Pennsylvania PUC "Investigating" Causes of "Anomalous" Wholesale Market Charges, Forced Outages in January

The Pennsylvania PUC will be "investigating" the causes of anomalous PJM wholesale market charges experienced in January.

The investigation was announced in the PUC's written order concerning its opening of a proceeding reviewing the regulations governing retail electric supplier variable rate contracts (particularly with respect to disclosures).

The PUC noted that average wholesale day-ahead LMP prices for Pennsylvania in January 2014 were estimated at $148/MWh, versus $44/MWh in December 2013. "Estimated energy uplift charges, which are energy related charges billed to suppliers in addition to LMP costs, are estimated at $631 million in the month of January 2014, which is equivalent to a full year of uplift charges for the period 2010-2012. Average forced outage rates for electric generators were reported as 20%, or 38GW, on January 7, 2014," the PUC said.

"As a result of these anomalous PJM wholesale market charges to Pennsylvania suppliers and high forced outage rates by generators, the Commission will also be investigating the causes of these underlying wholesale cost spikes and pursue all appropriate FERC complaints, and PJM tariff and operating manual modifications necessary to improve the efficient functioning of wholesale PJM markets. The Commission will participate in all necessary PJM stakeholder processes and OPSI working groups to help implement modifications to energy and capacity market rules necessary to achieve these objectives," the PUC said.

Regarding the PUC's variable rate proceeding, more thoroughly covered in our prior story (click here for details including proposals on disclosures and rate history), the written order provides some additional color, including the following statements:

"In general, it is unlikely that many market-priced, variable contracts have very explicit formulaic rates that establish how the retail rate is calculated from transparent wholesale price components. Thus, many current disclosure statements may not precisely describe how contract prices change as a function of the underlying wholesale costs or other price indices. The regulatory requirement to provide the 'basis' for price changes under variable contracts may necessitate the need to provide more advance notice to customers of contract price changes and specifics as to how the new price has been calculated. At minimum, we should inquire into the feasibility of requiring prior disclosure of variable price changes to residential and small commercial customers."

"Alternatively, there may be situations where the variable pricing mechanism is well defined in the disclosure statement, yet consumers may have difficulty comparing the various generation services offered due to the complexity or unfamiliarity of the formulaic rates or price indices. In these situations, it may be necessary to provide more useful and standardized information to customers so that they can better understand how variable price contract charges change."

Docket M-2014-2406134