Four EGSs Propose Retail Bid Process To Assign Default Service Obligation To Retail Suppliers In Pennsylvania
EGSs Propose Winning Retail Suppliers Be Required To Pay A Per-Customer Charge Into "Social Responsibility" Fund
Consumer Advocate Does Not Support PUC's Suggested Changes, Use Of PLC, NSPL Tickets For Small Customers
July 29, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • email@example.com
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In comments filed in the Pennsylvania PUC's review of default service cost assignment, rate structure, and procurement issues, a coalition of retail electric suppliers proposed that the default service obligation be assigned to retail electric generation suppliers (EGSs) via a competitive bidding process
The coalition ('EGS Coalition') includes NRG Energy, Inc., Direct Energy Services, LLC, Interstate Gas Supply, Inc., and Vistra Energy Corp.
As noted in EnergyChoiceMatters.com's exclusive analysis (story here), the PUC has opened a proceeding which may end the state's "plain vanilla" default service mechanism. As previously reported, the inquiry was prompted by a desire for non-shopping customers to realize the benefit of "smart energy" behaviors, such as load shifting and peak reductions, and may include value-added default service alternatives
The EGS Coalition said, "The Commission should take the initiative to relieve EDCs of the default service
obligation and reassign the default service obligation to EGSs through a competitive bidding
process, with service to customers on customer assistance programs being handled separately to
ensure access to affordable electricity supply."
The EGS Coalition said, "The competitive bidding process for default
service that is envisioned by the EGS Coalition would replace the existing wholesale auction
structure with a retail provider structure, in which five retail EGSs for each service territory that bid the lowest price in an auction to supply the residential default service load would be selected
to provide a portion of the default service load at a fixed retail price for two years. Three
providers would be selected to supply the small commercial default service load at a fixed retail
price for two years. One supplier would be selected to serve the large commercial default
service load for two years. The large commercial default service customers, defined as those
customers with a peak consumption of 100 kw or greater at any time during the year, would be
served on a market-based pass-through rate for all of the market components, plus an
administrative fee that would be competitively bid and that would cover the winning suppliers'
costs to serve that market."
The EGS Coalition said, "The winning suppliers for the residential, small commercial and large commercial
customer classes would be chosen independently, and collectively, they would serve 100% of the
default service load. New residential and small commercial customers who do not choose to be
supplied directly by an EGS would choose one of the retail default service providers, or be
randomly assigned to one of those entities. Customers assigned to the retail default service
provider would be free to shop at any time without penalty in favor of an EGS's retail product."
The EGS Coalition said, "At the end of the first two-year term, and every two years thereafter, until the Commission elects
to move to a more pro-competition model, the Commission would conduct retail default service
auctions and select five residential, three small commercial, and one large commercial retail
default service provider(s) to serve the customers remaining on default service."
The EGS Coalition said, "As to concerns that may be raised about low income customers, the EGS Coalition
envisions that a separate competitive bidding process would be held for the express purpose of
serving customers who are on customer assistance programs. While the auction process would
generally be similar, the EGS Coalition expects that a benchmark would be established for EGSs to bid at levels that would ensure that low-income customers are charged a price that is lower
than the default service price produced by the general auction process."
The EGS Coalition said, "Importantly, all retail default service providers -- under the vision of the EGS Coalition --
would be required to meet a 'social responsibility' requirement by donating $2.00 per customer
acquired through the default service auction to a fund that would disseminate customer rebates
spent on energy management measures and for customer education efforts directed at those
customers to help them understand the benefits of being served by the competitive market. In
year two, those winning suppliers would donate $3.00 per customer who remained on default
service to that same fund. With 3.5 million customers currently not shopping for electric supply
in Pennsylvania, the EGS Coalition estimates that funding for these programs in the first and
second years would likely be in the millions of dollars."
The EGS Coalition said, "Adoption of this proposal of the EGS Coalition would also set the stage for a move to a
fully competitive model, in which all customers procure their electric service from the
competitive market, with a provider of last resort or other 'backup' rather than 'first stop'
service to accommodate short term service unavailability or supplier market exit. Such a market
construct has been extremely successful in Texas, where electric customers enjoy a wealth of innovative products and services and shop for electric service using smart phone apps and the
like, just like any other product or service, with over 100 different retail suppliers from which to
choose. Ninety percent of all customers have made an affirmative choice in that market. The
EGS Coalition's proposal will provide an efficient transition to such an 'ideal' structure when
the Commission determines that it is in the public interest to move in that direction."
Separately, the Office of Consumer Advocate filed comments stating that OCA does not support most of the kind of changes to
default service suggested by the Commission’s order opening the proceeding (see our prior story for such specific proposals)
OCA said, "OCA finds the existing
default service program to be a successful and reasonable approach to the provision of energy
supply for the vast majority of residential customers. The OCA submits that there is no need to
disrupt a program that is working well and that satisfactorily serves the needs of customers. If a
goal of this investigation is to assist residential customers to better utilize electricity, then the OCA
submits that a better course would be to rely on the programs originally authorized by Act 129 –
Energy Efficiency and Conservation (Demand Response). Demand Response programs such as a
peak-time rebate program are one method of giving residential customers greater control over their
household energy usage. So too are a wide variety of Energy Efficiency programs. The OCA will
continue to work on well-designed voluntary TOU programs and recognizes the need for potential
new rates in the future, such as for electric vehicle charging. The OCA, however, does not support
a move to mandatory TOU rates or demand charges for residential customers."
OCA said, "The establishment of a demand charge equal to or similar to the Peak Load Contribution
('PLC') and Network Service Peak Load ('NSPL') tickets for residential default service
customers moves towards attempting to match each customer’s contribution to costs to each
customer’s obligation to pay those costs. Using these types of demand charges would result in
average per-kWh costs increasing for low load factor residential default service customers (e.g.,
low income customers and elderly using relatively few kWh per month) and decreasing for high
load factor customers.
While the OCA recognizes the general importance of assigning costs on the basis of causality,
the OCA also views electricity as a necessity. Access to affordable, reliable, and safe electricity
profoundly affects the health and well-being of Pennsylvania’s citizens. Some reasonable degree
of intra-class subsidization has consistently characterized residential rate design not only in
Pennsylvania but throughout the U.S. This recognizes the fact that residential customers as a class
benefit when electric bills are affordable for all customers. Therefore, as a way of ensuring
continued access to affordable electricity for all of Pennsylvania’s residential customers, the OCA
opposes the imposition of any demand charge on residential default service customers."