Retail Suppliers: PPL Migration Rider is "Illegal, Bad Idea" That Will Harm Competition

The reconciliation rider recommended for approval by an ALJ at PPL Electric Utilities is, "an illegal bad idea that will most assuredly harm the development of retail competition in the electricity market," the Retail Energy Supply Association said in a brief on exceptions.

As only reported by Matters, a recommended decision (RD) would approve a new reconciliation rider at PPL for default service over/under-collections, which would be nonbypassable for newly shopping customers for the time during which they were on default service under which the under/over-collection occurred, for up to 12 months after the customer leaves default service for competitive supply.

Furthermore, the reconciliation rider (RR) would not be part of the Price to Compare. The reconciliation rider is essentially similar to the migration rider in place at the Pennsylvania natural gas utilities.

RESA said that, "[b]eyond lacking factual and/or legal support," the conclusions in the recommended decision, "completely disregard the Commission's statutory obligations pursuant to the Electricity Generation Customer Choice and Competition Act ('Competition Act') and everything the Commission has done and continues to do --particularly in the last year -- to meet its statutory obligations."

RESA urged the PUC to, "act immediately and decisively to reject the RD and PPL's petition so that it can get back to focusing on how to constructively achieve all the laudable pro-competition goals it has set regarding the competitive retail electricity market."

As to the legal infirmity of the recommended decision, RESA said that Section 2807(e)(4) of the Competition Act, "explicitly requires PPL to treat any shopping customer who chooses to return to default service 'exactly as it would any new applicant for energy service.'"

However, while PPL modified its original proposal in an attempt to meet this requirement, and while the ALJ accepted the modification, RESA said that the proposed reconciliation rider still fails this statutory mandate, which compels dismissal.

Under PPL's modified proposal, all new customers are fully exempted from the reconciliation rider for twelve months. However, for a shopping customer returning to default service, the customer is only exempt from the reconciliation rider for a period equal to the number of consecutive months, not to exceed twelve months, that the customer was a shopping customer immediately prior to switching to default service.

Therefore, new customers and returning customers are not being treated "exactly" the same, RESA said, "because the applicability of the RR for returning customers ... is uncertain because it is based on how long the returning customer has shopped."

In contrast, the exemption from the RR for new customers is definite, RESA noted.

RESA noted that under the recommended decision, "PPL will be removing a cost to provide default service from the default service rate paid by default service customers," by applying a part of default service costs to newly shopping customers under the reconciliation rider.

RESA said that the requirements of the Competition Act "are clear -- all costs that can be associated with providing default service must be recognized and recovered in the default service rate which is paid by default service customers."

"Consistent with these statutory requirements, the Commission's default service regulations require the default service rate to include the sum of all generation and transmission related default service costs. While the Competition Act expressly provides for the recovery of certain costs through non-bypassable charges on all customers, there is no such express authorization for the recovery of default service costs through non-bypassable, distribution service type charges such as the riders proposed by PPL here," RESA noted.

"The bottom line of all these requirements means that PPL is legally required to ensure that default service customers pay all the costs ... related to the provisioning of default service. With regard to the reconciliation solely attributable to default service which is the subject of this case, PPL currently satisfies these legal requirements by imposing the reconciliation only on default service customers. PPL's proposal to convert this bypassable charge to a non-bypassable charge to be paid by all customers (except new ones) completely changes the legality of the current mechanism to an illegal one," RESA said.

RESA also said that the recommended decision runs contrary to the PUC's policy (and statutory charge) of developing a workably competitive retail market.

"If all the costs of providing default service are not included in the default service rate, then the default service rate will not reflect the true costs of providing default service which will hinder the ability of a truly competitive market to develop," RESA said.

Despite the negative impact that the reconciliation rider would have on the retail market, the PUC's own Bureau of Investigation and Enforcement took no issue with the rider's design in general, and only filed an exception to a single issue of the recommended decision; namely, the RD's finding that PPL's optional Time of Use program constitutes a default service (and thus can be reconciled in the reconciliation rider).

Investigation and Enforcement Staff said that, "mere status as a default service provider does not mean that any, and all, service alternatives are default service. Alternative programs do not meet the classic definition of default service and should not be recognized in the same manner. In the instant proceeding, PPL's Time of Use program fits the definition of an alternative service better than it does that of default service."

The case is P-2011-2256365.