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Default Service Utilities Seek To Move To Six-Month Fixed Rate, From Current Three-Month Fixed Rate, In New Default Service Plan

Also Propose Another Action To Reduce Potential For Significant Fluctuations In Default Service Rates

Utilities Seek To Make POR Clawback Charge "Permanent"

Utilities Seek To Eliminate Shortest-Term Contracts From Commercial Default Service Procurement To Smooth Out Price Swings

Customer Referral Program, CAP Customer Shopping Also Addressed

Utilities Propose New Tariff To Allow Third Parties To Access Customer Data

December 14, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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Metropolitan Edison Company, Pennsylvania Electric Company, Pennsylvania Power Company, and West Penn Power Company (the FirstEnergy utilities) have filed with the Pennsylvania PUC a proposed default service plan for the period June 1, 2023 through May 31, 2027 (DSP VI).

Among the notable changes under the FirstEnergy utilities' newly proposed default service plan is modifying the price to compare (PTC) for the residential and commercial classes to be a six-month fixed rate, departing from the current three-month fixed rate

"[F]or DSP VI, the Companies are proposing to modify the PTC Riders to adjust rates semi-annually, instead of on a quarterly basis, with rate change filings to be made the latter of forty-five days prior to the effective date or seven days after the last supply auction," the FirstEnergy utilities said

After conducting an assessment, in accordance with PUC direction, concerning the use of a six-month fixed PTC versus a three-month fixed rate, "the Companies found that six-month PTC changes will provide benefits to customers, including price stability," the FirstEnergy utilities said

The FirstEnergy utilities also proposed moving to a six-month reconciliation for the price to compare (and hourly price rider)

"Currently, the Companies compare their actual default service supply costs to the revenue that is billed to customers under the PTC and HP Riders and reconcile the differences in these amounts quarterly, which means that any over-or-under difference will be refunded or recovered beginning three months after the end of the quarter that gave rise to the difference. This timing, in combination with billing cycle lag (the time between when default service supply costs are incurred and revenue to pay those costs is billed) can produce significant fluctuations in the PTC that are not directly related to the underlying cost of default service supply," the FirstEnergy utilities said

"The Companies are proposing to reconcile the over-and-under-collection component of the PTC and HP Riders on a semi-annual basis. This change will reduce potentially significant fluctuations in default service rates and provide better information for customer shopping decisions," the FirstEnergy utilities said

Customer Classes, Supply Portfolio, & Procurements

The FirstEnergy utilities do not propose any changes in the current cutoffs for the various default service customer classes

For the residential class, the FirstEnergy utilities propose that each residential class tranche for load that is not served by a proposed long-term solar procurement (noted below) includes a 95% fixed-price load following product, the price for which will be established through the Companies' descending-price clock auction process, and a 5% variable-price spot portion. The 5% spot portion will be priced at the hourly PJM real-time zonal locational marginal price (LMP) for each of the Companies plus a $20 per megawatt hour (MWh) adder to cover costs for other supply components associated with serving the contracted load, including capacity, ancillary services, AEPS compliance, and other costs.

Residential products, apart from energy obtained through the long-term solar procurement, will have staggered 12- and 24-month terms.

For the residential supply portfolio, the FirstEnergy Companies propose to procure, through multi-year, fixed-price power purchase agreements, the energy and solar photovoltaic alternative energy credits (SPAECs) generated by one or more new in-state solar photovoltaic projects with total capacity of at least 7 MW and up to 20 MW.

The winning project(s) will be selected through a competitive procurement process.

The energy generated by the selected project(s) will be paired with spot purchases to satisfy a fixed quantity of residential default service load.

The SPAECs procured through the proposed solar PPAs are expected to meet up to an estimated 32% of the Companies’ solar AEPS requirements under DSP VI.

For the commercial class (under 100 kW), the supply portfolio is proposed to reflect a 100% fixed-priced load following product

However, the FirstEnergy utilities propose to eliminate the current three-month supply products from the commercial class portfolio

Instead, commercial products are proposed to have staggered 6-, 12-, and 24-month terms.

