Pennsylvania PUC's Witmer Encourages Study of Bypassable Adders to Default Service Price

Pennsylvania PUC Commissioner Pamela Witmer has encouraged the Commission to further investigate several proposed bypassable charges suggested by parties to be added to the Price to Compare, to reflect charges currently embedded in distribution rates or other costs of providing default service not currently reflected in the PTC.

Witmer's statement was in response to the PUC's consideration of the FirstEnergy electric distribution companies' default service plan, and specifically, the bypassable 5 mill per kWh Market Adjustment Charge (MAC) proposed by the utilities. The EDCs had proposed the MAC to reasonably compensate the EDCs for the obligation and attendant risk of procuring electric power for non-hourly customers who choose not to shop.

Yesterday, in a binding poll, the PUC affirmed an ALJ's recommendation to deny the MAC.

However, Witmer urged further study of the charge and related proposals made in the case.

Specifically, Witmer said:

"I am encouraged by some of the creative proposals set forth by various parties, including the Retail Energy Supply Association ('RESA') and Dominion Retail, Inc."

As summarized on a PUC list of issues for the poll, RESA's position was that because generation, transmission and distribution costs continue to be bundled, all customers - to some extent - are paying the costs of default service, even those who are not receiving default service (i.e. shopping customers). The MAC should be designed to cover the EDCs' administrative and implementation costs of infrastructure and systems related to retail processes and programs. The MAC should also cover any risks identified by the EDCs that actually materialize. Any MAC revenue remaining after costs are recovered should be returned to all distribution customers.

Dominion Retail's position, as summarized on a PUC list of issues, had been that there are identifiable costs of default service that are presently unrecovered, and those costs should be recovered through the MAC. Adding a MAC to the PTC would enable EGSs to make offers that could provide substantial savings over default service. To increase customer interest in shopping, Dominion Retail recommended that the MAC be doubled to 1 cent per kWh until 50% shopping is achieved. Excess revenue from the MAC could be flowed back to customers outside of the PTC.

"As a proponent of competitive markets, I believe that it is in the public interest to ensure that the default service PTC properly reflects current market conditions and not include other charges that serve to artificially inflate or depress this important price signal," Witmer said. "I find merit in the proposals put forth by RESA and Dominion that may help to remove the impact of non-market issues on the PTC. At the same time, I also believe that these proposals deserve a fuller vetting within the context of the Commission's Retail Market Investigation and the proceeding initiated by Commissioner Cawley at the July 19, 2012 Public Meeting related to Default Service Interim Reconciliation Guidelines," Witmer said, in voting to support the ALJ's recommended denial of the MAC in the instant proceeding.

The PUC's binding poll also affirmed the ALJ's recommendation that reconciliation of the Price to Compare shall continue on a quarterly basis, with quarterly rate adjustments.

Additionally, the PUC agreed with RESA's position with respect to a migration rider.

While the ALJ did not recommend implementation of a migration rider at this time, the ALJ's recommended decision included a conclusion that a migration rider may be an appropriate remedy if, because of extensive shopping, the number of default customers in a particular class becomes very low and the reconciliation balance became disproportionately high relative to the customer base.

The PUC agreed with RESA's exceptions that such a finding is premature, and that a migration rider may not be appropriate in the future. Migration riders improperly assign default service costs to customers that are no longer receiving default service, and consistent with the Commission's policy and regulations, all default service costs must be reflected in the PTC, RESA had said.

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

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