Camel's Nose: PECO CAP Shopping Plan Being Used to Obtain 12-Month Reconciliations of Default Service Previously Rejected by PUC

PECO's plan to allow Customer Assistance Program (CAP) customers to shop has become a venue to implement its desired 12-month reconciliation of default service costs for residential customers -- a design recently rejected by the PUC in establishing PECO's default service plan.

In its recent default service plan, PECO had originally proposed a 12-month reconciliation of residential (and small/medium C&I) default service costs because the current quarterly reconciliations can cause large swings in the bypassable Price to Compare. These large quarterly reconciliations reflect the "billing lag" rather than true changes in market prices, PECO claimed.

The PUC denied this proposal in setting PECO's June 1, 2013 to May 31, 2015 default service plan

Specifically, the PUC found that it is, "not clear how a smoothed out PTC will create clear price signals," and said that, "customers do not benefit when they are sheltered from the market forces that are the basis of the prices they will eventually pay."

"In addition, we agree with RESA on this issue that an annual reconciliation will separate the PTC from underlying wholesale costs thus masking the current cost of retail energy," the PUC said.

Despite this dispositive ruling, in its proposed program to allow CAP customers to shop (such customers may not currently shop), PECO proposed to adopt an annual reconciliation of residential default service costs.

PECO says that the 12-month reconciliation is compelled by its proposal in the CAP plan to require that retail suppliers serving CAP customers offer a rate which does not exceed the applicable Price to Compare.

"In light of the need for EGSs participating in the CAP Shopping Plan to track PECO's default service rate and ensure the price charged to CAP customers is at or below the PTC, PECO proposes to reconcile the GSA over/under collections for residential customers on an annual basis instead of a quarterly basis. By using an annual, rather than quarterly, reconciliation schedule, potentially significant fluctuations in default service rates will be smoothed out and clearer pricing signals will be sent to both customers and EGSs," PECO said.

PECO's proposed annual reconciliation of default service costs found support from the Office of the Consumer Advocate, which said in a post-hearing brief filed Friday that, "because PECO's PTC is subject to significant fluctuations due to billing lags and not market forces, it is necessary to smooth out such fluctuations."

"Smoothing out wild fluctuations in the PTC will make shopping easier for all residential customers, including CAP customers that will be entering the market for the first time," the OCA said.

Regarding other issues in PECO's CAP shopping plan, OCA proposed that if a retail supplier stops serving the CAP market (as is likely since the retail supplier must always meet or beat the PTC), the retail supplier should be prevented from re-entering the CAP market for a "reasonable period."

"[O]nce an EGS decides to exit the CAP market, and cede CAP customers back to default service, that EGS should be required to remain out of the market for a reasonable period of time. An EGS should not, in other words, have the right to enter the CAP market in Quarter 1, exit the CAP market in Quarter 3, only to re-enter the CAP market in Quarter 5," OCA said.

OCA also proposed that retail suppliers serving CAP customers be prohibited from using early termination fees.

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