Ohio Staff Recommends Dayton Power & Light "Strongly Consider" Electric Security Plan Over Market Rate Offer

Staff of the Public Utilities Commission of Ohio have recommended that Dayton Power & Light should "strongly consider" filing an electric security plan to govern the Standard Service Offer, as an alternative to DP&L's proposed market rate offer.

Staff's recommendation is not surprising as Staff made similar recommendations concerning prior market rate offer applications filed by other utilities. To date, PUCO has not accepted a market rate offer SSO design in any service area.

Specific details of DP&L's market rate offer can be found in our prior story

"Staff believes that the Applicant should consider submitting an electric security plan pursuant to R.C. 4928.143. Although either an electric security plan or a market rate option would fulfill the obligation under R.C. 4928.141, the electric security plan can offer significant advantages for the Applicant, the ratepayers of the Applicant and the public at large," Staff said.

Staff said that an electric security plan can:

• Include a competitive procurement process without the requirement for an initial blending period;

• Utilize options to hedge rates;

• Encourage economic development

• Provide a means of encouraging energy efficiency and the use of renewable energy sources;

• Add flexibility to change rate treatment within rate classes;

• Provide a process where stakeholders can seek resolution of specific issues

"Staff recommends that the Applicant strongly consider building on the successful electric security plan rather than proceed with the somewhat more limited market rate option."

Staff found DP&L's market rate offer filing to conform to the rules governing the information required of such filings and elements required in the filed design. In some prior MRO applications, the initially filed applications were found to be non-conforming.

Staff also addressed a number of discrete issues with respect to DP&L's sought MRO.

DP&L's proposed full requirements auction would require the winning SSO suppliers to assume the alternative energy obligation for their awarded load.

"However, Staff believes that inclusion of renewable energy requirement compliance in the product being offered through the CBP [competitive bidding process] plan may not be appropriate at this time. Introducing this new level of complexity into the CBP appears to be unnecessary, especially during the five year blending period, when the Company will need to continue to participate in the REC market for the balance of its renewable requirements."

Staff suggested that the MRO should provide a process for approving potential modifications to the competitive bidding process. Staff also noted that the Commission has indicated a preference for the use of load caps in other CBP plans that it has approved, which DP&L has not proposed to use in its auctions. "[T]he use of a load cap should be evaluated and considered by the Commission for this CBP plan," Staff said.

As previously reported, DP&L proposed a nonbypassable Reconciliation Rider under its MRO. Among other things, the Reconciliation Rider would include CBP auction costs, CBP consultant fees, Commission consultant fees, audit costs, supplier default costs, and case expense.

However, Staff noted that the list of CBP cost items to be included in the Reconciliation Rider is open ended, and that the rider is also intended to include, "any other costs associated with implementing the MRO."

"Staff believes that the proposal could allow for costs of existing routine day-to-day functions of the Company and for a multitude of unknown future costs to become included in the RR simply because the costs may have some relationship to the CBP process. In order to allow some flexibility in dealing with potential unknown costs, and at the same time provide some certainty about what should be included, Staff recommends that the CBP costs that can be included in RR at this time be limited to those that are specifically listed in the application, and not to include the case expense item or any other non-listed costs. If the Company, at some future time, believes that it is appropriate to include other costs in addition to those specifically listed, it should be required to apply to the Commission for approval prior to including such costs," Staff said.

Specifically as to case expense, which is the cost of litigating the MRO before PUCO, Staff believes that the proper context for consideration of these costs would be a distribution rate case.

Regarding DP&L's proposed pilot Time of Use generation program, Staff said that DP&L's plan to charge a $5 monthly fee for participation in the program may discourage participation, and recommended that the company remove the fee.

DP&L has proposed to continue collecting on a nonbypassable basis the amounts collected under the current rate stabilization charge, under a new Electric Service Stability Charge (ESSC).

Staff noted that while DP&L compared this charge to an approved charge at Duke Energy Ohio, Duke Energy Ohio operates under an electric security plan rather than an MRO.

Staff noted that the electric security plan statute specifically allows for such a stability charge, but that the MRO statute does not explicitly address such a provision.