Pa. PUC Issues Final Order In PECO Default Service Case, Addressing Retail Suppliers' Changes To NITS Treatment

Order Addresses Standard Offer Customer Referral Program Changes, POR Discount, CAP Shopping

December 2, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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The Pennsylvania PUC issued a final order in PECO's default service proceeding which establishes parameters for default service for the period June 1, 2021 through May 31, 2025 (DSP V)

Aside from striking a discrete conclusion from an ALJ concerning a proposal from retail suppliers regarding Network Integration Transmission Service (NITS), without modifying the ALJ's ultimate substantive recommendation, the PUC adopted the ALJ's recommendation without modification

As previously reported, a coalition of electric generation suppliers (Electric Supplier Coalition or ESC) proposed to have PECO assume the responsibility of Network Integration Transmission Service (NITS) costs for all delivery customers, with recovery on a nonbypassable basis, and with retail suppliers relieved of NITS responsibility

In proposing the change, the Electric Supplier Coalition argued that NITS costs are not market-based and are volatile, which requires retail suppliers to include risk premiums in fixed term prices. In contrast, the ESC said that since PECO recovers NITS costs through the Transmission Service Charge, and not through the wholesale full requirements contracts, wholesale suppliers do not bear the same risk and need not include a NITS risk premium, thereby producing a skewed market.

Calpine and PECO are among the opponents of the ESC's NITS proposal.

As exclusively first reported by EnergyChoiceMatters.com, an ALJ recommended denying the ESC's NITS proposal

Of note is that the ALJ recommended finding that the ESC's NITS proposal would be contrary to the Competition Act, as the ALJ said that it constitutes rebundling of transmission and distribution service

While the PUC denied the ESC's NITS proposal in its final order, the PUC declined to adopt the ALJ's recommendation concerning whether the ESC's NITS proposal is contrary to statute.

The ALJ had specifically found that, "More importantly, having EDCs collect NITS costs, as proposed by ESC, constitutes rebundling of transmission and distribution service for certain groups of customers in clear contravention of the Competition Act. Also, Commission regulations designate transmission service as a load-following expense, meaning that the entity providing a customer's generation service must also take responsibility for the provision of transmission services and collection of the associated costs. See 52 Pa. Code §§ 54.182, 54.187(d). Consequently, the removal of NITS costs from products in the competitive market is contrary to the intent of the Competition Act and Commission regulation."

The PUC found this conclusion from the ALJ to be contrary to prior PUC decisions

"Our prior DSP decisions, however, do not reach any conclusions that a NITS proposal like that of the ESC’s in this case would be contrary to the Competition Act or the Commission’s Regulations," the PUC said

"In FE DSP III, we specifically addressed whether shifting the collection of NITS from EGSs to EDCs would violate the Competition Act, the Code, or the Commission’s Regulations. In that case, we explained that although we found the EGS did not meet its burden of proof regarding its NITS proposal, such a proposal would not violate the Competition Act, the Code, or our Regulations. We stated that 'neither the Competition Act nor the Code preclude the implementation of the NITS proposal, if we had determined that changed circumstances caused us to reconsider our prior decisions on this issue,'" the PUC said

"We find no reason in this proceeding to reach a different conclusion. Therefore, to the extent that the ALJ’s language in the Recommended Decision which the ESC finds objectionable can be read as a legal conclusion that the ESC’s NITS proposal, if implemented, would be inconsistent with the Competition Act or our Regulations, we will not adopt herein the ALJ’s language discussing this issue," the PUC said

The PUC still rejected the ESC’s NITS proposal, finding that the ESC did not satisfy its burden of proof and, particularly, did not show that NITS costs in PECO’s service territory are so volatile that they cannot be predicted.

