Utility Formally Proposes Wholesale Auction Process & Specific Details For Default Service, In Sought Move Away From Managed Portfolio
Details Include Bypassable Vs. Nonbypassable Costs; Start Date; Credit Requirements
Proposal Includes Listing Price To Compare On Shopping Customer Bills
April 28, 2022 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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Duke Energy Ohio (the Company) has filed its specific proposal to transition to a wholesale Standard Service Offer (SSO) auction to procure its natural gas supplies for default service customers, from the current gas cost recovery mechanism
In the application, Duke said that it will obtain SSO supplies by conducting a wholesale descending clock auction consistent with those
conducted by the Dominion East Ohio Gas Company, CenterPoint Energy, Inc., and Columbia
Gas of Ohio, Inc.
Under the new default service mechanism, non-shopping customers would pay Rider SSOR and Rider SSOCR
Rider SSOR would be a bypassable rider that will be updated monthly and will show the
calculated rate resulting from adding the Retail Price Adjustment (RPA) from the SSO auction to the
New York Mercantile Exchange (NYMEX) closing price for the month in which the rate will be
in effect, converted from a rate per dekatherm (Dth) to a burner-tip rate per Ccf by applying the system loss factor and rolling 12-month average BTU. This rate will apply to Rates RS, RSLI, GSS
Rider SSOCR would be established as a bypassable rider to recover costs or refund
overcollections for incremental costs associated with providing service under the Company’s SSO,
including, but not limited to, any incremental provider-of-last-resort costs, costs associated with
managing the annual audit, adjustments to charges billed through the SSOR during prior periods,
costs associated with storage and transportation costs needed to utilize storage, revenues and
penalties received from Commission-approved balancing services, charges that Duke Energy Ohio
pays to Duke Energy Kentucky for transportation across Duke Energy Kentucky’s system,
reconciliation of actual costs to SSO revenue, pipeline transportation charges and credits, and other
costs or credits applicable to SSO service. Initially, Rider SSOCR will also be used to recover or
pass back the Unrecovered Gas Cost Balance and Refunds remaining from the GCR mechanism.
This rider will be updated quarterly and will be subject to annual audits by the Commission at its
"Because Rider SSOCR is bypassable to customers who are served by a retail supplier,
the Company proposes to include an emergency provision such that Rider SSOCR could convert,
for an interim time and with Commission authorization, to being non-bypassable if the percentage
of customers who have switched to a competitive supplier exceeds ninety-percent of all natural
gas customers of the Company," Duke said
Rider SSOCR will be adjusted quarterly and will be subject to
annual audits by the Commission at its discretion.
Additionally, a rider (Rider ATC) to recover transition costs associated with the move to an SSO auction would apply, and its bypassability will depend on customer type
Duke said that Rider ATC would recover the prudently incurred costs to transition to the SSO Auction
structure and away from the GCR.
Rider ATC would be non-bypassable for residential customers
and bypassable for non-residential customers
As a wholesale auction, SSO Suppliers' names would not appear on customers’ bills.
As previously reported, as part of the SSO transition, Duke proposes to include a price to compare message on all utility bills, including those for shopping customers
Duke included sample bills in its filing, which were for combined electric and gas service. In such sample combined bill, the gas price to compare message appeared on page 4 of the bill for both shopping and non-shopping customers.
The message for shopping customers would state: "PRICE TO COMPARE: In order for you to save money, a
natural gas supplier must offer you a price lower than $X.XX
per CCF for the same usage that appears on this bill.
When shopping for a natural gas supplier, it may be
useful to compare supplier offers with the standard service
offer (SSO) rate available to eligible customers, which
varies monthly based on the market price of natural
gas. Price represents one feature of an offer; there
may be other features which you consider of value. More
information about the SSO and other suppliers' offers
is available at energychoice.ohio.gov or by contacting the
The timing for the first SSO auction is to be determined based on PUCO approval, but Duke proposes that the first SSO delivery period start in November 2022
Duke proposes that the first SSO period run from November 2022 to March 2024, with the subsequent SSO periods (starting April 2024) being a one-year term running from April to March
Duke highlighted certain differences between its SSO mechanism and those put in place at other Ohio LDCs
"The first difference between Duke Energy Ohio’s proposed
transition to an SSO and previous transitions to an SSO process is
that the Company proposes to retain all storage assets used to
balance and serve the Company’s customers. This is necessary in
order to maintain the current Choice and interruptible transportation
services in the same manner as they operate today. Currently, the
Company provides a virtual storage and balancing service for the
Choice brokers, which is backed by the Company’s storage.
Releasing the storage to the SSO suppliers would have necessitated
changes to the current Choice tariffs, thus making the impact of
transitioning to an SSO service not limited to only the GCR
customers," Duke said
"The second difference is in how the Company allows the balancing
of its interruptible transportation customers. Duke Energy Ohio
currently operates so as to allow the interruptible transportation
customers’ demand to be served. In order to minimize impact to
shopping customers, it was best to not change how interruptible
transportation customers are balanced. In addition, the current
flexibility in the balancing process for the interruptible
transportation customers further demonstrates why the Company
needs to retain all storage for balancing and SSO customer use," Duke said
Duke proposes various SSO Supplier Credit Requirements, including the following
Potential bidders in the SSO Auction must be pre-qualified. All bidders will
be required to provide auction security in order to participate in each SSO
Auction in an amount determined by Duke Energy Ohio prior to the SSO
Auction. This amount, per tranche, will be the same for all bidders and will
be returned to non-winning bidders following the conclusion of the auction.
Winning bidders’ auction security will be returned after they have signed
the agreement and provided any required credit support as determined by
the creditworthiness evaluation versus exposure calculated for number of
tranches won. Security must be in the form of either cash or a letter of credit. The pre-qualification process shall include a creditworthiness evaluation,
and bidders must demonstrate the ability to meet Duke Energy Ohio's
creditworthiness requirements in advance of participation in the Auction.
Bidders will have their creditworthiness assessed against exposures that
include 150% of the tranches that they express the intent to bid on. This
level is required in order to allow for sufficient credit to enable an SSO
Supplier to accept an increase in its tranche volumes in the event of an SSO
Supplier default, up to a level equal to 150% of the design day demand of
the original tranche level won by the SSO Supplier in the SSO Auction.
Based on the creditworthiness evaluation, Duke Energy Ohio will determine
the amount of unsecured credit that each bidder’s creditworthiness supports,
which will be communicated to each bidder prior to the SSO Auction. For
bidders wishing to provide a parent guaranty, the unsecured credit amount
will be based on their guarantor’s creditworthiness.
In consideration of various exposures, Duke Energy Ohio will determine
for each SSO Auction the exposure amount per tranche representing the
credit requirement that each SSO Supplier will have to meet. Upon the
conclusion of the SSO Auction, SSO Suppliers shall provide appropriate
credit support including any parent guaranty utilized to establish an
unsecured credit amount, and cash or letters of credit to the extent the
exposure for tranches won in the SSO Auction exceeds the amount of the
SSO Supplier’s unsecured credit threshold.
In addition to those creditworthiness requirements addressed above, upon
the awarding of tranches, each winning bidder shall provide Duke Energy
Ohio with a cash deposit in the amount of thirty-five cents per Mcf
multiplied by the initial estimated annual delivery requirements for the SSO
Period of the tranches won by that SSO Supplier. This financial security
shall be held and administered by Duke Energy Ohio exclusively for the
benefit of the other SSO Suppliers who are called upon to cover for the SSO
Supplier in case of its default.