Pennsylvania Denial of Assignment of Default Supply Contract "Patently Unreasonable," Could Raise Retail Rates, FirstEnergy Solutions Says in Appeal

FirstEnergy Solutions has appealed to the full Commission a Pennsylvania PUC Secretarial letter in which Staff denied the request of Met-Ed and West Penn Power to allow the assignment of four default service tranches from the winning bidder to FirstEnergy Solutions

See prior story for background on the denial

FirstEnergy Solutions' appeal is the first pleading to cite the winning bidder seeking to assign the tranches to FirstEnergy Solutions, which is BP. FirstEnergy Solutions also confirms in its appeal that the transfer would have no impact on the 50% default supply load cap.

FirstEnergy Solutions said that the denial, "creates barriers to participation in future default supply procurements which will result in increased clearing prices."

As previously reported, the Secretarial letter denied the assignment as unsupported, contrasting the request with a previously approved assignment at PECO, in which the assignment of default supply tranches was approved when the winning supplier (Conectiv) was exiting the wholesale supply business.

However, FirstEnergy Solutions said that Staff's "arbitrary" requirement of "a major business event" as a condition of assignment "lacks any basis in the earlier Secretarial Letter approving the Conectiv assignment, as well as any basis in Section 16.3 of the SMA, and is patently unreasonable."

"The ability to assign tranches is critical to making default supply procurements attractive to participants, who need the assurance that if a business need arises, they have the ability to assign tranches to other willing suppliers," FirstEnergy Solutions said.

"Staff's refusal to approve an assignment of an SMA, even when consistent with the SMA provisions and underlying Commission Orders, will have broader negative impacts on Pennsylvania default supply markets ... Without this assurance, suppliers may be reluctant to participate in the default supply procurements of Pennsylvania electric distribution companies ('EDCs'). If participants are unable to assign tranches, there may be fewer participants in default supply procurements and future auction clearing prices may rise," FirstEnergy Solutions said.

FirstEnergy Solutions requested that the Commission address its appeal at today's Commission meeting.