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Duquesne Light Seeks To Implement Capacity Proxy Price In Default Service Auction (Had Previously Addressed Capacity Price Uncertainty Via Shortened Term Lengths)
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Duquesne Light Company petitioned the Pennsylvania PUC to modify its supplier master agreement to implement use of capacity proxy price (CPP) in its upcoming March 2021
procurement of default supply contracts
"The delays in PJM capacity markets that precipitated the Company’s April 2020 DSP VIII
Petition have persisted. It is now clear that the market price for capacity in the 2022/2023 delivery
period will not be known by March 2021, when Duquesne Light must procure certain fixed-price
full requirements ('FPFR') supply contracts," that extend into the 2022/2023 unpriced capacity period, Duquesne Light said
Duquesne Light noted that, per a recent PJM presentation, the BRA for the 2022-2023 delivery period is
to be held in May 2021, with results to be released June 2, 2021.
Duquesne Light's proposed CPP, which is calculated as a straight average of
the actual capacity prices from the two preceding delivery periods, is illustrated below:
• 2020/2021 Delivery Year. 3rd
Incremental Auction. Final Zonal
Net Load Price ($/MW-day): $77.31
• 2021/2022 Delivery Year. 2nd
Incremental Auction. Adjusted
Zonal Net Load Price ($/MW-day): $142.71
• Proposed 2022/2023
Capacity Proxy
Price ($/MW-day): $110.01
"This proposed change would apply only to the Company’s scheduled March 2021
RFP for Residential and Small C&I default supply. It would not apply to any subsequent RFPs or
RFPs for default supply for other customer classes. Once PJM sets capacity prices for this period,
which is currently anticipated to occur in early June 2021, any differences between the CPP and
the actual capacity price would be reconciled," Duquesne Light said
"Winning wholesale suppliers of the Company’s 24-month FPFR contracts procured
in March 2021 will be paid the auction closing price, subject to subsequent true-up for the portion
of the contracts that extend into the 2022/2023 delivery period. Once the PJM capacity price is set,
the suppliers will be debited or credited (as applicable) any differences between the CPP and the
PJM capacity price. Effective in June 2022, the Company will make an adjustment to its Rider
No. 8 – Default Service Supply rates to compensate for any differences between the CPP and the
final PJM 2022/2023 capacity price. The Company would then refund/recoup any remaining
differences through its next section 1307(e) reconciliation of default supply rates. Thus, the impact
of the CPP on customers over time will be neutral," Duquesne Light said
Duquesne Light said that its CPP proposal follows the same approach as the CPP proposal of
the FirstEnergy Pennsylvania utilities, which the PUC approved by Order entered October 13,
2020, at Docket Nos. P-2020-3021424 et. al.
Duquesne Light had initially addressed the 2022/2023 unpriced capacity period by
truncating the affected contracts procured in September 2020.
However, Duquesne Light said that this was not an appropriate remedy for the upcoming auction
"Truncating upcoming default service contracts is not a durable solution because,
with each successive RFP, a more aggressive truncation is necessary to avoid the 2022/2023
unpriced capacity period. Additional truncations would also move the Company further from the
mix of 12- and 24-month contracts initially approved in DSP VIII (and proposed for DSP IX, see
Docket No. P-2020-3019522). Moreover, given that the actual PJM capacity price is expected to
be established shortly after the Company’s March 2021 default supply solicitation, such additional
truncations are not necessary at this time," Duquesne Light said
Docket P-2020-3023149
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December 4, 2020
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Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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