Retail Provider Asks Ohio to Look Closely at Sale Between Utility, Affiliate Supplier

Direct Energy has asked the Public Utilities Commission of Ohio to "look closely" at transactions between Duke Energy Ohio and Duke Energy Retail Services [sic] (DERS) after an audit identified an error concerning a journal entry related to a REC sale.

Specifically, the audit of Duke Energy Ohio's Alternative Energy Resource Recovery Rider identified an error related to a journal entry on the gain on the sale of renewable energy credits. This sale related to a "Duke Energy Retail Services (DERS) pass-thru transaction and Duke Energy Ohio's AEPS obligation. The RECs purchased for the pass-thru were sold to DERS ... in March 2012," Direct said in quoting the audit.

"This sale raises several questions related to corporate separation that the Public Utilities Commission of Ohio ('Commission') should thoroughly explore," Direct Energy said, including:

• "Why did Duke engage in a pass-thru transaction with DERS, its competitive retail electric supply ('CRES') provider affiliate? "

• "Did Duke offer the same REC transaction opportunities to other CRES providers? If not, why not? "

• "Was this pass-thru transaction at a market rate? "

• "Were there other REC transactions (pass-thru or otherwise) between Duke and DERS that occurred but that were not identified in the Audit? For example, were there other REC transactions that were not identified because there were not similar journal entry problems? "

• "Is Duke in breach of its corporate separation plan? "

"The Commission should look closely at the pass-thru transaction as well as any other Duke-DERS transactions to ensure that Duke is not giving an unfair advantage to DERS as it relates to RECs," Direct Energy said. "Such an exercise would be prudent, especially given the Audit's finding that Duke 'does not have policy and procedures with internal controls in place that specifically relate to the AEPS program.' Audit at 5, 18. If Duke does not have any policy and procedures in place, a reasonable observer might question whether Duke is meeting its corporate separation obligations," Direct Energy said.

Duke Energy Ohio, however, said that, "The Audit Report thoroughly examined the transaction that is evidently of concern to Direct Energy and found no regulatory concern other than a recording error."

"Direct Energy's interest in whether or not there is an issue with corporate separations fails as the audit has been completed and there has not even been a hint of any problem with respect to corporate separation issues," Duke Energy Ohio said.