Pa. PUC Staff Not Opposed to Migration Rider for Default Service Costs at PPL

The Pennsylvania PUC Bureau of Investigation and Enforcement does not oppose the implementation of a reconciliation rider as a means of recovering proper transmission service and generation supply service charges, but said that a proposed rider from PPL Electric Utilities would recover "improper" costs not related to default service through the rider, and opposed the rider as proposed by PPL.

As first reported by Matters, PPL is seeking to implement a default service Reconciliation Rider to charge or refund to customers any default service reconciliations for their past service under default supply, regardless of the customer's current supplier. This Reconciliation Rider is essentially similar to the "migration rider" in place at Pennsylvania natural gas utilities.

Additionally, PPL is also seeking approval for a fully nonbypassable Competitive Transition Rider (CTR) for all generation and transmission reconciliations accruing from January 1, 2010 through May 31, 2012. Unlike the Reconciliation Rider, which only applies if a customer had taken default service for the period to be reconciled, the Competitive Transition Rider would apply to all distribution customers regardless of supplier during the period to be reconciled (see 8/29)

Investigation and Enforcement Staff, "is of the opinion that the Reconciliation Rider, as presented, has merit," but opposed implementation as proposed because it includes unrecovered costs related to PPL's optional Time of Use generation rate option.

"As the Company currently maintains recovery mechanisms for its transmission service and generation supply service '[i]t can be legitimately questioned whether the filing of this Petition is intended to recover costs associated with PPL's default service program or whether PPL's true intention is to recover losses related to its less than successful Time-of-Use program,'" Staff said.

"In addition, the Competitive Transition Rider is unnecessary as its sole purpose is to recover, or refund, unjust and unreasonable historical Time of Use costs," Staff argued.

Staff argued that the Time of Use costs are not default service costs, since the product requires an affirmative election.

"The substantial evidence in the record supports the premise that the TOU program should not be recognized as a default service program and, therefore, any under or over-collections should not be included in the Company's proposed recovery mechanism," Staff said.

In its post-hearing brief, PPL cited a recent decision regarding PECO in which the PUC agreed that, "the dynamic pricing options [required under Act 129, such as PPL's TOU rate] were to be an element of default service and not a rate option offered as part of transmission or distribution service."

"Based on the foregoing, PPL Electric's TOU program is a reconcilable Section 1307(e) default service option. As a default service option, the Company clearly is entitled to recover all of its TOU costs, including the over and under collections associated with the TOU program," PPL said.

Staff countered that, to the extent the PUC accepts the TOU program as a form of default service, the Competitive Transition Rider should still be rejected because the costs to be recovered under it are not "reasonable," and, "[o]nly the reasonable costs associated with default service are eligible for recovery."

Staff said that the unrecovered TOU costs are not reasonable because they stem from flaws in the design and implementation of the TOU program, whose peak rate in the first five months of 2011 was lower than PPL's fixed default service rate -- leading participation in the TOU program to jump to 23,000 from less than 500.

"I&E opines that the components of the TOU program that are under the control of the Company created the scenario wherein there are dramatic fluctuations in customer numbers. As presented by the Company's own witness, the peak pricing of the TOU program was lower than the fixed price reflected in the price to compare charged to default service customers. While this pricing scenario existed, approximately 55 times the number of customers in the 2010 program opted to receive service from a program where the peak prices, generally regarded as the highest prices, were lower than the fixed rate currently in effect. I&E believes that a company with the business acumen of PPL would contemplate an influx of customers under this offering and have sufficient measures to handle the additional participants. The record is void of evidence to demonstrate how PPL anticipated this response to the advantageous pricing of its January 1, 2011 through May 31, 2011 TOU program. To the extent the wide variation in customer numbers has contributed to the large under-collection associated with the TOU program during this time period, I&E maintains that this was a known risk that is clearly the Company's responsibility. I&E offers that the resulting costs should not be considered reasonable as they are the result of the flawed design of the program."