Pennsylvania PUC Opens Investigation of Competitiveness of Retail Electric Markets

The Pennsylvania PUC today directed that an order be prepared to officially launch its statewide investigation into the state's competitive retail electric market, which the PUC had said that it would undertake as part of approving the FirstEnergy-Allegheny Energy merger.

The investigation is docketed as I-2011-2237952, and will have a particular emphasis on the default service model.

The investigation will be broken into two phases.

The first will assess the status of the current retail market and explore what changes need to be made to allow customers to best realize the benefits of competition. The second phase will examine and address how to best resolve the issues raised, and implement the prudent changes identified based upon the PUC's review of stakeholder comments.

The PUC said that the second phase will take the form of working groups (plural) led by the Office of Competitive Market Oversight.

Each phase will also include an en banc hearing, with the first phase hearing set for June 8.

For the initial phase, the PUC has issued a series of questions, with responses due June 3. Questions include.

1. What is the present status of competition for retail generation for customers, by class and service area, and for alternative suppliers.

2. Does the existing Pa. market design present barriers that prevent customers from obtaining, and suppliers from offering, the benefits of a fully workable and competitive market. Do such barriers, if they exist, vary by customer class?

3. What are the economic and managerial costs associated with electric distribution companies (EDCs) fulfilling the default service role? Are such costs accurately passed to default service customers. Are there barriers to competition as a result of having EDCs provide default service?

4. Are there unintended consequences associated with EDCs providing default service, and related products, such as time of use rates?

5. Should default service continue in its current form? Does default service impede competition? Does default service provide an advantage to the incumbent EDC or its generation affiliate?

6. Can/should the default service role be fulfilled by an entity, or group of entities, other than the EDC? If so, what mechanisms can be used for a transition? Are different approaches appropriate for different customer classes? What criteria should be used to ensure electric generation suppliers are qualified to assume a default supplier role?

7. How can Pennsylvania's default service model be improved to remove barriers to achieve a properly functioning and robust retail market. Are there additional market design changes that should be implemented to eliminate the status quo bias benefit for default service?

8. What modifications are needed to the existing default service model to remove any inherent procurement (or other cost) advantages for the utility?

9. What changes can the PUC implement on its own to the default service paradigm improve retail competition?

10. What legislative changes, including changes to the current default service model, should be made to better support a fully workable and competitive retail market?

11. Are there potential barriers being created by the implementation of the EDC smart meter plans?