IGS Energy Proposes Retail Auctions at AEP Ohio

Interstate Gas Supply, Inc. proposed that AEP Ohio use retail auctions, rather than wholesale auctions, to serve default service customers, both for a percent of customers during a transition period, and then all default service customers starting in 2015.

In its modified electric security plan proposal (see prior story), AEP Ohio has proposed using competitive wholesale auctions to procure 100% of default service energy starting January 1, 2015 (the ESP would terminate May 31, 2015), and proposed that 5% of default service energy requirements may be competitively sourced through an auction for the period prior to January 1, 2015.

Interstate Gas Supply said that both auctions should be retail auctions, and that the auction for service prior to January 1, 2015 should be for 10% of customers (rather than 5% of requirements).

A retail auction, "would create a source of funds to pay for any enhancements in the AEP systems necessary to implement POR [proposed by IGS and others in testimony], so that customers do not have to pay those costs, and any remaining funds could be used to support various energy initiatives currently being proposed in the Ohio legislature through the Governor's energy bill. Further, retail auction customers see the name of the supplier on their bill and thus the customer becomes more comfortable with the idea of receiving supply from a non-utility supplier," IGS Energy said.

For the interim retail auction, for 10% of default service customers during the period prior to January 1, 2015, IGS Energy proposed to set the price at which auction customers would be served as 99% of the AEP Ohio default rate for generation, including all capacity costs. "Customers would pay the auction winners this price for the commodity they receive as long as auction winners continue to serve those customers. Ten percent of default service customers would be randomly assigned to receive the auction rate instead of the default service rate," IGS Energy said.

The auction would be an ascending clock auction, where interested and qualified bidders would bid into each round the number of tranches they would be willing to serve at the auction pre-determined price (99% of the AEP Ohio default rate). IGS Energy also suggested a load cap of 20% of the customers available in the auction.

Each round, an amount would be assigned to each tranche that, if cleared, the winning bidder would have to pay into the auction. The auction would close when the number of tranches bid equal the number to be served, and the winning bidders would pay to AEP the amount bid.

Winning bidders would serve the customers for the duration of the ESP period at the price of 99% of the default service rate, and would retain the customers after the end of the ESP period at a monthly variable rate.

Customers would have the right to move from the auction program to competitive suppliers without a cancellation fee, including to the auction winner, but would remain with the auction winner until and unless an affirmative action was taken by the customer, IGS Energy proposed.

IGS Energy recommended that the Commission establish a collaborative to develop a retail auction for 10% of the SSO load during the ESP period and establish a separate collaborative to develop a retail auction for 100% of the SSO load after May 31, 2015.