Pennsylvania ALJ Recommends Allocating PPL Time of Use Under-recovery to Default Service Customers

A recommended decision from a Pennsylvania ALJ would permit PPL to collect under-collections related to its Time of Use (TOU) program, including historic under-collections, from all default service customers.

The recommended decision notes, however, that the same matter is before the PUC in PPL's competitive transition rider and migration rider case, in which PPL had sought to recover the historic under-collection from all distribution customers, including those on competitive supply. While the recommended decision in the migration rider case recommended deferring consideration of the Time of Use under-collection to the TOU proceeding, the PUC could still revise that recommendation on final disposition.

As of October 31, 2011, the claimed TOU under-collection was approximately $1.9 million for residential customers and $8,000 for Small C&I customers.

The recommended decision in the TOU proceeding would specifically permit PPL to recover under-collections of its prior period TOU program from all default service customers, by customer class, following certification by the Commission's Bureau of Audits that the amount of the under-collection claimed is correct and the accounting method used is consistent with Commission directives.

"[This] reconciliation methodology, including recovering existing under collections from all default service customers in the respective service groups, is reasonable because all customers benefit from TOU rates over time," the ALJ said. "Shifting energy use from on-peak periods to off-peak periods ultimately will reduce the cost of that energy for all customers. That reduction in the cost of energy should be reflected in a lower default service rate for all non-shopping customers because customer load shapes will reflect lower usage during on-peak periods. It is important to remember that all residential and small C&I customers have the option of participating in the TOU default rate option, which has the potential to lower their costs immediately."

The recommended decision would also deny PPL's proposed revised TOU program, which was only to be in effect on an interim basis since a replacement TOU program has been proposed in PPL's default service proceeding for the period starting June 1, 2013. The major change in the revised program was linking the TOU rates to default service rates (at a specific percentage premium or discount based on time of day) to eliminate the possibility, which occurred under the former TOU plan, of TOU peak rates being less than the standard default service rate.

"This program would be effective for less than one calendar year. There is another proposal in PPL Electric's pending default service provider case. The effectiveness of this program would not be evident until after the litigation of the DSP case is finished, and therefore, the lessons learned will not be available in time to apply them. What is certain is that the implementation of any new program incurs costs. For the instant program, those costs would be for minimal or no benefit, considering the length of time that the program would run. This is not in the public interest. The proposed TOU program should be denied. The parties are encouraged to take their thoughtful and well-developed positions to the negotiations table in the pending DSP case to develop the best TOU program possible for the Company's ratepayers," the ALJ said.

The ALJ would direct PPL to file an extension to its existing Time of Use program tariff supplement to extend its application until the issuance of the final Commission order in the default service plan proceeding.

The ALJ would also affirm a finding in a prior, but still pending, recommended decision in concluding that the TOU program does constitute a form of default service.

"If TOU is indeed a default service provision, then it is bound by the same requirements of default service as the rest of the statutory sections. As generation costs are now 'pass-through,' and not a source of profit for the EDC, neither can a TOU program be a source of such profit," the ALJ said.

However, if the Commission decides that a TOU program is not a default service program, "then the Company should be permitted to design it to be profitable and operate it as an EGS might but would not be permitted to recoup any losses or undercollections," the ALJ said.