SOS Workgroup Proposes Shifting Responsibility For Certain RTO Charges From Wholesale Suppliers To Utilities (Seeks To Reduce SOS Risk Premiums)

August 24, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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According to a filing from Maryland PSC Staff concerning the Maryland SOS Procurement Improvement Process group, the PIP group has recommended that, under a revised SOS full requirements service agreement, "[t]he following four line items are shifted from the sellers’ responsibility to the buyers’:

1. 1930 Generation Deactivation (Charge)

2. 1932 Generation Deactivation Refund (Charge)

3. 2930 Generation Deactivation (Credit)

4. 2932 Generation Deactivation Refund (Credit)"

The PIP report stated, "Since these items occur randomly, are very hard to estimate, and are not market based, sellers are unable to hedge the risks they entail. Instead, the sellers would need to estimate what these charges would be over the contract term and build that amount into their price, along with a risk premium to account for the possibility that their estimates were too low. Keeping the items with the sellers unnecessarily added costs to the SOS product. With the transfer of responsibility to the utilities, these costs become a pass through of the actual costs in SOS rates."

The PIP report did not address the utilities assuming the Generation Deactivation charges listed above for all retail customers, including customers of competitive retail suppliers.

Under the proposed change, the utilities would be responsible for the listed Generation Deactivation charges in the same manner as the utilities are currently responsible for Network Integration Transmission Service charges and Transmission Enhancement charges for SOS load.

The proposed revised FSA provides as follows:

Seller and Buyer agree the PJM settlement, Inc, (PJM Settlement) shall transfer all of the following charges directly related to the Seller’s retail load obligations from the Seller’s account(s) to the Buyer’s account by the last business day of the month prior to the effective date of the Delivery Period, of the first Transaction under this FSA:

Billing Line Item Number - Billing Line Item

1100 Network Integration Transmission Service charge

1104* Network Integration Transmission Service Offset

1108 Transmission Enhancement charge

1115 Transmission Enhancement Settlement (EL05- 121-009) Charge

2108 Transmission Enhancement Credit

2140 Non-Firm Point-to-Point Transmission Service

1930+ Generation Deactivation

1932+ Generation Deactivation Refund

2930+ Generation Deactivation Credit

2932+ Generation Deactivation Refund Credit

* Applies to The Potomac Edison Company only

+ Buyer requires setup of unique PJM short name (account) to effectuate the transition (of being the responsible party going forward)

In other SOS issues, the PIP parties propose to continue the use of a capacity proxy price, "until PJM is fully able to resume establishing a market capacity price on a timely basis."

CCA issues related to SOS are discussed in our related story today (click here)

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