Consumers' Counsel: PUC Should Find Ways To "Elevate" Use Of Market Rate Offers For Default Service

Utility Seeks To Delete "Obsolete" Default Service Rules Requiring RTO Membership, Independent RTO Market Monitor

August 26, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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In a five-year review of Ohio rules governing the filing requirements for electric security plans and market rate offers, the Ohio Consumers' Counsel said that the Public Utilities Commission of Ohio, "should find ways to elevate the use of market rate offers instead of electric security plans."

The Ohio Consumers' Counsel said of the default service paradigm in Ohio: "In 2008, the Ohio General Assembly created two options for electric utility standard offers for selling generation to consumers – a market rate offer and an electric security plan (that was supposed to mimic a market rate by being more favorable in the aggregate than a market rate). Unfortunately for consumers, in the eleven years since the passage of the 2008 legislation Ohioans have never been given the benefit of a market rate offer with its competitive pricing of electricity."

"Instead, consumers have been dealt a succession of so-called electric security plans where competitive market pricing is forgone and the principal “security” accrues to the utilities charging their 'riders' on Ohioans’ monthly electric bills. And those riders (charges) have included subsidies for the utilities and others, the very antithesis of competitive markets," OCC said

OCC said that, "In this rulemaking, the Public Utilities Commission of Ohio (PUCO') should find ways to elevate the use of market rate offers instead of electric security plans."

For electric security plans, OCC recommended, among other things, that a projected impact from any "zero-dollar placeholder riders" (riders which are approved but initially set at $0 pending further disposition) should be included in the review of the ESP

"The rate impacts of these zero-dollar placeholder riders are not properly accounted for in the electric security plan cases. This should be changed. If deferrals are fully accounted for, the rate impact of these zero-dollar placeholder riders should also be fully accounted for. Electric distribution utilities should be required as part of their standard filing requirements to provide projections for any proposed riders through the life of the electric security plan. The standard filing requirements should include an evaluation of the proposed electric security plan under more favorable in the aggregate test," OCC said

OCC said that any proposed distribution infrastructure modernization plans included in an ESP should be subject to a cost-benefit analysis and future prudence reviews.

In separately filed comments, Duke Energy Ohio said that PUCO should delete "obsolete" rules concerning demonstration of RTO membership and an RTO independent market monitoring function

Duke recommended deletion of the following rules applicable to the filing of a market rate offer (MRO):

OAC 4901:1-35-03(B)(1)(a): The electric utility shall establish one of the following: that it, or its transmission affiliate, belongs to at least one regional transmission organization (RTO) that has been approved by the federal energy regulatory commission; or, if the electric utility or its transmission affiliate does not belong to an RTO, then the electric utility shall demonstrate that alternative conditions exist with regard to the transmission system, which include non-pancaked rates, open access by generation suppliers, and full interconnection with the distribution grid.

OAC 4901:1-35-03(B)(1)(b): The electric utility shall establish one of the following: its RTO retains an independent market-monitor function and has the ability to identify any potential for a market participant or the electric utility to exercise market power in any energy, capacity, and/or ancillary service markets by virtue of access to the RTO and the market participant's data and personnel and has the ability to effectively mitigate the conduct of the market participants so as to prevent or preclude the exercise of such market power by any market participant or the electric utility; or the electric utility shall demonstrate that an equivalent function exists which can monitor, identify, and mitigate conduct associated with the exercise of such market power.

Duke Energy said, "4901:1-35-03(B)(1)(a) can be met by establishing that an electric utility belongs to at least one RTO approved by the Federal Energy Regulatory Commission (FERC). All Ohio electric utilities belong to an RTO and therefore meet this requirement."

Duke Energy said, "4901:1-35-03(B)(1)(b) can be met by establishing that the RTO to which the electric utility belongs 'retains an independent market-monitor function' and possesses certain capabilities. All RTOs have an independent market-monitor function and possess the capabilities described in this subsection; therefore, all Ohio electric utilities meet this requirement."

Duke also recommended deletion of 4901:1-35-03(B)(1)(c) concerning the availability of wholesale electricity pricing information for bidders, with Duke noting that RTOs publish such pricing.

"Duke Energy Ohio suggests that the Commission delete Subsection 4901:1-35-03(B)(1), because all of the electric utilities to whom its requirements apply already fulfill these requirements, and there is no added value in requiring redundant documentation in the SSO application," Duke said

"All three of these requirements are obsolete, because all of the electric utilities to whom these requirements apply now belong to a regional transmission organization (RTO)," Duke said

"These requirements added value in earlier years, when some electric utilities did not belong to an RTO and/or when RTOs did not all meet the above conditions. However, now that all electric utilities are widely known to meet these requirements, there is no reason to continue requiring superfluous documentation. Removal of Subsection 4901:1-35-03(B)(1) would streamline the rules and make the SSO application process more efficient," Duke said

However, while Duke calls the cited rules "superfluous" because of utilities' current membership in an RTO, it is unclear whether any other provision of the revised code or administrative code would compel continued and future membership in an RTO for any MRO application, or require that such RTO have an "independent" market monitoring function that meets the capabilities described above. Duke does not, in its comments, state that the rules are superfluous because they are redundant or duplicative of other requirements for EDCs, but that they are superfluous because utilities currently meet the requirements.

Case No. 18-1188-EL-ORD

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