"The Companies are proposing to replace the three-month commercial product in their current supply portfolios with a six-month commercial product to align with their proposed semi-annual rate adjustments for the residential and commercial classes discussed [above] and to smooth out the price swings from the three-month commercial product," the FirstEnergy utilities said

With respect to procurements, the FirstEnergy Companies are proposing plans for the residential and commercial classes that consist of semi-annual procurements. The first auction for DSP VI will occur in November 2022 due to the timing of the DSP VI filing. From 2023 to 2026, auctions would be conducted in March and September.

As proposed, the industrial class product will be an hourly-priced service (HPS) based upon the PJM real-time zonal hourly market price, as is currently done

Click here for a proposed schedule of default service procurement

Generally speaking, the load following default service products are full requirements (including solar AEPS, in a change from current practice), except as noted below.

First, only in the initial year of the proposed DSPs, default service and retail suppliers for Met-Ed, Penelec, and Penn Power will be allocated SPAECs obtained through existing long-term contracts which expire on May 31, 2024.

After completing the allocations from certain existing long-term contracts which end on May 31, 2024, Met-Ed, Penelec, and Penn Power will no longer be procuring SPAECs on behalf of retail suppliers.

However, if necessary for compliance purposes related to default service, the Companies plan to conduct short-term AEC procurements at market prices to fulfill any compliance needs. During the current DSP V term, such procurements include bilateral purchases from Commission-approved AEC providers/facilities or transactions conducted through AEC brokers. Under the proposed DSPs, the Companies will continue to address potential compliance needs through market purchases.

Additionally, as noted above, the Companies will allocate SPAECs from long-term residential customer solar power purchase agreements to their respective default service suppliers, in proportion to the residential load they served in a compliance year

For all classes, the FirstEnergy utilities will continue to assume responsibility for Regional Transmission Expansion Plan charges (RTEP); Expansion Cost Recovery Charges; Reliability Must Run/generation deactivation charges associated with generating plans for which specific RMR charges begin after July 24, 2014; historical out-of-market tie line, generation, and retail customer meter adjustments; unaccounted for energy; or any Federal Energy Regulatory Commission (FERC) approved reallocation of PJM RTEP charges related to Docket No. EL05-121-009 (collectively, referred to as "non-market based charges" or "NMB charges"). These NMB charges will be assumed by the utilities for both default service suppliers and EGSs (retail suppliers) that serve load in the Companies’ service areas, and the associated costs will be recovered from customers in a competitively neutral manner through the Companies’ nonbypassable Default Service Support (DSS) Riders.

POR Clawback Charge, CAP Shopping, Customer Referral Program

The FirstEnergy utilities propose to continue the current purchase of receivables (POR) clawback charge as, "a permanent part of their POR programs."

The clawback charge is assessed to EGSs whose write-offs as a percentage of revenues are 200% higher than their peers and whose average price per kWh is greater than 150% of the average PTC of the Company that is the default service provider for the customers served by the EGS in question.

More specifically, the utilities describe the clawback mechanism as follows: "The clawback charge calculation is a two-prong test. The first prong identifies those EGSs in the POR program whose average percentage of write-offs as a percentage of revenues over a twelve-month period exceed 200% of the average percentage of total EGS write offs as a percentage of revenues per operating company. The second prong of the test identifies those EGSs identified under the first prong whose average price charged over the same twelve-month period exceeds 150% of the operating company average PTC for the period. For those EGSs that fail both prongs of the test, the annual clawback charge assessed is the difference between that EGS’s actual write-offs and their actual write-off amount calculated at 200% of the average EGS percentage of write-offs per operating company. The charge recovers the amount of EGS write-offs over 200% of the operating company average and is billed to the EGS annually."

In addition, as required by a September 2018 Order, the Companies developed and now distribute an EGS-specific customer arrears report with unpaid aged account balances for EGSs participating in the Companies’ POR programs.

