Ohio Staff Maintains Preference for Three-Year Transition to Fully Auction-Based Default Service at Dayton Power & Light

Staff of the Public Utilities Commission of Ohio have maintained a preference for a three-year electric security plan at Dayton Power & Light with a faster transition to fully auction-based default service versus the utility's proposal.

Staff and other parties yesterday filed initial post-hearing briefs, which, by their nature, repeat previously offered record evidence covered by EnergyChoiceMatters.com

In short, Staff said that the ESP term should be three years, recommending that competitive auctions be used to source 40%, 60%, and 100% of SSO load over the first, second, and third year of the term, respectively.

Staff opposed a nonbypassable switching tracker proposed by DP&L, which would have granted DP&L revenues to compensate for switching above a certain threshold.

Among other reasons, Staff said that DP&L, "charged into the competitive markets by opting into the PJM capacity markets when prices were high rather than opting for the alternative construct."

"The Company has had sufficient time and resources to come to grips with the occurrence of switching. Assuring the profit margin of one player in a competitive market is clearly anti-competitive. The ST [switching tracker] does this and should not, therefore, be authorized," Staff said.

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Staff also said that the capacity market construct favors a three-year ESP versus DP&L's proposed five-year term.

"The first reason is that capacity prices for years four and five of an ESP cannot be known today. These prices are set through the RPM auction process and the auctions for those years have not yet happened. The one thing that is certain about the RPM process is that its results are volatile," Staff said.

Staff found a nonbypassable Service Stability Rider (SSR), intended to maintain a certain level of revenue to DP&L in a transition to an auction-based SSO, to be legally permissible, but did not specifically endorse the mechanism (or oppose it).

Staff also reiterated its findings that the quantifiable impacts show that the ESP is not more favorable than a Market Rate Offer, and therefore PUCO would be required to make adjustments (such as reduction in the SSR) resulting in higher quantifiable effects or take into account qualitative benefits in order to approve the ESP.

Staff said that if an SSR is approved, DP&L should not be permitted to participate in the SSO auctions while the SSR is in place.

Staff's remaining positions, including those on other bypassable charges, were consistent with its earlier testimony, click here for prior story on Staff's positions

FirstEnergy Solutions claimed that, "DP&L's proposed ESP seeks nearly a billion dollars in above-market charges," which FES said, "outweighs any benefits that may stem from additional non-quantifiable characteristics."

While PUCO has approved ESPs with negative quantitative benefits, FirstEnergy Solutions noted that in the AEP Ohio ESP 2 case, the Commission approved a proposed ESP which failed the price test by $386 million, "based on a transition to market and an agreement to structurally separate during the term of the proposed ESP."

Neither of these elements are present in DP&L's proposal, FirstEnergy Solutions said.

FirstEnergy Solutions and other parties also again took issue with the transfer price at which competitive supplier DPL Energy Resources obtains power from affiliate DP&L. Matters previously noted protests over such pricing in coverage of initial testimony (click here)