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PUC Approves Default Service Settlement Under Which Utility Will Initiate Collaborative To Discuss "Enhancements" To SOS Procurements
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The PUC of Ohio has approved without modification a settlement among several major parties in Duke Energy Ohio's electric security plan proceeding, under which Duke will implement limited changes in the default service auctions in order to reduce risk premiums
However, as previously reported, the settlement, now adopted by PUCO, omitted Duke's original proposal for "flexibility" to seek greater changes to default service design and procurements in the middle of the ESP term if the initial limited changes did not adequately address risk premiums. See more background on the originally proposed provisions dropped under the ESP settlement here
The settlement, supported by Duke, Staff of the PUC of Ohio, Ohio Consumers' Counsel, IGS Energy, the Retail Energy Supply Association, Constellation, Ohio Energy Leadership Council, Ohio Energy Group, and other parties representing large customers and also small consumers, establishes Duke's ESP V, which will run for a term of June 1, 2025, through May 31, 2028
The adopted settlement provides for limited, customary changes originally proposed by Duke as "initial" measures to reduce risk premiums in the Standard Service Offer auctions
Such changes included in the approved stipulation are:
(1) Removing 36-month contracts from the default service portfolio, relying exclusively on 12- and 24-month contracts
(2) Using a capacity proxy price for SSO auctions which are held at a time at which the PJM base residual auction price has not yet been established
PUCO notably said in approving the stipulation that, "While the competitive auction process continues to be beneficial to ratepayers, the various enhancements made to the process that mitigate volatility in the marketplace are particularly helpful to ratepayers."
Specifically, in the first year and third year of the ESP, 70% of the SSO portfolio would consist of 12-month contracts, and 30% of the SSO portfolio would consist of 24-month contracts. During the second year of the ESP, 12-month contracts will constitute 40% of the SSO portfolio, while 60% will be sourced under 24-month contracts
A chart showing the laddering and procurement dates can be seen here
Two annual procurements will be held for the SSO contracts, with a change in one of the procurement dates -- but not the change Duke had originally proposed
Excluding the procurements for the initial year, whose dates are impacted by the timing of PUCO's ultimate approval for the ESP, Duke will conduct SSO auctions in October and February of each delivery year.
Currently, SSO auctions are held in September and February
In Duke's original ESP application, Duke had originally proposed maintaining the September auction, but accelerating the February auction to December of the preceding year. Duke had originally said that moving the February SSO auction to an earlier date would allow wholesale suppliers to participate on their own in the PJM Auction Revenue Rights process which occurs in February and March. As noted above, as approved by PUCO, the second SSO auction in a delivery year will continue to be held in February as is current practice
Most notably, under the settlement, Duke withdrew its prior sought authorization for "flexibility" to seek implementation, in the middle of the established ESP and default service plan, of further SSO changes as a means to reduce risk premiums
As previously reported by ECM, Duke had said in its original application that the "most likely" next step to reduce SSO risk premiums would have been a volumetric risk cap applied to SSO suppliers, with Duke assuming the responsibility for any increases in SSO load above this cap
Other potential solutions to reduce SSO risk originally raised by Duke, as potentially included in such previously sought flexibility, had consisted of including a new generation build component under the ESP, as well as further measures to limit risk from opt-out aggregation load swings
While Duke withdrew its request for flexibility in being permitted to seek SSO design changes during the term of the ESP, the adopted stipulation does provide that Duke will convene a collaborative to discuss potential "enhancements" to future SSO auction processes.
Retail default service rate design is unchanged under the stipulation, but the adopted settlement does include a change impacting the (typically) bypassable Rider SCR, which addresses SSO reconciliation
As under the current tariff, Rider SCR (Supplier Cost Reconciliation Rider) will remain bypassable, except that if the balance under SCR exceeds 10% of SSO revenues, Rider SCR, upon PUCO approval, will become nonbypassable
Notably, the adopted stipulation provides that Duke will cease recovery through Rider SCR of credits paid to net metering customers for excess generation, thus lowering the balance of Rider SCR, all else equal
Additionally, if a capacity proxy price is used for SSO wholesale contracts, Duke will reflect the actual PJM capacity price in the SSO bypassable capacity rider (Rider RC) once such PJM capacity price is known (including changing the established Rider RC rate if the rate was already set using a proxy price), to reduce potential retail rate reconciliations arising from the use of a CPP
The approved stipulation provides that Duke will conduct a campaign to educate default service customers about increases in SSO rates due to PJM capacity prices
"The customer awareness campaign shall be competitively neutral and shall not be designed to encourage, steer, or direct customers to SSO service, or any particular supplier," the settlement provides
Duke shall consult with PUCO Staff concerning the capacity price messaging, and OCC agrees to help promote the awareness campaign by posting information on OCC's website
Duke's education communications about capacity-driven rate increases shall include bill messages, emails, or texts (based on customer preference), and information located on Duke's website.
Duke's purchase of receivables program is untouched by the stipulation, but the settlement will require reporting, separated by shopping and non-shopping customers, and by customer class, of the amount of disconnection notices issued by Duke (and the customer arrearages at such time), the amount of actual disconnections for nonpayment, and the customer's arrearages at the time of disconnection
The POR program will continue to have zero discount, with all customers paying the generation-related uncollectibles rider (Rider UE-GEN), except shopping customers whose receivables are not included in POR do not pay Rider UE-GEN
As previously reported, the stipulation did not include various EE and DSM programs initially proposed by Duke under Duke's original ESP filing. Certain environmental groups had petitioned PUCO to include such EE and DSM programs in the ESP
PUCO declined to require additional EE and DSM programs beyond what is included in the settlement (with the settlement including certain low-income programs), as PUCO cited its previously reported orders that held that the competitive market is a more appropriate vehicle for the relevant EE and DSM programs
Citing such recent precedent, PUCO reiterated that EE and DSM programs, "are better suited for the competitive market, where both residential and non-residential customers will be able to obtain products and services to meet their individual needs."
Case 24-278-EL-SSO, 24-0278-EL-SSO
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Utility Will Educate Default Service Customers About Rate Increases Due To PJM Capacity Price Spikes
May 14, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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