Arizona Commission Adopts Terms For New Competitive Generation Program At Tucson Electric Power

December 23, 2020

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Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Arizona Corporation Commission adopted a final order in the rate case of Tucson Electric Power and in doing so established a new "buy through" wholesale competitive generation program at TEP

The ACC adopted the design of the new "buy through" wholesale competitive generation program (Market Pricing Experimental Pilot Program or MP-EX) as proposed in a recommended order, and did not adopt a proposal from Commissioner Justin Olson to modify MP-EX to allow participation of customers from all customer classes (see more details on Olson's proposal here). ACC Chairman Bob Burns and Olson voted in favor of Olson's proposal, while the other three Commissioners voted against it.

As adopted, the MP-EX program at TEP is limited to a participation cap of 75 MW overall (very large and medium/large customers will be eligible for separate programs each with their own smaller cap). The MP-EX program will be open to medium and large non-residential customers with demands (including aggregated demand) of at least 3 MW, with a minimum aggregate load factor of 60%, and with further requirements and limitations noted below.

Customers electing MP-EX will avoid only TEP's Base Power Charges and PPFAC (Purchased Power and Fuel Adjustment Clause). MP-EX customers will be charged a $1,000 per month billing fee and a monthly settlements fee of $500 for each service point billed under the program.

For medium and large customers in rate classes MGS and LGS, the program will be called MP-EX Program 1

Program 1 MP-EX will have a participation cap of 25 MW

Under Program 1, all provisions, charges, and adjustments in the customer's applicable rate schedule will continue to apply except for the Base Power Charges and PPFAC [Purchased Power and Fuel Adjustment Clause].

Program 1 customers will have the option to replace their existing Base Power Charge and PPFAC rider change with either:

• A day-ahead market index option (supplied by TEP).

• An hourly market index option (supplied by TEP).

• 7x24 blocks of capacity and energy purchased from a third-party supplier, with a minimum block size of 1 MW (similar to the Program 2 alternative supply option noted below)

Very large customers under classes LPS-TOU and LPS-TOU-HV will be eligible for Program 2 MP-EX, with customers required to have minimum aggregated peak demand of 3 MW, with a minimum aggregate load factor of 60%.

Program 2 MP-EX participation will be capped at 50 MW.

Under Program 2, LPS customers will have the option to replace their Power Supply Charge and PPFAC with an hourly market index price, or the customer may purchase 7x24 blocks of energy and capacity from a third-party wholesale market service provider (or sourced from TEP via an RFP). Minimum block sizes for LPS customers will be 5 MW. LPS customers are only eligible to purchase blocks in a maximum of 50% of their average monthly peak demand based on the months of October through April.

Under Program 2, for alternative wholesale supply, the customer will need to post adequate credit support and pay for any associated credit support costs under these arrangements. LPS customers who utilize the 7x24 block of energy and capacity option must have at least an investment grade credit rating or demonstrate creditworthiness in the form of either a 3rd-party guarantee from an investment grade rated company, surety bond, letter of credit, or cash in accordance with TEP's standard credit support rules

For both MP-EX options, eligible customers may be aggregated if they have the same corporate name, ownership, and identity. In addition, an eligible franchisor customer may be aggregated with eligible franchisees or an associated corporate account.

Under the alternative wholesale supply options under MP-EX, all power must be delivered to TEP at a point of delivery as agreed to by TEP. The customer is responsible for the cost of any incremental transmission costs to deliver the power to TEP's delivery point.

TEP shall meet with stakeholders to develop a plan of administration for the MP-EX program, such as assigning load to prospective participants (e.g. a lottery)

Docket E-01933A-19-0028

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