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NRG Proposes Mechanism For Serving Non-Shopping Customers Under Any Arizona Transition To Retail Electric Choice

NRG Recommends Minimal Capital Requirements, "Insurance" For Supplier Licenses


December 2, 2019

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

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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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