Ohio Consumers' Counsel Suggests SSO Rate Could Send Variable Price Signals

The Ohio Consumers' Counsel has suggested that Standard Service Offer rates could reflect time-based price signals, in comments on PUCO's inquiry into dynamic pricing.

OCC said:

"For potential suppliers of the utility's SSO, AMI could provide a treasure trove of new information about customer class and sub-class load shapes and how customers generally respond to prices and other stimuli. SSO solicitations could be conducted in a manner that enables potential suppliers to tailor their bids to reward customer response to price signals. Under this approach, an SSO supplier would have an incentive to offer rates that include variable price signals to consumers. The PUCO may want to inquire further into whether SSO bidders should be required to include temporal differentiation in their bids and reflect wholesale price variation consistent with PJM's Price Responsive Demand ('PRD') initiative, assuming that this initiative is approved by the Federal Energy Regulatory Commission ('FERC')."

Retail suppliers opposed the offering of dynamic generation rates by electric distribution utilities, citing generation as a competitive service.

The electric distribution utilities varied in their opinion on whether EDUs should offer a time-based generation rate.

Ohio Edison, Cleveland Electric Illuminating, and Toledo Edison said:

"Because EDUs such as the Companies no longer own generation assets and only offer generation service as a provider of last resort ('POLR'), their supplies for such POLR service are obtained through a wholesale competitive bid process. Pricing for such POLR service should already factor in the times at which the generation service is needed based on customer load profiles, and, accordingly, the bid prices should already reflect the time at which the generation will be used. Moreover, because pricing of competitive services such as electric generation is part of the competitive process, if EDUs were lawfully ordered to offer time-differentiated and/or dynamic generation related pricing, EDUs would, in essence, be competing with CRES [competitive] providers for customers shopping for an electric generation supplier - a situation that is contrary to State policy, which removed EDUs from this market. And because EDUs are assured cost recovery for the POLR services provided, inserting EDUs into the competitive generation market would provide EDUs with an unfair competitive advantage. Finally, should the Commission lawfully order the Companies to provide such a time sensitive pricing option to those with interval metering capabilities, any price differential between what the customer would pay under such a new rate and what they would otherwise pay would need to be recovered from other customers taking POLR service. This would create a cross subsidization issue that, again, is contrary to State policy and the principles of competitive markets."

The FirstEnergy EDUs also said:

"As EDUs, the Companies' current meter technology is sufficient to allow them to bill their customers for the POLR service received by the customers. Therefore, the cost of any metering technology needed for dynamic pricing options today should be borne by either the CRES supplier or the shopping customer."

Ohio Power said:

"The SSO rate is designed as a default rate for customers that choose not to shop for their generation service or for those that return to default service. In a competitive environment, it is anticipated that the design of the SSO rate options would be relatively simple. However, EDU's must be allowed significant discretion to offer a wide variety of rate options to comply with the State of Ohio's increasingly aggressive energy efficiency resource standard ('EERS') and peak demand reduction ('PDR') targets, as mandated in Amended Substitute Senate Bill 221 ('S.B. 221') and ensuing Commission rulings."

Duke Energy Ohio said:

"The Company does not believe that prescriptive requirements are appropriate in regard to time-varying pricing or dynamic rates. Ohio is a retail choice state, meaning that customers have the ability to purchase electric generation service from a competitive market, therefore competitive forces and customer demand should dictate the type of pricing options offered to customers in Ohio ... EDUs should not be required to offer any specific type of time differentiated rates or dynamic pricing. Additionally, EDU's presently auction their loads to determine the standard service offer and such standard service offers are based upon an around-the-clock price, which means that the EDU's actual generation costs are not tied to hourly pricing. Given the lack of connection between time varying PJM market prices and the electric distribution utility's generation costs, it would not make sense for the electric distribution utility to offer customers a rate based on the PJM market prices ... Time-differentiated rate offerings should be the product of the EDU or CRES supplier in response to customer demand. Based upon the Duke Energy Ohio's experience with offering time-differentiated rate pilots to date, Duke Energy Ohio recommends a portfolio of relatively simple time-of-use rate offers with varying ratios of peak to off-peak ratios that allow customers to match their personal risk tolerance to a rate."

The Demand Response and Smart Grid Coalition said that EDUs should offer consumers, with advanced or interval meters, time-differentiated or dynamic retail rates, to ensure that such options are available to such consumers.

While the Coalition did not explicitly state that such time-differentiated rates would be generation rates, the Coalition said, "EDUs currently offering pilot time-based programs should consider offering them to all customers with AMI." Such current dynamic rate pilots include pilots differentiating the bypassable generation rate based on time of use.

"DRSG also believes that EDUs without any time-based options should develop and offer at least one to such customers. One of the options that should be considered for inclusion is Peak Time Rebate (PTR), which is a time-based pricing program. The time-based options should be voluntary," the Coalition said.