Pa. Utility Files Default Service Plan Which Includes Block Energy Purchases

Proposes Increase In Cost Of Standard Offer Program

May 27, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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UGI Utilities, Inc. – Electric Division (the Company) has filed with the Pennsylvania PUC a proposed default service plan (DSP IV) for the period June 1, 2021 and May 31, 2025.

The proposed DSP IV plan is largely identical to the current DSP III plan

For small customers (GSR-1, which includes Rate Schedules R, GS-1, GS-5, FCP, BLR, OL, SOL, MHOL, LED-OL, SL, SSL, MHSL, LED-SL and LED-CO as well as Rate Schedules GS-4 and LP where the customer’s annual peak load is less than 100 kW), UGI proposes a supply mix that generally uses full requirements contracts for 50% of the portfolio, and block energy supplies for 50%, which is the approach currently used.

For the 50% GSR-1 full requirements contracts, UGI will hold procurements in the spring and fall of each plan year, and in each procurement will seek load-following supplies in an amount of 25% (of total GSR-1 load during each month of the 12-month period) on a full requirements basis. Winning bidders will be responsible for acquiring any necessary capacity, transmission to UGI Electric’s system, ancillary services, transmission, congestion management services, AEPS credits and such other services or products as necessary to provide default service to the Company.

Generally, the staggered full requirements contracts will be 12 months, but the initial contracts will be for 6 months, due to the end dates of the existing portfolio and to set-up the staggering process (schedule noted below)

For the 50% block purchases, UGI will procure block energy in procurements held in the spring and fall of each plan year, with block supplies to be delivered over 6-month periods in an amount of 50% of total GSR-1 load needed during each month of the 6-month period. The Company will issue RFPs seeking 5x16 energy blocks (covering 5-day periods at peak hours) and 7x24 energy blocks (covering 7 day periods around the clock). For these procurements, UGI itself will be responsible for acquiring any necessary capacity, transmission to UGI Electric's system, ancillary services, transmission, congestion management services, AEPS credits and such other services or products as necessary to provide default service to the Company.

For DSP IV, the Company proposes to reconcile variances between actual load consumption and scheduled electric deliveries (for the GSR-1 customer load) by way of spot market purchases using the same method adopted for DSP III.

A small portion of the Company’s default service load for DSP IV will continue to be acquired through the long-term arrangement between UGI Electric and the Allegheny Electric Cooperative, Inc. ('Allegheny') as was done in DSP III. These procurements will continue to be included as a generation supply source in the Company’s DSP IV and will be recovered through the Company’s GSR-1 rate (Rider B - Generation Supply Service Surcharge) in the same manner as occurred in DSP III.

Additionally, during the term of DSP IV, the Company will continue purchasing generation from customer-owned generation resources in its service territory (as was done in DSP III). The Company will pay for excess generation left over at the end of the PJM year under its net metering tariff rules at the currently effective PTC (which equals the GSR-1 rate). As such, these procurement costs will be recovered through the GSR-1 rate (as was done in DSP III).

The GSR-1 rate shall continue to be calculated quarterly, beginning each June 1st.

The GSR-1 rate will be the sum of the following components:

• Energy Costs (EC) – Projected direct and indirect purchase power costs (for load following and block procurements) in the upcoming 3-month period, including all PJM bill line items, administrative costs, AEPS credits, etc. The EC is divided by Sales for the Projected Quarter (SEC). The SEC includes projected sales for all default service customers in GSR-1 for the upcoming 3-month period.

• Energy Cost Adjustment (ECA) – The ECA (i.e., E or C Factor) is the net over or under collection related to the EC, which is collected/refunded for the quarter based on EC revenues received and actual EC costs incurred for the 3 month period ending 2 months before the GSR effective date. If the ECA would result in more than a 5% change in the system average total bill for default service, adjustments may be reconciled over more than a 3 month period, but no longer than 12 months. The ECA is divided by the Sales Used to Calculate the ECA (SECA). The SECA includes projected sales for all default service customers in GSR-1 for the adjustment period (i.e., 12 months beginning December 1).

• Interest (Int) – Interest associated with over and under collections during the quarter. The interest is computed at the prime rate for commercial banking, not to exceed the legal rate of interest as reported in the Wall Street Journal. The Int is divided by the Sales Interest (Sint). The Sint includes the projected sales for default service customers in GSR-1 for 12- months beginning December 1.

• Taxes (T) –Taxes (i.e., Pennsylvania Gross Receipts Tax) are applied to the sum of the above-components.

A schedule for the staggered GSR-1 procurement schedule is available here, on page 27 of the PDF file

For larger GSR-2 customers (GS-4, LP and HTP, where the customer’s annual peak load is greater than or equal to 100 kW), default service will be hourly priced.

In terms of retail market enhancements, UGI will continue its New/Moving Customer Referral Program

UGI will also continue to make available to retail suppliers a Standard Offer Program

UGI noted that there are no retail EGSs that are currently participating in UGI Electric’s Standard Offer Program.

UGI did propose a cost increase to retail suppliers under the Standard Offer Program

Currently, under the Standard Offer Program, participating EGSs shall collectively reimburse the Company for the costs to operate the program of $10,000 per month.

UGI proposes to increase the cost to participating Standard Offer retail suppliers to $12,000 per month. As in the current tariff, this Standard Offer participation charge would be divided equally based on the number of participating EGSs each month.

UGI does not propose a program to allow customer assistance program (CAP) customers to shop for an EGS

UGI said that, "As of April 2020, UGI Electric had 55,436 residential customers, of which 455 were shopping (i.e., 0.82%). UGI Electric also has 3,187 CAP customers. If the Company developed a shopping program for electric CAP customers, it is unlikely that all of them would shop. The more reliable estimation method would be to apply the known percentage of electric shopping customers (i.e., 0.82%) to the number of electric CAP customers (i.e., 3,187). Doing so results in a probability that approximately 26 electric CAP customers would be interested in shopping. It is within this context that the Company had to determine the costs and benefits associated with developing a CAP shopping program; one that ensures EGSs never charge a supply price that exceeds the PTC."

"Due to the high implementation costs, programming complexities involved and general lack of interest in UGI Electric’s Standard Offer program, the Company has decided against implementing a CAP shopping program in its DSP IV, which would potentially only benefit approximately 26 customers," UGI said

Docket P-2020-3019907

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