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NRG Proposes Mechanism For Serving Non-Shopping Customers Under Any Arizona Transition To Retail Electric Choice
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In comments to the Arizona Corporation Commission concerning the ACC's review of retail electric choice, NRG Energy included a proposal for a mechanism to serve non-shopping customers under any transition to retail choice
NRG, similar to other suppliers, opposed using the utility to serve as the default supplier or POLR. However, NRG's comments is one of the first specific alternatives presented to the ACC to address non-shopping customers without relying on the utility
NRG said that, "NRG fully supports full transition of all customers to competitive supply on Day 1 of
market opening."
"To facilitate this, ACC should establish a 90-day period prior to the opening of
the market during which consumers are allowed and encouraged to select a competitive supplier.
With sufficient consumer education prior to the market open date, consumers should be prepared
to make these choices within a 90-day period so they can be with their preferred supplier on day
one. While a longer transition period could be chosen, such a path would merely permit
consumers to procrastinate malting decisions when no valid basis exists for any further delay," NRG said
For customers who may be unable to choose a supplier in the 90-day window, such as
military residents who are deployed or customers temporarily out-of-state, their continued
service would be assured through an assignment process, NRG said
"ACC rules will determine the price or
maximum price to be charged, the nature of the product and specify the number of assignments
per supplier and manage the assignments. The price charged to these customers should be
reflective of current market conditions so that the suppliers' costs of serving them are covered," NRG said
"There are several ways to assign customers in an effective manner. For example, customers
could be assigned by the grid operator on a rotating basis to all suppliers who are serving at least
5% of the retail customers in Arizona at that time. Alternatively, customers could be randomly
assigned to a pool of suppliers offering this transition service based on criteria selected by the
ACC, such as the ten suppliers who have the highest market shares. Any model that is chosen
should require participation by the suppliers meeting the criteria established by the ACC and
should seek to involve several suppliers," NRG said
"Importantly, assigned customers should all receive a month-to-month, variable price
product and the providers who receive the assignments should be allowed to request security
deposits or perhaps transfer existing deposits with the utility to the new supplier. Also, while the
assigned customers are being served by the competitive supplier to which they have been
assigned, these customers should be permitted to switch to a different competitive supplier at any
time without penalty. In this manner, customers' failure to make a selection would not interfere
with continued supply or with the ability to choose a competitive supplier going forward," NRG said
Concerning serving customers whose supplier defaults, NRG said, "After the market opens, concerns about ensuring that there is a backstop service for
generation supply in the event a customer's chosen supplier is unable to perform are reasonable
and there are ways to structure this that do not require the service to be provided by the public
utility. Robust licensing and credit requirements will help to minimize market exits by
competitive suppliers."
"To address any departures from the market that occur despite these
precautions, ACC should first establish customer assignment processes to enable a different
competitive supplier to continue to serve the customers under the existing contracts of the exiting
competitive supplier. If this is not possible, then there must be one or more providers of last
resort ('POLR'). These providers would be other licensed competitive suppliers to whom the
departing supplier's customers could be assigned until they have an opportunity to choose
another competitive product," NRG said
"Importantly, the goal of the POLR is to offer a transitional supply product. Therefore, the
customers must be free to elect a different competitive product (either a different one offered by
the POLR provider or offered by a different competitive supplier) at any time and without any
penalty. To accomplish this goal, the POLR rates should not be attractively priced so that the
customer will choose to remain on POLR beyond the time necessary to select another
competitive product or provider. To accomplish this, the requirement of the POLRs would be to
serve customers on a month-to-month basis, charging an indexed price plus a modest premium
that is linked to current wholesale prices. In addition to positively incentivizing the POLR
customer to select another competitive offer, the premium would cover the cost to administer
what might be a considerable number of customers unexpectedly and the effect of out-of-cycle
energy purchases trading at a higher cost. Thus, the premium is important to both encourage the
consumer to elect a different competitive product and to incentivize competitive suppliers to
participate as a POLR. In response to a question from Commissioner Olson, ACC would
maintain regulatory control regarding the processes used to establish the default service rate as
well as the approved providers. Rather than setting the actual generation rate for default service,
however, the ACC would approve the processes utilized to acquire the power for default service
to ensure that the processes result in a just and reasonable rate," NRG said
Concerning supplier licensing, NRG said that, "To
ensure technical and financial fitness to serve, applicants should be required to submit evidence
of minimal capital requirements. Information that should be required to demonstrate financial
fitness may include credit ratings and history, audited financial statements and insurance."
Docket RE00000A-18-0405
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NRG Recommends Minimal Capital Requirements, "Insurance" For Supplier Licenses
December 2, 2019
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Reporting by Paul Ring • ring@energychoicematters.com
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