FirstEnergy Pa. EDCs to Rely on 24-Month Contracts for Commercial Default Service, Propose Retail Adder

Met-Ed, Penelec, Penn Power and West Penn Power have proposed a joint default service plan which relies exclusively on 24-month contracts for the full requirements portion of the portfolio, and which includes a bypassable retail adder in the Price to Compare.

The proposed default service plan at the FirstEnergy electric distribution companies covers the period June 1, 2013 through May 31, 2015.

For both residential and commercial customers, the FirstEnergy EDCs proposed to serve 90% of default service load through full requirements contracts lasting 24 months in length.

For commercial customers, this is a departure from the current exclusive reliance on 12-month contracts for the full requirements portion of default service, currently in place at Met-Ed, Penelec, and Penn Power. Additionally, most of the FirstEnergy EDCs currently include some 12 months contracts in their residential full requirements portfolios (though some contracts also extend beyond 24 months as well).

Two procurements would be held for the 24-month full requirements contracts: in November 2012 and January 2013. A descending clock auction would be used, and it does not appear that the companies have proposed a load cap.

The remainder of default service residential load at Met-Ed, Penelec, and Penn Power will be served by spot purchases priced at the hourly PJM LMP, and by an existing 50 MW block energy product from their prior default service plan. The remainder of default service residential load at West Penn Power, and commercial load at all four EDCs, will be will be served by spot purchases priced at the hourly PJM LMP.

The full requirements product will exclude Network Integration Transmission Service, Regional Transmission Expansion Planning costs, and any PJM Transmission Expansion Charges. Such charges will be assumed by the EDCs for both default service load and competitively served load, and will be recovered under a nonbypassable rider.

The full requirements product will include the obligation to comply with the non-solar Alternative Energy Portfolio Standards (AEPS) obligations, and 60% of the solar AEPS obligations. The remaining 40% of solar AEPS obligations will be assumed by the EDCs, for both default service and competitive load, with nonbypassable cost recovery.

Industrial customer default service will be hourly pricing. Though supporting testimony and exhibits from the FirstEnergy EDCs will be filed in December, nothing in the initial petition suggests a change in the current cutoff for hourly pricing currently applicable at each EDC.

For residential and commercial customers, the Price to Compare will change every three months, on March 1, June 1, September 1, and December 1. The seasonal factor will be eliminated from the Price to Compare.

Most notably, a Market Adjustment Charge will be added to the Price to Compare, applicable to the residential and commercial classes.

The bypassable Market Adjustment Charge would be 5 mills per kWh, and is designed to, "reasonably compensate the Companies for the obligation and attendant risk of procuring electric power for customers who choose not to shop."

"The MAC will have the collateral benefit of enhancing competition by creating additional 'headroom' beneath the price-to-compare for competitive offers," the FirstEnergy utilities noted.

A cost of credit is also being included in the Price to Compare.

Opt-In Auction, Referral Program
As first reported by Matters (11/8), the FirstEnergy EDCs included a retail opt-in auction in their default service plan.

Under the FirstEnergy EDCs' proposal, electric generation suppliers would compete in a retail auction held after the January 2013 procurement, but no later than March 2013. The auction would occur prior to customers electing to opt-into service under the auction.

Retail suppliers would bid a rate priced as a "percent off" the Price to Compare for 24 months, with the winner of each auction determined by the highest percentage off the Price to Compare. In the event of a tie, customers would be randomly split among winning suppliers.

Though supporting testimony is to be filed next month, there does not appear to be a load cap associated with the retail auction.

The retail opt-in auction product will not include an early termination fee.

After the winning suppliers are selected via auction, the EDCs will notify customers of their ability to enroll with the winning supplier, informing customers of the winning percent off the Price to Compare. Customers will have up to eight weeks to opt into service with the winning supplier, and may do so through returning a tear-off card (sent by the EDCs) to the winning supplier, or via website or phone.

Winning suppliers will serve opt-in auction customers for the entire 24 months of the default service plan. At the end of the term, the customers will, absent affirmative action, remain with the retail supplier, which must inform the customer of their right to select another supplier or return to default service.

The FirstEnergy EDCs also proposed a customer referral program offering a product with standard terms and conditions.

The referral product would be offered to customers who call the utility with a new mover request, call the utility about a high bill complaint, or call the utility to inquire about choice. At the end of the relevant discussion, the utility representative will inform the customer of their ability to shop and that they can be transferred to the Customer Referral Plan implementation team, if interested.

The Customer Referral Plan implementation team would, among other things, inform customers that the utility has information about the current lowest price for a 12-month fixed price offering and a 24-month fixed price offering, which were obtained through an open bidding process.

Specifically, the EDCs will establish a website for retail suppliers to enter their 12-month and 24-month referral plans offers, with such pricing refreshed weekly. The lowest offer on the site for each term will be the referral product marketed to customers for that week.

The referral products will only be marketed to customers if they are below the Price to Compare. The referral product may not include any early termination fees.

Suppliers must accept all customers who wish to enroll through the referral program.

Finally, West Penn Power and Penn Power would allow retail suppliers, via auction, to compete for the ability to supply the optional Time of Use (TOU) generation product available to residential customers. Met-Ed and Penelec currently offer a competitively neutral TOU product available to all customers regardless of shopping status, and do not propose changing this mechanism.

At Penn Power and West Penn Power, retail suppliers competing to offer the TOU service would be required to bid a 12-month, fixed price, on-peak and off-peak product (with such periods aligning to the periods used by PJM). The winning supplier would be determined by the lowest weighted price for the 12-month product.

The winning TOU supplier would serve customers for 12 months, and would retain customers at the end of the term absent an affirmative selection by the customer. The supplier may not charge an early termination fee during the initial 12-month term.