New Duquesne Light Default Service Plan Calls for 12-Month Fixed Residential Rate

Residential customers at Duquesne Light would be served under a 12-monh fixed rate under Duquesne Light's proposed default service plan for the period June 1, 2013 through May 31, 2015.

At a high level, Duquesne Light proposes:

• For Residential and Lighting customers, Duquesne Light will procure default service supply through twelve-month full requirements contracts.

• For Small C&I customers, Duquesne Light will procure default service supply through laddered, six-month and twelve-month full requirements contracts.

• For Medium C&I customers, Duquesne Light will procure default service supply through six-month full requirements contracts.

• For Large C&I customers, Duquesne Light will procure default service supply directly from PJM in the day-ahead spot market.

A table showing the procurement dates, procurement amounts (as a %), term lengths, and delivery periods for residential, small C&I and medium C&I default service contracts can be found here.

More specifically, for residential and lighting customers, Duquesne Light proposed to procure 12-month full requirements, load following contracts through semi-annual competitive RFPs, with the delivery period for each contract aligning to the June 1 to May 31 PJM delivery year (e.g., no products with overlapping terms). The full requirements product would include the alternative energy obligations.

For residential and lighting default service for the June 1, 2013 to May 31, 2014 delivery period, Duquesne Light proposes to procure 50% of its default service supply in November 2012 and 50% of its default service supply in April 2013. Duquesne Light proposes to procure 50% of default service supply for the June 1, 2014 to May 31, 2015 delivery period in April 2013, 25% in November 2013, and 25% in April 2014.

"By procuring 50% of the default service supply required for the second plan year at the same time that 50% of the supply for the first plan year is procured, the Plan incorporates a hedge against energy price movements which otherwise could result in large unanticipated increases in Residential and Lighting customers' rates starting June 2014," Duquesne Light said.

Duquesne Light does contemplate purchasing 25% of residential and lighting default supply for the period after May 31, 2015 in the April 2014 procurement, but in the event that legal or regulatory developments result in Duquesne Light no longer serving as the default service provider for its service area after May 31, 2015, this solicitation could be adjusted by the Commission as necessary, Duquesne Light said.

Duquesne Light's current default service plan includes a 29-month fixed rate for residential customers. Duquesne Light proposes a 12-month fixed rate, rather than quarterly rates, because, "[p]rice stability and transparency is important, and can promote retail competition."

Under Duquesne Light's plan, wholesale suppliers will bid a single price to supply both residential and lighting customers' default service load. Separate retail rates will be developed by Duquesne Light for residential and lighting customers to reflect the lower market cost of supplying the applicable lighting customer classes.

Reconciliations for the residential and lighting default service class, as well as the small C&I class and medium C&I class, would occur on an annual basis.

For the Small Commercial and Industrial (Small C&I) class, which are customers under 25 kW, Duquesne Light proposed to serve default service customers under laddered full requirements supply contracts obtained through semi-annual RFPs.

Unlike with the residential class, the small C&I default service contracts will have delivery periods that overlap, and small C&I rates will be reset twice per year.

Once the laddering is established, procurements for 12-month contracts for 50% of small C&I default load will be held semi-annually in April, for delivery starting in the immediately following June, and in November, for delivery starting in the immediately following December.

The small C&I class will include unmetered C&I customers, with rates for unmetered accounts the same as the small C&I default service rates.

Default service for Medium Commercial and Industrial (Medium C&I) customers, which are customers with monthly metered demands equal to or greater than 25 kW and less than 300 kW, will be supplied with full requirements supply contracts for six-month terms with no laddering.

After a legacy procurement from POLR V is held, procurements for 6-month contracts for 100% of medium C&I default load will be held semi-annually in April, for delivery starting in the immediately following June, and in November, for delivery starting in the immediately following December.

For Large Commercial and Industrial (Large C&I) customers, which are customers with monthly metered demands equal to or greater than 300 kW, Duquesne Light will offer day-ahead hourly spot pricing, purchased directly from PJM, with true-ups made using purchases and sales in the real-time spot markets. This is the same service that is being offered to Large C&I customers under Duquesne Light's current POLR V Plan.