"We likewise find that the ESC has failed to meet its burden of proving that the fact that PECO recovers NITS costs only from its default service customers demonstrates that inequalities exist in the market," the PUC said

The PUC also rejected the ESC's alternative proposal for the Commission to institute a statewide review of whether there is a need to address NITS cost recovery in a more uniform and comprehensive way that would facilitate and enhance the retail electric market

"Initially, we conclude that the ESC cannot properly frame this NITS investigation proposal as an Exception under 52 Pa. Code § 5.533(b), because it was not a contested issue to be briefed, and the ALJ did not address it in the Recommended Decision. Upon review, we decline to open an investigation into the allocation of NITS costs in the context of this DSP proceeding for both this procedural reason and substantive reasons," the PUC said

The PUC cited both informal and formal investigations it has recently conducted into the treatment of NITS and related PJM and/or default service charges

"As we have recently reviewed various DSP-related issues in the context of the informal and formal investigations discussed above and provided informed guidance to EDCs for future DSP proceedings, we do not believe it would be beneficial to open a new investigation or to reopen the prior formal investigation at this time, particularly in the context of this individual DSP proceeding. The individual EGSs that comprise the ESC had the opportunity to participate and file comments in the prior investigation, either separately or as part of a coalition. If the ESC believes a new investigation into the recovery of NITS costs is warranted, ESC may file a petition outside of this proceeding requesting such an investigation. A petition would properly provide interested parties that are not involved in this proceeding with an opportunity to respond to the ESC’s request," the PUC said

Other Issues

The PUC adopted, without modification, a partial settlement and Time of Use settlement which address procurement issues and the price to compare; changes to the Standard Offer Customer Referral Program including its impact on the POR discount; billing improvements for EGSs, Customer Assistance Program (CAP) customer shopping; and a TOU option or non-shopping customers.

The only opposition had been from renewable energy parties which had opposed the lack of long-term renewable contracts under the partial settlement. The adopted settlement addresses various issues as follows:

Procurement, PTC

The settlement maintains the current customer classifications (delineations) for the purposes of default service procurement and pricing

Under the settlement, for the Residential Class, PECO will continue to procure a mix of one-year (approximately 38%) and two-year (approximately 61%) fixed-price full requirements ('FPFR') contracts, with six months spacing between the commencement of contract delivery periods. During the Revised DSP V period, the remaining approximately 1% of Residential Class load will be supplied directly by PJM’s spot energy, capacity and ancillary services markets.

For Small Commercial customers (at or under 100 kW), default service load will continue to be supplied by equal shares of one-year and two-year FPFR products.

For residential and small commercial FPFR products, suppliers will bid in a competitive, sealed-bid request for proposals ('RFP') process on 'tranches' corresponding to a percentage of the actual customer class default service customer load. Winning suppliers will be obligated to supply full requirements load-following service, which includes energy, capacity, ancillary services, and all other services or products necessary to serve a specified percentage of PECO’s default service load in all hours during the supply product’s delivery period. The full requirements product requires the supplier to provide PECO all necessary AECs, less any reduction in obligation due to PECO's long-term AEC contracting noted below, for compliance with Pennsylvania’s Alternative Energy Portfolio Standards ('AEPS') Act, 73 P.S. § 1648.1 et seq.

Each of the contracts will be procured approximately two months prior to the beginning of the applicable contract delivery period.

For Large Commercial and Industrial customers (over 100 kW), PECO will continue to solicit twelve-month hourly-priced full requirements products, without overlap, for all default service supply.

Under the settlement, PECO will also conduct two solicitations in both 2021 and 2022 for ten-year Solar AEC contracts to deliver a total of 16,000 Solar AECs annually (i.e., 4,000 Solar AECs in each of four solicitations). PECO will procure up to half of each year’s Solar AEC amount from solar generating facilities located within its service area. PECO will continue to allocate AECs obtained through its separate AEC procurements to wholesale default service suppliers in accordance with the percentage of load served by each supplier.

PECO's Generation Supply Adjustment (GSA) will continue to change quarterly and over/undercollections of default service costs will continue to be reconciled on a semi-annual basis. The Price to Compare, reflecting the GSA and transmission charge, will change quarterly.

Under the settlement, PECO will continue to be responsible for and recover the following PJM charges from all distribution customers in PECO’s service area through its Non-Bypassable Transmission Charge ('NBT'): Generation Deactivation/RMR charges (PJM bill line 1930) set after December 4, 2014; RTEP charges (PJM bill line 1108); and Expansion Cost Recovery charges (PJM bill line 1730).

Standard Offer Customer Referral Program (SOP)

Under the settlement, PECO will continue the current Standard Offer Customer Referral Program ('SOP'), including the cost recovery mechanisms last approved by the Commission in PECO’s DSP IV proceeding, until May 31, 2025, with some changes related to enrollment and branding

Under the settlement, PECO will change the brand name for the SOP from 'PECO Smart Energy Choice' to 'Customer Referral Program'.

