Pennsylvania to Adopt More Market-Reflective Default Service at FirstEnergy EDCs, Versus ALJ Proposal

A Pennsylvania PUC binding poll conducted today will modify a recommended decision from an ALJ concerning the procurement of default service for residential and small commercial customers at the FirstEnergy electric distribution companies.

Specifically, in the binding poll, the PUC voted 4-1 to adopt the position of the Retail Energy Supply Association with respect to residential default service procurement, and the position of the Office of Small Business Advocate with respect to small commercial default service.

The default service plan before the PUC covers the period June 1, 2013 through May 31, 2015 for Metropolitan Edison Co., Pennsylvania Electric Co., Pennsylvania Power Co. and West Penn Power Co.

As first reported by Matters, the recommended decision would have required, for both residential and commercial customers, that 90% of default service load be served through full requirements contracts lasting 24 months in length. Two procurements would have been held for the 24-month full requirements contracts: in November 2012 and January 2013.

Under the recommended decision, the remainder of default service residential load at Met-Ed, Penelec, and Penn Power would have been served by spot purchases priced at the hourly PJM LMP, and by an existing 50 MW block energy product from their prior default service plan. The remainder of default service residential load at West Penn Power, and commercial load at all four EDCs, would have been served by spot purchases priced at the hourly PJM LMP.

In contrast, for residential customers, RESA had proposed an initial default service auction including 15 tranches of 24-month contracts with two subsequent auctions including a total of 30 tranches of 12-month contracts. This would result in a product comprised of 24-month fixed price contracts (45%), 12-month fixed price contracts (45%), and spot price (10%). The PUC adopted this position.

OSBA had proposed, for commercial customers, that the default service portfolio should consist of a mix of one-year and six-month contracts, including a laddering of contracts.

Specifically, OSBA proposed that the EDCs should initially procure half of their Small C&I default service requirements through one-year contracts and half of their requirements through a 6-month contract. After every subsequent six month period (the first being in approximately July of 2013), the Companies would conduct a procurement to replace the expiring contract (for half of the class default supplies) with a new 12 month contract. To the extent that the Commission retains its desire that all supply contracts expire at May 2015, the last procurement would be a six-month contract. The PUC adopted this position.

The PUC also adopted the position of RESA with respect to a load cap in the wholesale default service procurements. RESA had sought a load cap of 50%.