Testimony Provides Clearer Picture of Load Cap for Duquesne Light Retail Auction

Testimony concerning Duquesne Light's proposed default service plan has clarified how the load cap in Duquesne Light's proposed opt-in retail auction will function.

As only reported by Matters, Duquesne Light proposed the opt-in retail auction for residential customers, for service starting in June 2013. Aside from limiting the amount of customers served under auction to 50% of default service customers, Duquesne Light said that each retail supplier would be limited to providing service to no more than, "50% of the load under the Opt-In EGS Service program."

However, it was unclear if the term "load under the Opt-In EGS Service program" meant the load included in the initial auction (e.g. all tranches put out for bid), or rather only the load which, after the auction, actually opted to take service under the program.

Under the Duquesne Light program, tranches in the opt-in auction will consist of all residential default service customers, except those that are in the Customer Assistance Program (CAP). There will be 10 tranches, each representing 10% of customers.

Attached to Duquesne Light's testimony, the opt-in program service agreement which retail suppliers would have to sign to participate in the auction provides that all eligible customers would be divided up among the opt-in retail suppliers in proportion to the number of tranches they were awarded.

"Each Opt-In Supplier would have a supplier participation cap equal to 50% of the Eligible Customers that it was awarded," the agreement states. As will be explained further below, while suppliers will also be limited to winning 50% of available tranches (each tranche initially designed to include 10% of eligible default service customers), a supplier could win more than 50% of eligible default service customers if there are unsubscribed tranches which lead to an enlargement of awarded tranches. In such case, as indicated by the language of the supplier agreement, the load cap would be 50% of any customers awarded in the auction.

In the auction, suppliers may bid to serve no more than 50% of tranches, and no supplier may be awarded more than 50% of the tranches.

However, if there are unsubscribed tranches in the auction, the auction would still proceed, with customers in the unsubscribed tranches being assigned to the bid tranches on a fractional share basis.

For example, if the program tranches are only subscribed at 70% and one EGS wins 50% while another EGS wins 20%, then the first EGS would be assigned five-sevenths (or 71%) of all eligible Duquesne Light residential customers and the other EGS would be assigned two-sevenths (29%) of all eligible Duquesne Light residential customers.

Each supplier could then serve a maximum of 50% of its awarded eligible customers under the auction program. In other words, the supplier awarded 71% of all eligible Duquesne Light residential customers could serve 50% of such customers, or 35.5% of all eligible Duquesne Light residential customers. In contrast, if all tranches had been fully subscribed, this supplier would only have been awarded 50% of all eligible Duquesne Light residential customers, and limited to serving 50% of such customers, meaning the supplier would have been limited to serving 25% of all eligible Duquesne Light residential customers, rather than 35.5%.

Though the tranches may be enlarged, an EGS will not be required (or permitted) to serve more tranches than it bid.

Duquesne Light's testimony also confirms that the retail auction will be a sealed bid format, with a single clearing price equaling the last cleared (highest-priced) tranche. In the event of a tie in which the tranches cannot be fully awarded between one or more bidders, the customer accounts will be divided on a pro rata basis based on the number of tranches bid at that price level among the winning EGSs for the remainder of the supply.