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PUC Staff Opposes Rider Meant To "Unbundle" Generation Service Costs From Distribution Rates

May 23, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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In a report on Duke Energy Ohio's electric rate case, Staff of the Public Utilities Commission of Ohio have recommended that the Commission not adopt a rider meant to unbundle certain costs related to generation service from delivery rates, with such costs instead recovered through a new rider with a rate specific to default service customers as well as a separate rate for shopping customers (for unbundled costs related to operating the choice program)

Duke Energy Ohio had included such rider, known as Rider RR or retail reconciliation rider, in its rate filing, but did not recommend adoption of the rider

The rider would unbundle certain costs related to default service, as well as costs related to running the choice program, and would assign such costs to SSO customers or shopping customers, respectively

Specifically, the default service costs that would be removed from base rates would be labor costs related to PJM settlements for SSO customers, and costs related to calculating SSO rates and related filings

Costs related to Duke's choice program to be removed from base rates and included in the rider would be labor costs related to running Duke's supplier business center, and labor costs related to PJM settlements for retail suppliers

Notably, Duke proposed to not unbundle several costs currently included in distribution rates in the retail reconciliation rider

Duke would not include in the rider PUCO and OCC Assessment Fees, "because these apply to the distribution company, and are not related to generation service."

"Call Center costs are excluded because the call center exists to serve the needs of the retail distribution customers (including those few customers that take service at transmission voltage). The call center does not exist to promote SSO generation service. Most of the calls received by the call center pertain to billing, disconnections, reconnections, moves, late payments, and general rate questions. The Company does not maintain logs that record the volume of calls that specifically deal with SSO generation," Duke said

"Other O&M expenses included in the [distribution rate] filing are also excluded from this [Rider RR] analysis because those costs exist to serve all distribution customers," Duke said

Staff agreed that the retail reconciliation rider should not be adopted

"Although the Company proposes a new rider to reallocate costs between Standard Service Offer generation service customers and Competitive Retail Electric Service (CRES) Provider service customers, it did not recommend implementing such a rider. Staff agrees with the Company that the Rider should not be approved and implemented," Staff said

In its testimony, Duke had said that Rider RR should not be adopted because cost recovery would vary with the amount of customer switching.

"The dependence of base distribution revenue recovery on generation switching is unfair to customers and the Company. If switching percentages change, customers could over-pay or under-pay for base distribution costs. At the same time, the Company could over-recover or under-recover its base distribution revenues. These under- or over-recoveries cannot be trued-up between rate cases because base rates are not trued-up, and because generation switching percentages change over time," Duke said

"Rider RR would require frequent true-ups to ensure that customers do not over- or under-pay, and that the Company does not over- or under-collect the base distribution revenues. These true-ups and associated audits would likely add to the Company’s and the Commission’s administrative burden,' Duke said

"All distribution base rates, including large commercial and industrial rates, would need to be decoupled from actual sales for true-ups to be possible," Duke said

Case No. 21-888-EL-ATA et al.

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