"The charge has been effective in achieving the Companies’ goal of reducing the uncollectible accounts expense that would otherwise have to be collected from the Companies’ customers through retail rates. Accordingly, the Companies propose to continue the clawback charge as a permanent part of their POR programs," the utilities said

With respect to customer assistance program (CAP) customer shopping, the FirstEnergy Companies are proposing to continue the existing CAP shopping programs approved in the DSP V Orders which the utilities said are consistent with the guidelines provided in a PUC Proposed Policy Statement Order.

Under the current CAP program, EGSs must charge CAP customers a rate for generation service that is always at or below the applicable Company’s residential PTC.

To ensure EGS compliance with this limitation on rates, the Companies’ billing system only accepts rate-ready, percentage-off rates on CAP customer accounts.

With respect to the customer referral program, the FirstEnergy utilities propose to continue offering each one from June 1, 2023 to May 31, 2027.

"Consistent with their current CRPs [customer referral programs] and the Companies’ existing tariffs, the Companies propose to continue to recover CRP costs through an EGS participant fee not to exceed $30 per enrolled customer [the current rate] with any remaining program costs recovered, on a non-bypassable basis, through the Companies’ applicable DSS Riders," the utilities said

Utility Time Of Use Generation Supply Rate Option

The FirstEnergy utilities propose a default generation supply time of use rate option for non-shopping residential and commercial customers

To determine the TOU default supply rates for each period, the Companies propose to adjust the standard TOU Rider rates for each class using pricing multipliers that reflect the ratios calculated from the Companies’ PJM zone spot market prices and the cost of capacity during on-peak hours. "The Companies are proposing to allocate the cost of capacity to on-peak hours only to send cost-based price signals and create larger price differentials that are more likely to motivate customers to adjust the time of day they use electricity," the utilities said

The Companies propose to source both the standard and TOU default service for residential and commercial customers from the same supply portfolio for each class

TOU pricing periods would be as follows:

On-Peak: 2 p.m. – 9 p.m., Monday through Friday

Super Off-Peak: 11 p.m. – 6 a.m., Every day

Off-Peak: All other hours

"TOU customer kWh usage and costs will be included in the semi-annual reconciliation of the over/undercollection component of the PTC Riders by class (i.e., residential or commercial). The Companies’ proposed reconciliation process using a single E-Factor for each customer class will help mitigate potential large swings in the PTC Rider over/under collections that could arise if customers switch between the Companies’ standard default service and TOU default service rates.," the utilities said

"In addition, the Commission has previously authorized other EDCs to recover TOU over/undercollection amounts from all default service customers based on its finding that the TOU rates mandated by Act 129 are a 'form of default service,'" the utilities said

Load Cap

The Companies’ current DSPs employ a 75% load cap for both fixed- and hourly-product auctions, which restricts the amount of supply any one bidder can win in an auction. The Companies propose to reduce the load cap to 40% on an aggregated load basis across all products in each fixed-price auction.

"Reducing the load cap for fixed-price auctions will diversify the load to additional suppliers, reduce the concentration risk, and reduce the potential collateral requirements on any one supplier that could lead to a default," the FirstEnergy utilities said

The FirstEnergy utilities also proposed a new credit-based tranche cap to limit bidders with "poor or no credit ratings" from having the ability to bid on a large number of tranches. The Companies also proposed Independent Credit Requirement per Tranche (ICRT) for winning bidders as further discussed in the companies' filing

Third-Party Access To Customer Data

The FirstEnergy utilities propose a new process for non-retail supplier third parties to access customer data

The proposed Third-Party Data Access Tariffs would establish a registration process for a non-EGS entity seeking electronic access to customer data. As part of that registration process, the entity would be required to accept all terms and conditions outlined in the proposed tariff, including a warrant that by sending an electronic request for individual customer data to a Company, the entity has obtained valid customer authorization to access or retrieve, or both, data specific to such customer.

As proposed, the Companies will provide automated solutions for the third party to register and request customer-specific data and for the Companies to deliver the data securely in electronic form. These automated solutions will adopt the self-service tools that exist on the supplier portal today for EGSs, as well as electronic data interchange protocols, to minimize customer costs.

Docket P-2021-3030012 et al.

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