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PUC Denies Changes To Default Service Procurements, Including Risk Cap

Orders New Smart Thermostat Rebate Program, Directs That Program Consider Terms Of Recently Adopted Program Open To Retail Suppliers

May 15, 2024

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Copyright 2010-24
Reporting by Paul Ring •

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The Public Utilities Commission of Ohio adopted an order to approve, with modifications, an electric security plan (ESP V) at the FirstEnergy Ohio electric utilities

PUCO established the term of ESP V to be five years, starting June 1, 2024. The FirstEnergy utilities had proposed an eight-year ESP term

Default Service Procurements

As previously reported, the FirstEnergy EDCs had proposed implementing a volumetric risk cap (VRC) in the default service auctions, under which an SSO supplier's obligation to serve load would be capped at 20 MW above a benchmark for a tranche as established in the supply master agreement. As proposed, the FirstEnergy EDCs would physically serve excess load migration, above the 20 MW cap, at real-time market prices.

PUCO rejected the VRC, citing the risk that would be shifted to customers, as well as a moderation in recent SSO pricing

"To put it simply, at this time we find that the known VRC risk of subjecting customers to volatile real-time market prices outweighs the possible reward of lower risk premiums built into the auction clearing prices," PUCO said

PUCO noted that risk premiums in recent auctions without the VRC have decreased.

"We observe that the auction clearing prices increased dramatically in late 2022 and early 2023. However, the February 2024 clearing price, $69.27, was similar to the clearing price in March 2022, $68.11, before the mass customer migration back to the SSO described by the parties," PUCO said

While PUCO declined to adopt a VRC at this time, PUCO affirmed that it will continue to consider changes to default service procurements if warranted

"As we recently stated in another proceeding, we will continue to monitor the auctions and clearing prices so that we may implement mitigation measures that are commensurate to the circumstances at hand," PUCO said

However, PUCO, applying its reasoning to the VRC as well as other proposed changes that PUCO also rejected (discussed below), said that, if PUCO were to adopt changes, PUCO would likely address any changes in a generic proceeding applicable to all EDCs, rather than individual cases

Rejecting another proposed change, PUCO declined to separate the default service auction load by customer class.

PUCO rejected a proposal from NRG to default all SSO customers to a time-of-use generation rate, as PUCO cited the potential for "significant" rate shock from TOU rates

Consistent with prior PUCO policy, ESP V will include a capacity proxy price (CPP) in the SSO auctions for those periods in which a PJM base residual auction price has not been established

PUCO declined to place a specific end date for the use of the CPP

PUCO approved the FirstEnergy utilities' proposal to eliminate the use of 36-month contracts in the default service supply portfolio. SSO supply contracts will be a mix of 12 and 24-month contracts

Energy Efficiency & Retail Suppliers

PUCO denied the FirstEnergy EDCs' request to implement, as part of its energy efficiency programs, a Residential Rebate program and an Energy Solutions for Business program

The rejected Residential Rebate program would have included rebates and discounts for the purchase of qualified ENERGY STAR energy efficient appliances and equipment

The rejected Energy Solutions for Business program would have included rebates for prescriptive equipment, incentives for custom projects, and energy audits

The Residential Rebate program and Energy Solutions for Business program had been opposed by retail suppliers

PUCO agreed that the activities under these two proposed programs, "are better suited for the competitive market[.]"

PUCO further denied a proposed Demand Response for Residential program, which would have included a behavioral component (notice to customers to reduce usage) and a load control component (an EDC-selected vendor would have cycled customer devices)

In place of the proposed Demand Response for Residential program, PUCO ordered the development of a smart thermostat rebate program, with a $2 million annual budget

PUCO directed that the smart thermostat rebate program developed under its order should consider the terms of the smart thermostat rebate program recently adopted at AEP Ohio, with the AEP Ohio program explicitly allowing retail supplier participation

PUCO also noted that, in a separate FirstEnergy Ohio Grid Mod II proceeding, a smart thermostat rebate program which is open to retail suppliers has been proposed (details here)

The smart thermostat rebate program directed under PUCO's ESP V order is distinct from any disposition of the pending smart thermostat rebate program under Grid Mod II, but PUCO said that if the Grid Mod II program were adopted, nothing would prevent the FirstEnergy utilities from combining the programs, provided the combined program did not exceed the aggregate of each program's funding cap

PUCO directed the creation of a working group for the FirstEnergy EDCs, PUCO Staff, retail providers, and other interested stakeholders (such as smart thermostat vendors) to collaborate to discuss implementation and ways to maximize the benefits associated with the smart thermostat rebate program

PUCO said, "The working group should also discuss and implement any reasonable and cost-effective measures necessary to preserve CRES providers’ communication channels with their CRES customers relative to programming initiated pursuant to market-based activities, and will further explore a reasonable and cost-effective solution for any potential limitations to CRES provider offered programs that could be impacted or limited due to physical or technology capabilities with smart thermostats and the vendors running the smart thermostat demand response operations[.]"

Non-Market Based Services Rider (Rider NMB)

Aside from a "modest" increase in the amount of load eligible for the Rider NMB Pilot Program, PUCO rejected all changes proposed to Rider NMB

PUCO denied the FirstEnergy utilities' proposal to create NMB 2, which would have been applicable to C&I customers with interval meters or AMI and would have been billed based on 5CP NSPL. The utilities had proposed that the current NMB design and billing determinants be applicable to all other customers (NMB 1).

PUCO also rejected the proposal from certain parties to make Rider NMB bypassable for all customers, with responsibility for the attendant PJM-related services returned to the LSE (retail suppliers and the SSO suppliers)

PUCO said that it was "mindful" of testimony which had stated that returning responsibility for such non-market-based costs to LSEs, "has the potential to disrupt the CRES [retail] market as existing contracts likely do not include the costs of the non-market-based transmission services currently obtained through Rider NMB."

As PUCO is continuing Rider NMB in its current form, PUCO rejected the FirstEnergy EDCs' proposal to include UFE charges or credits in Rider NMB

PUCO will continue the Rider NMB Pilot through the term of the ESP.

However, PUCO expanded the amount of load eligible to be served under the Rider NMB Pilot, ordering that 100 MW under the pilot be made available to new customers on a first-come, first-served basis, with each individual new customer capped at 20 MW.

Regardless of the Rider NMB Pilot cap, PUCO affirmed that customers may still seek to participate in the pilot through application and approval of a reasonable arrangement by PUCO


As part of various "stewardship commitments" funded by shareholders, the FirstEnergy EDCs had initially proposed $16 million to facilitate the conversion to electric vehicles by supporting education efforts and providing financial assistance to customers who switch to EVs

For these funds, PUCO directed that, "the Companies should limit activities to those directly related to providing distribution services[.]"

Case 23-301-EL-SSO


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