For the default service procurements, Duquesne Light proposes that no one supplier shall be awarded more than 50% of the tranches available for any procurement class (Residential, Small C&I, or Medium C&I) in any RFP.

Retail Opt-in Auction, Referral Program
As directed by the PUC, Duquesne Light proposes to offer a one-time retail opt-in auction, under which customers could opt into competitive supply service at a pre-determined price, for service starting in June 2013.

The auction would be held in May 2013, at which time the default service rate for the June 1, 2013 through May 31, 2014 period will be known.

Duquesne Light proposes that the auction product be a 12-month fixed rate product (the PUC has generally set a six-month term for opt-in auction products), in order to align with Duquesne Light's default service 12-month fixed price.

In the opt-in auction, retail suppliers must bid a price that is at least 5% below the Price to Compare and must provide a $50 bonus to each customer that remains on the auction product for three billing cycles. An RFP will determine the standard fixed rate to be supplied under the auction.

Duquesne Light proposes that each EGS be limited to providing service to 50% of the load under the opt-in auction. Additionally, a customer participation cap in the auction will be established, set at 50% of Duquesne Light's default service customers as of March 31, 2013, excluding Customer Assistance Program (CAP) customers.

Duquesne Light described customer enrollment in the auction as such:

"Duquesne Light will send a standardized letter to all Residential default service customers, excluding CAP customers and default service customers that have recently affirmatively instructed Duquesne Light not to release their addresses to EGSs, notifying them of the Opt-In EGS Service Program price and terms. All eligible customers will be randomly assigned a specific EGS by the Company so that customers know the EGS that will provide them service. Therefore, each letter will identify the EGS that has been randomly assigned to the customer. Customers will notify Duquesne Light of their desire to enroll by returning a postcard or tear off coupon, on-line through the Duquesne Light website, or via the Company's IVR, and may select a winning EGS. Once the Company then notifies the EGS, the EGS will then complete enrollment by sending an EDI enrollment transaction to Duquesne Light. In addition to the process described above, customers can select a different EGS by calling the Company."

Duquesne Light further described the auction in testimony, but such testimony was not immediately available.

From the quoted description above, it is unclear how the auction will function. Specifically, the quoted text contemplates that assignment to an EGS will occur prior to the customer opting into the auction. Due to varying customer participation rates, this would seem to result in not all EGSs receiving the same number of customers under the auction. Furthermore, it is unclear how the load cap will function if EGSs have already been pre-assigned customers (consider a scenario where enrollment with a particular EGS vastly exceeds the average enrollment rate, resulting in this EGS's share of opt-in load exceeding 50%).

Also note that notification of the opt-in auction would not be provided to, "default service customers that have recently affirmatively instructed Duquesne Light not to release their addresses to EGSs" -- exclusion of such customers was not contemplated by the PUC's retail markets order.

Customers will have approximately a one-month period to enroll with a winning EGS. After the opt-in auction's 12 billing cycle term expires, customers will remain with the EGS on month-to-month service unless a customer affirmatively elects an alternative supplier or elects to return to default service.

Duquesne Light has also proposed a Standard Offer customer referral program, to be launched June 1, 2014 after new technology systems are in place.

Duquesne Light proposes that EGSs be required to provide the Standard Offer referral program price for 12 billing cycles, with the Standard Offer price set at, "7% below the PTC on the date that the Standard Offer is made."

Furthermore, Duquesne Light proposes that if residential shopping in its service area reaches two-thirds or more of residential customer load, then Duquesne Light would suspend the Standard Offer Program for the remainder of the default service plan period.

The Standard Offer Program will be presented to non-shopping residential customers that call Duquesne Light with a: (a) new or mover request; (b) high bill complaint; or (c) inquiry about customer choice. Duquesne Light will not automatically notify customers that call with issues related to emergencies, terminations, or outages, and also will not automatically notify shopping customers of the Standard Offer Program. However, Duquesne Light will not turn away any residential customers who inquire about the program, except for CAP customers.

Duquesne Light said that it will implement a New/Moving Customer Referral Program separate from the default service plan, with a targeted launch in the fourth quarter of 2012.

Duquesne Light also said that it proposes to continue its current Purchase of Receivables plan adjusted to reflect separate discounts for Residential, Small C&I, and Medium C&I customers and revised administration fees.