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Utility To Study Audit Recommendation That SOS Adder Be Linked To Retail Supplier Price Quotes, To Preserve Market Neutrality
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Disparate parties have supported a recommendation from an audit consultant which had stated that the bypassable SOS Adder at Pepco-DC should be, "tied more closely to competitive third-party [retail] supply pricing", to ensure that the Adder does not "undercut" competition
See background on the audit consultant's recommendations on the bypassable adder here
As previously reported, the audit consultant, "recommends a potential enhancement to Pepco’s process so that the SOS Administrative Charge and Adder may be tied to or verified against third-party quotes to ensure that the Adder does not undercut competition."
The D.C. Office of the People’s Counsel generally supported the audit report's recommendations, including the recommendation concerning the SOS Adder
OPC said, "OPC requests that the Commission adopt Atrium’s [audit consultant] proposed: (1) enhancement to Pepco’s SOS
process so that the SOS Administrative Charge and Adder are tied to or verified against
competitive third-party supply pricing, ensuring that the Adder does not undercut competition;
(2) remittance of the Administrative Credit to customers on a dollar-for-dollar contemporaneous
basis, ensuring immediate pass through to distribution customers as a volumetric credit, set
annually, on distribution customers’ bills at the same time it is charged to SOS customers;
and
(3) requirement for a written conformance memo to document Pepco’s procedure for properly capturing allowable Community Renewable Energy Facility-related incremental expenses as part
of the SOS Administrative Charge."
Separately, Pepco said that Pepco will "explore" the audit consultant's recommendation to link the adder to third-party price quotes
to better preserve market neutrality.
"Additionally, Pepco will evaluate how this specific
recommendation synergizes with other [audit consultant] recommendations to determine the feasibility of its
implementation,
particularly in scenarios where the adder is set to zero."
The Retail Energy Supply Association welcomed the audit consultant's findings and said that the PSC should consider changes to the SOS Adder
"Atrium’s [the audit consultant] findings shed light on why the adder was, and remains, too low.
According to Atrium, the calculation of the Administrative Charge, of which the adder is the
residual amount after subtracting the other components from the capped Administrative Charge,
is unrelated to, and therefore not an accurate proxy for, actual supplier costs. This has resulted
in an adder that is too low, which makes the SOS Administrative Charge an artificially low
market price against which supplier must compete," RESA said
RESA said that in addition to reviewing retail supplier price quotes to determine the appropriate level of the SOS Adder, "[o]ther methods may exist that also warrant consideration to
ensure: (1) a more accurate and transparent adder, assuming the Commission declines to fully
unbundle Pepco’s distribution rates to properly account for SOS-related costs that are recovered through distribution rates."
FC 1017
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Consumer Counsel Supports Recommendation That SOS Admin. Charge Be Tied To Or Verified Against Competitive Third-Party Supply Pricing, To Ensure Adder Does Not Undercut Competition
May 20, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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