EPIC FAIL: Pennsylvania Won't Implement Quarterly Mass Market Default Supply Auctions Without Legislative Action

Originally published ~11am Friday, 2/15

The Pennsylvania PUC's long-winded and much hyped retail market investigation has resulted in the PUC, on its own authority, merely adopting a form of small customer default service contract lengths that is, "more reflective of market conditions than the currently-offered default service products," but which stops short of ordering, on its own authority, the use of quarterly supply contracts for small customers.

Such contracts that are "more reflective of market conditions" will NOT include the exclusive reliance on non-laddered 90-day full requirements contracts UNLESS the legislature acts to modify the current "prudent mix" standard for default service, according to a quick scan of the PUC's order

Additionally, a quick scan of the PUC's order did not indicate that the PUC has endorsed any specific contract length for the alternative "more reflective of market conditions" contracts, should the legislature not adopt the PUC's preferred quarterly contracts, nor, just as important, did the order indicate whether laddering/staggering of the contracts would be used. Conceivably, given that some EDCs rely on contracts in excess of 12 months currently, the use of a portfolio including laddered 12 month contracts (plus some 6 month contracts) could meet the definition of the alternative "more reflective of market conditions" portfolio -- while still being far from market reflective, and not much different from the current prudent mix

"[W]e are concerned that a general pronouncement directing a 90-day product for residential and small business customers and an hourly LMP product for 'medium' C&I customers may raise legal questions about compliance with the above-referenced provisions of the Competition Act [e.g. the prudent mix standard]. To avoid any legal uncertainty, the Commission would prefer to pursue legislative amendments that clearly provide the authority to approve default service plans containing products that more closely resemble current market conditions at the time of delivery. Further, as a creature of the Legislature, the Commission is well-served to ensure that the General Assembly is supportive of our overall policy direction on matters as important as the retail market for electricity," the PUC said.

"Although the Commission appears currently to have authority to establish shorter-term default service products that are more reflective of market conditions than existing products, our intention is to seek legislative changes that afford the Commission as much flexibility as possible going forward so that we can quickly adapt our policies as necessary to meet the needs of the competitive market and consumers," the PUC said.

"[T]he Commission believes a change to the existing statutory procurement standard may be required to use a 90-day default service product for residential and small C&I customers. Should legislative efforts fall short, we will consider an alternative shorter-term product that is more reflective of market conditions than the currently-offered default service products," the PUC said.

Link to PUC Order