Dayton Power and Light Seeks to Implement Market Rate Offer

On March 30, Dayton Power and Light applied at PUCO to implement a Market Rate Offer (MRO) to govern the procurement and pricing of the Standard Service Offer starting January 1, 2013 (Case 12-0426-EL-SSO).

The MRO would establish a 5 year, 5 month transition to full market pricing. During the transition (January 1, 2013 through May 31, 2018), a limited amount of Standard Service Offer (SSO) requirements would be sourced through a competitive auction, with such rates blended with existing electric security plan (ESP) generation prices.

The blending would be as follows:

January '13 – May '14: 90% ESP, 10% auction

June '14 – May '15: 80% ESP, 20% auction

June '15 – May '16: 70% ESP, 30% auction

June '16 – May '17: 60% ESP, 40% auction

June '17 – May '18: 50% ESP, 50% auction

Beginning June '18: 0% ESP, 100% auction

The blended bypassable generation rate during the transition would reflect, in their respective percentages, the results of the full requirements auction, and the bypassable ESP components, which include base generation (with environmental investment rider costs proposed to be rolled into base generation), fuel, Reliability Pricing Model charges, market-based transmission, and alternative energy compliance costs.

DP&L proposes to recalculate the blended SSO rate on a quarterly basis.

Two notable riders would be non-bypassable.

DP&L proposed a non-bypassable Reconciliation Rider (RR) to collect or refund the collective balance of any over- or under-recovery as of December 31, 2012 for riders that will be included in the blended SSO rate beginning January 1, 2013. These riders include Tariff Sheet Nos. G27 PJM Reliability Pricing Model (RPM) Rider; G28 FUEL Rider; T15 Transmission Cost Recovery Rider (TCRR); and G26 Alternative Energy Rider (AER). Furthermore, the Reconciliation Rider will also include case expense and costs associated with implementing and administering the competitive bidding process (CBP) under the MRO. Specifically, this includes case expense for outside attorneys' fees, consulting fees, hearing costs, required newspaper publications and other costs associated with this filing, costs for administering the CBP auction, CBP consultant costs, supplier default costs, PUCO consultant costs (if any), audit costs (if any), and any other costs directly attributable to the auction or interaction with suppliers.

"The costs of implementing and administering the CBP should be shared by all customers since customers are free to switch to alternative suppliers and return to Standard Service Offer (SSO) at anytime. Non-bypassable implementation for this charge is necessary to eliminate the potential for having the last few SSO customers pay for the entire auction and its related costs. In addition, it is appropriate for the over- or under-recovery balances of the RPM Rider, the FUEL Rider, TCRR, and the AER to be charged to all customers because these costs have been incurred by both shopping and non-shopping customers," DP&L said.

Additionally, DP&L's proposed rider to true-up costs under the competitive bidding process auction with actual revenues, while initially bypassable, may become non-bypassable. The CBP True-up (CBT) Rider will be conditionally bypassable such that, at the end of each quarter, if the balance of the CBP True-up deferral exceeds $5 million, the CBT Rider will become non-bypassable.

DP&L also proposes to split transmission costs into bypassable and non-bypassable components. The non-bypassable transmission rider will reflect "non-market" transmission costs assumed by DP&L for all load in its service areas, including competitive retail load, and would include Network Integration Transmission Service (NITS), costs associated with PJM's Regional Transmission Expansion Plan (RTEP), Black Start, Expansion Cost Recovery Charges (ECRC), NERC/RFC admin costs, Reactive Supply, TO Scheduling, PJM Scheduling, Load Response Charge Allocation, and Generation Deactivation. Retail suppliers would no longer be required to pay for such costs.

DP&L also proposes to continue collecting on a non-bypassable basis the amounts collected under the current rate stabilization charge, under a new Electric Service Stability Charge (ESSC).

DP&L's competitive bidding process will be a descending clock auction for slice of system, full requirements, load following service. Winning suppliers will provide energy, capacity, market based transmission services, market based transmission ancillaries, alternative energy requirements, and any other LSE service, or other service as may be required by PJM to serve the SSO load of DP&L.

Eventually, the process will establish a blend of contracts such that one-third of the portfolio is served on 12-month contracts, one-third is served on 24-month contracts, and one-third is served on 36-month contracts.

The initial auction, to be held in October 2012, would procure 17-month contracts for the term January 1, 2013 through May 31, 2014.

Following the initial October 2012 auction, there will be a single auction conducted in March of each year from 2014 through 2017, for products of 12, 24, or 36 months in length.

Starting in 2018, with the procurement that includes product(s) with a delivery period commencing on June 1, 2019, DP&L will conduct two auctions annually. The first auction to procure supply for each June 1 delivery period will be conducted in the preceding September. The second auction will be conducted in March.

The auctions would not include load caps.

DP&L is not seeking separation of its generation into a non-utility affiliate at this time. DP&L said it is willing to study the issue of legal separation of its generation assets.