Additionally, under the settlement, the SOP enrollment process will require that, prior to obtaining customer approval to participate in the SOP, the customer service representative (CSR) for PECO’s third-party SOP administrator will ask the customer’s authorization to enroll with a specifically named supplier. OCA had expressed concern that, currently, CSRs are enrolling customers into the SOP prior to the identification of the supplier with whom the customer would be contracting.

Prior to filing its next default service program, PECO agrees to conduct a customer satisfaction survey of customers who withdrew from the SOP before the conclusion of the twelve month program, those who selected a new EGS at the conclusion of the SOP, those who returned to default service at the conclusion of the SOP, and those who remained with their SOP supplier at the conclusion of the program.

Under the settlement, PECO agrees to allow customers to enroll in the SOP through its website and is to waive the SOP referral fee for web-enrollments. The website presentment will contain the same information and disclaimers about the program as currently provided in PECO’s SOP-related scripts.

All implementation costs to enable SOP web-enrollment will be recovered over the Revised DSP V period through a Purchase of Receivables discount. PECO is to present a good-faith estimate of implementation costs to the Joint Petitioners by the end of March 2021. If the Joint Petitioners approve those costs, PECO would proceed with implementation by March 2022. SOP suppliers must accept referrals from both PECO’s website and call center.

Billing Improvements

The settlement provides that PECO will convene a stakeholder process to discuss mechanisms to collect electric generation supplier (EGS) pricing information compatible with PECO’s 'bill-ready' billing system and to develop bill improvements to ensure that shopping information is clear and transparent to residential customers. This process will also address EGS recommendations to improve the presentation of shopping information on residential customer bills.

CAP Shopping

Under the settlement, PECO will not implement its proposed CAP Shopping Plan as described in its original DSP V Petition

PECO's original CAP shopping proposal had included a requirement that retail suppliers must adhere to CAP program pricing limits, or drop the customer, for existing shopping customers who become CAP customers mid-contract. See background here

The settlement notes that PECO, in a separate docket, is currently seeking to transition its CAP program from the existing Fixed Credit Option ('FCO') design to a Percent of Income Payment Plan ('PIPP') design.

The settlement provides that within 90 days of a final order in the separate CAP design proceeding (M-2018-3005795), PECO will make a filing with the Commission in which it will make a proposal regarding CAP shopping that is consistent with the CAP design approved in such final order

Time of Use Option

The settlement provides that, during DSP V, PECO will introduce new Time of Use (TOU) default service rate options for eligible customers in PECO’s Residential and Small Commercial procurement classes (the 'TOU Rates') to comply with PECO’s obligation under Act 129 of 2008 ('Act 129') to offer TOU and real-time rates to all default service customers with smart meters.

PECO will source both the standard and TOU default service for residential and small commercial customers from the same supply portfolio for each procurement class.

PECO will use the standard default service GSA as the reference price for PECO’s TOU rate calculations. PECO will calculate the TOU Rates on a quarterly basis

PECO’s TOU generation rates will differentiate prices across three usage periods that are constant throughout the year, as shown below.

• Peak: 2 p.m. – 6 p.m. Monday Through Friday, excluding PJM holidays

• Super Off-Peak: Midnight (12 a.m.) – 6 a.m. Every day

• Off-Peak: All other hours

The settlement initially adopts the TOU price multipliers for each procurement class shown below, but such multipliers may be updated in the future. The multiplier is the ratio to the Super Off-Peak TOU price

GSA-1 Residential 
TOU Pricing Multipliers
Peak              6.5
Super Off-Peak      1
Off-Peak          1.5


GSA-2 Small Commercial 
TOU Pricing Multipliers
Peak              5.1
Super Off-Peak      1
Off-Peak          1.7

PECO’s TOU Rates will be available to residential and small commercial default service customers with smart meters configured to measure energy consumption in watt-hours. However, customers enrolled in the Company’s Customer Assistance Program ('CAP') will not be eligible for the residential TOU Rate during the DSP V term to avoid potential adverse impacts on CAP benefits.

PECO will recover the costs to implement the new TOU rates from customers in the eligible procurement classes (i.e., the Residential and Small Commercial Classes) through the administrative cost factor of the GSA.

Docket No. P-2020-3019290

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