Draft Order Would Authorize Spot-Market-Based Default Service

A recommended decision from a Pennsylvania ALJ would continue the spot-market-based default service mechanism at Pike County Light & Power for two additional years.

Specifically, the recommended decision would extend the present approach for default supply procurement at Pike County, which would consist of obtaining all default electricity supplies on the NYISO spot market for the two-year period that runs from June 1, 2014 through May 31, 2016.

The ALJ would deny the Office of Consumer Advocate's proposed hedges, including a hedge in the form of a competitive procurement of a 1 MW block of on-peak fixed-price energy, once in March/April 2014 and once in March/April 2015. This represents roughly 50% of Pike's estimated residential default peak load.

"OCA is valuing lack of volatility over the 'least cost over time' standard required by the statute," the ALJ finds.

"The Commission rejected this approach for this Company in the last DSP case, and there is insufficient evidence to reach a different result here," the ALJ said.

A finding of fact from the ALJ notes, "There would be cost premiums involved for the 1 MW transaction for its odd-lot size, resulting in unnecessary costs on default service customers."

"If the Company had used the OCA-recommended hedging since 2011, the price volatility would have been reduced but customers would have paid more as a portion of the supply would have been hedged or locked in at a higher price as market prices fell," a finding of fact states.

P-2013-2371666