Maryland OPC Proposes Alternative True-Up Mechanism for Critical Peak Rebate Costs/Revenues

The Maryland Office of People's Counsel has opposed a proposal to include reconciliations of revenues from the PJM market and the costs of credits paid to customers under critical peak rebates in the nonbypassable EmPOWER MD charge, further clouding cost recovery issues relating to the critical peak rebate programs.

As was exclusively reported by Matters, a working group report recommended that the critical peak rebates be made available to all customers in eligible classes, regardless of whether the customer is on SOS or competitive supply, at Baltimore Gas & Electric and Pepco. Eligible classes would be residential at BGE, and residential and small commercial and Pepco.

The work group noted that it did not reach consensus on a proposal by Pepco to phase-in the critical peak rebates, which Pepco proposes to start with 5,000 residential SOS customers in the 2012/13 delivery year. During this phase-in only, the critical peak rebate would not be available to competitive supply customers.

Under the critical peak rebate, customers will be paid credits for reducing usage relative to a baseline, with the anticipated demand reductions sold into the PJM capacity market, and other markets as applicable. For more details on how the critical peak program would work, see prior story

An annual true-up will be required to calculate the difference between actual PJM market revenues (net of PJM credits and charges) and the critical peak rebate amounts paid to customers for the current PJM delivery year. As previously reported, BGE and Pepco propose that this annual dynamic pricing rebate true-up should be bundled as part of the nonbypassable EmPOWER MD Charge on the customer's bill, since all distribution customers will be eligible for the critical peak rebate program.

While all customers are eligible for the program, Matters previously noted that customers on competitive supply may choose to opt-out of the utility-offered critical peak rebate program in favor of demand response options offered by their supplier. As Matters previously noted, it is unclear whether customers who opt-out of the utility critical peak rebate in favor of a competitively offered dynamic rate offered by a retail supplier or curtailment service provider, and who thus do not contribute to any critical peak rebate over/under recovery, will be required to bear this portion of the EmPOWER MD Charge.

The Office of People's Counsel, in comments to the PSC, first said that it did not sign the working group report and that it was not a consensus document, though OPC, in comments protesting various aspects of the critical peak rebate program, did not offer any comments opposing the expansion of the program to all distribution customers, rather than being a program for SOS customers only.

OPC did oppose the use of the EmPOWER MD Charge for any critical peak rebate true-up.

"Although administratively convenient for the utilities, this proposal would obfuscate the costs of EmPOWER Maryland by including AMI charges not approved by the Commission in the EmPOWER Maryland cases. As the Commission has consistently stated in its orders approving the deployment of AMI for BGE and Pepco, the AMI deployment costs will be considered in the context of future rate cases. To bundle these costs in the EmPOWER Maryland surcharge runs counter to established Commission policy as the proposal contradicts the prior Commission decision which set the precedent for transparently displaying the costs of EmPOWER Maryland," OPC said.

"Instead, OPC recommends that the Commission order an annual dynamic pricing true-up in a separate proceeding outside of EmPOWER Maryland."

OPC did not offer specifics on its proposal, leaving open the question of how to treat customers eligible for the critical peak rebate, but who opt-out of the program because their demand reductions are being monetized in PJM by their competitive supplier.

OPC also said that Pepco's proposed phase-in of the critical peak rebate first to 5,000 SOS customers, "raises significant questions about the intent and legitimacy of the proposal."

"For example, it is questionable why Pepco proposes to include approximately 2,500 residential participants in Prince George's County and 2,500 residential participants in Montgomery County," OPC said.

In comments filed contemporaneously with OPC's comments, Pepco said that, "[t]he distinct demographics in these two counties allow for testing of messaging based on saving money and access to information, for example."

AARP also submitted concerns regarding the phase-in, stating that, among other things, "the proposal to only allow SOS customers in the 2012 program may also result in customer confusion about the intent of the program in the future."

Pepco supported its proposed level of 5,000 customers for the initial phase-in, versus the lower participation levels suggested by OPC and AARP, by stating, "It is important to start with a base of customers large enough so that sufficient numbers remain in each subsection for 'learnings' to be meaningful."

"The research will help Pepco to better understand the specific motivations that drive participation in dynamic pricing. The Company prefers to develop and test materials with varying messages to defined groups within this customer base," Pepco said.