversely affect the retail electricity market. As previously indicated, Pepco could manage the volumetric risk through spot market purchases and sales where necessary and/or SOS wholesale suppliers could manage the volumetric risk. In addition, the Commission could perform a cost-effectiveness review as part of the procurement process for the long-term renewable energy PPAs, including both economic and environmental benefits and costs, to ensure that the winning contractor(s)’ prices are reasonable. In the event that the Commission is unable to solicit PPAs with reasonable prices, we could simply cancel the solicitation and resolicit new bids," the PSC said

"While the Commission is starting small, we are also taking direct action to reduce GHG emissions by promoting the construction of new renewable energy generation within PJM. Nonetheless, this is just a start and ... we are directing the SOS Working Group to consider the feasibility of increasing the percentage of long-term renewable energy PPAs to a target quantity of up to 10 percent of the SOS load in the future, after the initial contract with a target quantity of five (5) percent of SOS load is executed," the PSC said

The PSC ordered that the SOS Working Group shall consider the feasibility of increasing the percentage of long-term renewable energy PPAs to a target quantity of up to 10 percent in the future, after the initial contract with a target quantity of five (5) percent of SOS load is executed

In addition, while the target percentage of five (5) percent is a percentage of SOS load, the Commission would consider a renewable energy PPA option adopted by Massachusetts where all District distribution ratepayers would support the PPAs, if that option produces lower prices or further reduces risk. Under this alternative scenario, the energy generated by the PPAs would be sold in the wholesale market with the net proceeds (either positive or negative) credited back to all distribution customers through a surcharge or sur-credits. The SOS Working Group may want to consider this option and how it could be implemented.

Pepco was prepared to file an analysis regarding the impact of long-term renewable energy purchase power agreement obligations on imputed debt

FC 1017

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