Recommended Decision Would Adopt Six-Month Fixed Default Service Rates at PPL

A recommended decision from a Pennsylvania PUC ALJ would adopt six-month fixed default service rates for residential and small commercial customers at PPL.

The recommended decision would adopt a default service plan at PPL covering the period June 2013 to May 2015.

As noted in a related story today, the recommended order's favoring of price stability is inconsistent with the PUC's tentative end-state retail market design

Specifically, for residential as well as small commercial customers (under 500 kW), the recommended order would adopt a product mix in which half of PPL's procurements turn over every six months. To achieve this goal, PPL would purchase 12- and 9-month full requirements, load following products semi-annually, for 100% of load not served by legacy block products (no new block or spot purchases would be undertaken). Through these semi-annual procurements, the 12-month product would be solicited approximately one month prior to delivery while the 9-month product would be procured approximately four months prior to delivery, with the exception of shorter-term procurements at the end of the plan to ensure no contracts extend beyond May 2015.

The ALJ found that this schedule, "strikes an appropriate balance between being market reflective and providing a level of price stability for default service customers."

Implicit in the recommended procurement schedule for both residential and small commercial customers is a six-month fixed rate for default service.

"Limiting the frequency of PTC [Price to Compare] changes to twice per year will give Residential default service customers greater assurance that the offers that they consider under these Opt-In and Standard Offer Referral Programs will result in real savings off of the PTC rates. This should encourage more of the remaining default service customers to try shopping and provide them with a positive experience to continue shopping after their initial contract terms end," the ALJ said.

Furthermore, the ALJ would adopt PPL's proposal to compute the bypassable GSC-1 reconciliation amount every six months based upon a rolling 12-month average of projected GSC-1 sales, rather than the current quarterly reconciliation of a three-month period of revenues and costs divided by a projection of the next three months' sales.

This 12-month average reconciliation methodology will smooth out the bypassable E-Factor rate adjustments, the ALJ noted.

"It appears that the shortened reconciliation time has actually created a PTC that is more volatile and higher than it needs to be, and that the EGSs would prefer that this situation remain rather than attempt a method which could result in accurate and fair prices for default customers," the ALJ said.

Hourly pricing would continue for customers over 500 kW.

Administrative costs related to the default service proceeding and other costs incurred prior to June 1, 2013 related to procurement of supply would be included in the rates for default service as applicable with the costs amortized ratably over the 24 month term of the default service program.

The ALJ would reject, however, PPL's proposed provisional claim for certain cash working capital costs.

Retail Market Enhancements
The recommended decision would adopt a format for PPL's opt-in retail auction, although it should be noted that in every other auction proposed in a recommended decision to come before the PUC, the Commission has radically changed the program to be an opt-in "program" rather than auction, with revised term lengths and pricing.

In any event, the ALJ recommended a six-month term for the opt-in product, with pricing at least 5% off the Price to Compare as of December 1, 2013 (reflecting a delayed start to the program), with participating customers receiving a $50 cash bonus for enrolling.

The ALJ would limit the opt-in auction to residential customers.

Notably, the ALJ would adopt a proposal from the Retail Energy Supply Association that there shall be a minimum of four successful bidders in order for service under the auction to occur. The PUC has not previously adopted this minimum participation requirement which has been proposed several times.

Until the PUC addresses the issue generically in a new investigation, low-income customers should be allowed to participate in the retail market enhancement programs, the ALJ said.

Separately, the ALJ would also adopt PPL's proposed Standard Offer referral program, which shall be a 7% discount provided for a term of six months. The Standard Offer program shall not commence until after the opt-in auction program occurs, the ALJ said, citing logistics.

The ALJ recommends that unrecovered costs of the retail market enhancement programs shall be assessed to the electric generation suppliers, but was not specific as to a methodology.

The ALJ would adopt the "Easy" Time of Use program proposed by the Sustainable Energy Fund, which would limit the TOU program to the summer. An on-peak period would apply in June, July and August from 3:00 p.m. to 6:00 p.m., excluding weekends and PJM holidays. For this period, supply for TOU default service customers would be procured separate from the standard default service, and would have unique rates. During the remainder of the year, TOU customers would receive the same rates as the standard default service customers, and would be included in load to be met by fixed rate default service suppliers. A collaborative would develop further details of the program.

Docket: P-2012-2302074