Use of Three-Year SSO Portfolio at FirstEnergy Ohio Utilities to be Extended Under Stipulation

Ohio Edison, Cleveland Electric Illuminating, and Toledo Edison have filed a stipulation among several parties, including PUCO Staff and large industrials, to extend, with some modifications including the deferral of bypassable renewable energy costs, the utilities' current electric security plan (as ESP 3) through May 31, 2016, continuing to use a blend of 12, 24, and 36 month contracts to serve standard service offer (SSO) customers.

The current ESP expires May 31, 2014. The stipulated proposal would add two years to the term, and maintain a mix of 12, 24 and 36 month contracts to serve all customer classes, excluding Percentage of Income Payment Plan customers (each contract term length would make up about one-third of the SSO portfolio). As done currently, descending clock auctions for full requirements service would be held twice annually for SSO supply of varying term lengths to create the staggered portfolio.

Stipulating parties said that the use of 36-month contracts procured in October 2012 and January 2013 is, "an attempt to capture the current historically lower generation prices and blend them with potentially higher prices occurring over the life of the ESP 3 plan, thereby smoothing out generation prices and mitigating volatility in generation pricing for customers through May 31, 2016."

Most notably, stipulating parties propose to extend the recovery period for renewable energy credit costs over the life of the ESP 3 plan, "in order to lower the [bypassable] rider charge that otherwise would have been in place for customers related to compliance with the statutory benchmarks for renewable energy resources."

RECs are excluded from the full requirements product, and will be procured separately via RFP, or, if the RFPs fail to procure enough RECs, bilateral contracts.

Furthermore, the generation cost reconciliation rider (Rider GCR) will remain only conditionally bypassable. As permitted currently, Rider GCR shall become nonbypassable if the allowed balance of Rider GCR reaches 5% of the generation expense in two consecutive quarters.

Stipulating parties said that the ESP would potentially enable the utilities to bid demand response resources and energy efficiency resources into the PJM 2015-2016 Base Residual Auction, "thereby adding to supply in that auction, which may in turn increase low-cost capacity supply in that auction."

Specifically, the stipulation would continue interruptible Riders ELR and OLR, with such customers' demand bid into the BRA, in order to add to the amount of capacity bid into that auction thereby increasing comparatively low-cost supply.

The utilities have also identified up to 65 MW of energy efficiency resources that can potentially be bid into the PJM BRA auction on May 7, 2012.

Due to the timing of the BRA, the stipulating parties sought expedited approval of ESP 3, by May 2, 2012.

Similar to the current ESP, the stipulation provides that the average total rate overall percentage increase projected for the period 12 months ending May 2015 (rates to be effective commencing June 1, 2014) compared to 12 months ending May 2014 resulting from the rates derived from the SSO Competitive Bid Process for customers on Private Outdoor Lighting, Traffic Lighting, Street Lighting, and Rate GT rates shall not exceed a percentage in excess of one and one-half times the system average overall percentage rate increase (the 'cap'), by distribution company. If the average percent change by distribution company is negative, all lighting schedules (rate schedules STL, POL and TRF) shall be limited to a maximum increase of zero percent and then no cap shall be applied to Rate GT customers. This cap calculation shall be performed prior to June 1st each year. Recovery of any revenue over the cap shall be recovered under nonbypassable Rider EDR.

As under the current ESP, the retail load and usage of Percentage of Income Payment Plan (PIPP) customers will be excluded from the SSO bid product, and instead will be supplied by the utilities at a six percent (6%) discount off the PIPP customers' price to compare. To accomplish this pricing, the utilities will enter into a wholesale bilateral contract with FirstEnergy Solutions for this power supply for a two year period, with power flow under such wholesale contract commencing June 1, 2014.

The stipulation provides that PUCO may order a load cap of no less than 80% on an aggregated load basis across all SSO auction products for each auction date such that any given bidder may not win more than 80% of the tranches in any auction

The utilities said that the ESP provides quantitative customer benefits of approximately $200 million.

Outside of the above noted modifications, with respect to the retail market, the extended ESP would continue terms of the current ESP, including the current provision of enhanced customer data and information and web-based access to such information, and the absence of a minimum stay for residential and small commercial non-aggregation customers and the absence of a minimum default service rider or standby charges.

Signatories to the stipulation include the utilities, PUCO Staff, Industrial Energy User-Ohio, Ohio Energy Group, Ohio Manufacturers Association, FirstEnergy Solutions, Council of Smaller Enterprises, Ohio Partners for Affordable Energy, and other parties.

Non-opposing parties include Duke Energy Retail Sales and Gexa Energy Ohio.