Rate Stability Replacing Market-Based Rates as Chief Concern for Pennsylvania PUC, as Citizens'/Wellsboro Default Service Plan Approved

On the basis of rate stability, the Pennsylvania PUC approved the continuation of a "stratified" procurement of default service at Citizens' Electric Company of Lewisburg, PA and Wellsboro Electric Company, for the period June 1, 2013 through May 31, 2015.

Notably, the PUC's order adopted as its action a Recommended Decision of an Administrative Law Judge without modification.

The recommended decision endorsed continuation of the stratified, or laddered, procurement plan for default service, under which the utilities purchase 7x24 products to provide stability, while additionally securing 5x16 and spot market products to reflect more market-responsive rates

The ALJ had noted that the, "Stratified Procurement Plan has performed well in comparison to the benchmarks, both in terms of the level and stability of default service energy costs."

Specifically, the ALJ noted that benchmark reports submitted throughout the current default service plan, "indicate that the rates resulting from the Stratified Procurement Plan have outperformed the spot market and scheduled procurement benchmarks while comparing favorably to other utilities" [emphasis added]

"Providing lower and more stable default energy costs means that the Companies' customers will benefit from lower and more stable rates than might otherwise be the case. This potential benefit serves the public interest," the ALJ said.

The ALJ also noted that expedited approval of a settlement regarding continuation of stratified procurements would "maximize ratepayer benefits" by enabling the utilities to continue their laddered procurements in the months between approval and the June 1, 2013 beginning of the new default service plan (allowing purchases further in advance of delivery), rather than procuring larger portions of the default supply in the months between the March 1, 2013, statutory deadline for ruling on the plan and June 1, 2013.

Notably, the ALJ approved a proposal for the utilities to reconcile certain default service costs on an annual -- rather than quarterly -- basis.

Specifically, an "A-factor" will be created to reconcile transmission, ancillary services, capacity, Auction Revenue Rights/Financial Transmission Rights, PJM Interconnection, L.L.C. membership dues, default service plan development and litigation costs, and portfolio management costs on an annual basis.

All other costs will be reconciled quarterly through the F-factor.

Prior to filing a default service plan for the period following May 31, 2015, the utilities will investigate the costs and benefits of either transitioning all default service costs to an annual reconciliation or implementing a rolling 12-month reconciliation

"Transitioning to an annual reconciliation will help to stabilize aspects of the Companies' default service rate. This provision will promote default service rate stability for the Companies' customers. That rate stability will benefit the Companies' customers. This benefit serves the public interest," the ALJ said.

Overall, regarding the adopted plan, the ALJ said, "the joint settlement petition will allow the Companies to continue their Stratified Procurement Plan, modifying the reconciliation process to ensure that supply costs reflect market rates while reducing rate volatility."

Also under the PUC's order, the utilities will implement a New/Moving Customer Referral Program pursuant to the Commission's Investigation of Pennsylvania's Retail Electricity Market: Recommended Directives on Upcoming Default Service Plans, Docket No. I-2011-2237952.

The utilities' customer service representatives will inform new and moving customers of the availability of PaPowerSwitch.com and the OCA website shopping guide using the following script: "PaPowerswitch.com is the Commission's website for information on the retail electric market. The Office of Consumer Advocate produces a shopping guide for the benefit of residential electric customers, at www.oca.state.pa.us. Both resources provide valuable information regarding electric service in Pennsylvania and, as competitive electric service becomes available, these resources will provide details concerning those offers."

Docket: P-2012-2307827 et. al.