PUC Rules on Annual Reconciliation of Default Service Rates, Hike in POR Discount

The Pennsylvania PUC has issued a written order concerning its approval of a plan to allow Customer Assistance Program (CAP) customers to shop for a competitive electric supplier at PECO, in which the PUC adjudicates, among other things, a sought annual reconciliation of default service rates, and an increase in the purchase of receivables discount rate.

The PUC granted electric CAP customers at PECO the eligibility to participate in retail choice at its public meeting earlier this month, and while the PUC made clear that there would be no cap on retail supplier rates as part of the CAP shopping plan, the PUC did not immediately issue a written order addressing several other contested issues in the docket.

Notably, in the CAP proceeding, PECO had proposed reconciling its residential Generation Supply Adjustment (GSA) on an annual basis, in lieu of the quarterly reconciliations of default generation costs.

The PUC rejected this proposal, finding that it would lead to default prices which are less market-reflective.

"We concur with Direct Energy that PECO’s proposal to reconcile the GSA on an annual basis runs counter to the findings and recommendations that were developed through the RMI [Retail Market Investigation] and were presented in the End State Final Order. In that Order, the Commission explained that it relied on several underlying principles including 'structuring the default service model to more closely reflect current market conditions.' The Commission addressed the characteristics of default service procurement and cost recovery that can lead to the inclusion of significant costs in the PTC [Price to Compare] that have little or no relationship to current energy prices. The End State Final Order also addressed how a PTC, that does not reflect current market prices, can jeopardize the viability and the benefits of a competitive retail market ... While the reconciliation of GSA over- and under-collections is only one factor that hinders the responsiveness of the PTC to market conditions, we are not inclined to exacerbate the effect that the reconciliation of the GSA has on the sensitivity of the PTC by extending the reconciliation period to a full year," the PUC said.

The PUC did approve PECO's proposal to advance its residential Generation Supply Adjustment PTC filing schedule by thirty days; from the current forty-five days prior to the effective date to seventy-five days.

PECO had also sought to recover implementation costs of expanding shopping eligibility to CAP customers through the POR discount rate.

The PUC rejected this proposal as well, though it did not offer any precedential policy statement regarding recovery of retail market enhancements through POR discounts.

The PUC only said that, "We are also not convinced that the incremental costs of extending shopping to CAP customers should be recovered through the POR discount charges at this juncture. Therefore, we reject PECO’s proposal to recover $4.3 million of implementation costs through the POR program or the USFC. Rather, we find that prudent costs associated with extending shopping to PECO CAP customers should be recovered through base rates and agree with OSBA and PAIEUG that commercial and industrial customers should not pay any of the CAP Shopping Plan costs."

While, as noted above, the PUC previously announced that there would be no cap on retail supplier rates for CAP customers, the written order reveals that the PUC's decision was based on statutory grounds, in addition to policy grounds.

"We concur with Direct Energy that there is nothing in the Electric Competition Act that gives the Commission the authority to limit prices charged by the EGSs. Accordingly, we reject PECO’s proposal to impose a limit on the shopping price for CAP customers at or below PECO’s prevailing PTC," the PUC said.

"We are also of the opinion that, just as with pricing limitations, we lack the legal authority to prohibit EGSs from charging early termination or switching fees," the PUC said.

Docket P-2012-2283641