Pennsylvania PUC: "Reasonably Predictable" Price to Compare is "Acceptable"

The Pennsylvania PUC has issued a written order adopting a default service plan at Duquesne Light for the period June 1, 2013 through May 31, 2015 that establishes a "reasonably predictable" Price to Compare (PTC) for residential customers (Docket: P-2012-2301664).

A news release issued last week had described the default service plan, but specifics, including the extent to which residential default supply rates will not reflect market conditions, had not been immediately available

Specifically, the PUC ordered that the residential PTC at Duquesne Light shall be fixed for six months, with reconciliation occurring every six months.

However, all of the underlying supply contracts procured by Duquesne Light for residential service will have a June 1 delivery start date. Accordingly, the only change that occurs in the Price to Compare every six months will be reconciliation, or some component not included in the full requirements contracts (e.g. transmission.)

"Given our approval of Duquesne's proposal to acquire default service supply through twelve-month contracts, it is unlikely that the PTC will change dramatically for the residential rate class during the DSP VI period," the PUC conceded.

"[M]oving from the current twenty-nine month fixed PTC to a three month PTC would be too abrupt," the PUC added.

It should be noted that although Duquesne Light currently has a 29-month fixed generation rate for residential customers (as will be noted below, this does not mean a fixed PTC for 29 months), Duquesne Light has had uncapped generation rates for some time. Moving from a 29-month fixed generation rate (set outside of the rate cap period) to quarterly PTCs is no different than going from capped generation rates immediately to quarterly, uncapped generation rates -- a transition the PUC previously approved at most of the other major electric distribution companies.

Moreover, it should be noted that the residential PTC under Duquesne Light's current default service plan has NOT been fixed for 29 months. Although the underlying base generation rate was indeed fixed for 29 months, there has been variation in the Price to Compare for transmission, STAS, and other factors. For example, as of October 2011, the residential PTC was 9.33 cents per kWh, and the rate is now 9.89 cents per kWh.

Residential default service will be served under a portfolio of staggered full requirements contracts, each lasting 12 months in length.

"Duquesne's proposal provides adequate diversity of supply and a reasonably predictable PTC, and thus is an acceptable plan for the forthcoming period," the PUC said of the residential procurements and price changes.

"We conclude that Duquesne's proposal to purchase one-year full requirements contracts, staged over time, appropriately balances Act 129's goal of rate stability and the least cost over time requirement," the PUC said.

The PUC did order that residential procurements (as well as procurements for small and medium C&I customers) shall occur no more than 5 months prior to the start of delivery, rather than up to 14 months as proposed by Duquesne Light.

For small commercial and industrial (C&I) customers (under 25 kW), the PUC adopted procurement of default service supply through laddered, six-month and twelve-month full requirements contracts, with default prices changing every six months.

For medium C&I customers (25 kW - 300 kW), the PUC adopted procurement of default service supply through six-month full requirements contracts with no laddering.

Small and medium C&I customer default service rates are to be reconciled every six months, rather than annually as proposed by an ALJ.

Hourly pricing will continue for C&I customers over 300 kW.

The PUC did not authorize any procurements for delivery beyond May 31, 2015.

The PUC ordered that retail suppliers and default suppliers shall continue to be responsible for transmission and transmission-related costs, such as PJM's RTEP costs, NITS costs, expansion costs, generation deactivation costs and ELR costs.

Regarding various retail market enhancements considered in the proceeding, the PUC adopted an opt-in retail aggregation program at Duquesne Light, rather than a retail opt-in auction. This aggregation program, under which Duquesne Light will solicit customers for enrollment with a retail electric generation supplier (EGS), will be open to residential and small C&I customers, and both shopping and non-shopping customers.

The PUC ordered Duquesne Light to develop a plan allowing Customer Assistance Program customers to purchase supply from retail suppliers by January 1, 2014.

As with PECO and the FirstEnergy utilities, the PUC delegated many issues surrounding the aggregation program, including the customer assignment process and cost recovery, to a collaborative and a subsequent filing.

The PUC did establish that the opt-in aggregation program shall offer customers a twelve-month product, comprised of a four-month guaranteed discount of 5% from the PTC in effect at the time of enrollment, an EGS-provided fixed-price product for the remaining eight months, and a bonus of $50 to customers who remain in the opt-in program for at least the initial four-month period. The PUC shall review the terms of the 8-month price.

The opt-in program shall feature a 50% supplier participation cap.

The PUC also directed Duquesne Light to offer a standard offer customer referral program under which customers will be enable to enroll, on an ongoing basis, for a 12-month term with a retail supplier, at a 7% discount from the then-current PTC. The standard offer program shall be open to small C&I customers as well.

The PUC ordered that the opt-in aggregation program must be implemented no later than July 1, 2013. Implementation of the standard offer referral program shall occur no later than August 1, 2013.