District of Columbia Opens Review of Standard Offer Service

The District of Columbia PSC has opened a review of the provision, procurement, and pricing of electric Standard Offer Service.

"In conducting this review and considering options for improving SOS, the Commission, among other things, must seek to ensure that the price for SOS will not hinder the development of a competitive electricity supply market in the District, provide appropriate SOS contract lengths, protect against any SOS provider's failure to provide service, ensure an appropriate rate design, provide for a contingency plan in the event of insufficient or inadequate bids, and determine the threshold financial viability of wholesale bidders," the Commission said.

The review includes the entire breadth of SOS service, from whether Pepco should continue to act as SOS provider, to whether current adders to the SOS bid prices should be continued. Hourly pricing for large customers and alternative supply contract lengths also highlight issues under review.

Specific questions for stakeholder comment include:

• Should Pepco continue to act as the SOS provider or should the Commission choose another option for providing SOS?

• Should the Administrative Charge be modified? The Administrative Charge is the mechanism by which the SOS provider recovers its incremental costs for procuring and providing SOS. These costs, include, but are not limited to, uncollectibles, the Commission's Market Monitoring Consultant costs, wholesale bidding expenses, working capital expenses, wholesale supply transaction costs related to wholesale supplier administration and transmission service administration, wholesale payment and invoice processing, incremental billing process expenses, customer education costs, incremental system costs, and legal and regulatory filing expenses related to SOS requirements

• Should the adder be eliminated? The purpose of the adder is to reflect the retail electricity suppliers' marketing costs in SOS rates in order to ensure that the suppliers are not placed at a competitive disadvantage

• Should the SOS provider continue to be compensated for the costs of administrating SOS through a margin that is calculated on a volumetric, per kilowatt hour charge basis or instead be paid on an annual fixed-cost basis? Is a volumetric, per kilowatt-hour charge consistent with the goal of energy efficiency?

• Should the Market Price Service (MPS) rate structure be changed to better reflect real market conditions by eliminating the provision mandating that the MPS price cannot go below the SOS price at any time?

• Should a peak load ceiling for large commercial SOS customers be established where large commercial users would be eligible only for hourly priced service? If a peak load ceiling is established, what should be the peak load ceiling? For example, this ceiling could be set at a peak load of 600 kilowatts.

• Currently, the SOS provider procures one year SOS electricity contracts for the large commercial customer load and three year SOS electricity contracts for the small commercial and residential customer load. Should the length of these contracts be changed? If so, why?

• Currently, the bidding for SOS is scheduled on an annual basis with two bid days, one in December and one in January. Should the bidding be scheduled differently and if so, what schedule should be used for the bidding? For example, there could be a larger spread between bid dates, as in Maryland where they procure most residential SOS in October and April.

• Currently, SOS is procured using a sealed-bid auction format. Should the bidding method be changed. If so, what bidding method should be used and why? For example, a reverse descending clock auction could be an alternative bidding method.

• Is there any other aspect of the SOS program that should be changed in light of competitive developments in the District of Columbia?

Formal Case 1017