Pennsylvania Approves Default Service Design Which Includes Reliance on Block (Non-Load Following) Contracts

The Pennsylvania PUC approved a settlement in UGI Utilities' default service proceeding which relies on block energy purchases for a portion of default service load for residential and small commercial electric customers.

The adopted settlement established the default service design for the period June 1, 2014 through May 31, 2017.

The settlement maintains UGI's original proposal to combine, for purposes of procurement, residential and small commercial customers (under 100 kW) into a single GSR-1 default service group.

However, while UGI had originally proposed to serve the GSR-1 customers exclusively through non-laddered, load-following contracts, the approved settlement adds a significant amount of block purchases to the procurement mix.

Specifically, under the approved settlement, UGI will acquire 50% of its estimated annual requirement for all default service customers with peak loads below 100 kW (GSR-1 Group) from the purchase of blocks (7x24 and 5x16) and spot purchases and sales from and into the PJM market.

The remaining 50% of the GSR-1 Group estimated annual requirements will be provided through the solicitation of full requirements, load following contracts. However, laddering will be introduced into the load-following portfolio, with some 12-month contracts running June to May, and others running December to November.

Both block and load following procurements will occur up to eight months prior to the start of delivery.

Under the default service plan, UGI will implement a New/Moving Customer Referral Program and a Standard Offer Customer Referral Program to enhance the competitive retail market.

UGI will work with the OCA and PUC Staff on scripts for the New/Moving Customer referral program, "to include education about how to compare prices and offers from Electric Generation Suppliers ('EGSs') with the Price to Compare ('PTC') charged by UGI, explaining the difference between fixed and variable generation supply contract options, and educating customers about how UGI's PTC changes over time."

Commissioner James Cawley issued a statement expressing concern with continued use of Pace Global Energy Services, LLC as UGI's independent third party evaluator for default service procurements. In this role, Pace is responsible for providing an evaluation to the Commission regarding indicative price estimates for the load following products, block products or AEPS credit solicitations.

"However, in past solicitations, the Commission has been concerned about the accuracy, thoroughness, and detail provided by Pace in this role," Cawley said. "I therefore strongly encourage Pace to be responsive to our staffs suggestions for improved reporting in its price estimation role. Alternatively, I urge UGI to explore retention of a different third-party evaluator."

"Moreover, I encourage Pace to spend less time reiterating general energy and capacity market fundamentals in its reports, and more time on wholesale cost calculations and analysis specific to UGI. I want to see details regarding PJM Western Hub futures, UGI basis history and basis projection assumptions relative to the PJM Western Hub, Auction Revenue Rights and/or Firm Transmission Rights credit value, capacity rates as a function of default service class load factors and Base Residual Auction results, ancillary costs, load shape adjustment factors, alternative energy production credit costs, and transmission costs, again, as a function of class load factors, each expressed in a cents/kWh equivalent. Lastly, in support of its price evaluation, Pace should provide critical calculations and source information as part of its report," Cawley said.

Docket P-2013-2357013