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 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
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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
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
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
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
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.
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
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
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
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
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
"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
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.