Say What? Pennsylvania Utility Seeking Nonbypassable Surcharge for Excessive Generation Costs Files to LOWER Bypassable Generation Rate on April 1

A Pennsylvania utility seeking to institute a nonbypassable surcharge to recover a default service undercollection resulting from extreme pricing in the PJM market during January has filed to lower its bypassable default service charge by 8% effective April 1.

Specifically, Citizens' Electric Company of Lewisburg, PA calculated that its bypassable default generation rate, "must decrease on April 1, 2014, from its current level of 9.7166 cents per kWh to 8.9326 cents per kWh."

"This rate change is necessary to reflect the projected purchased power costs that the Company will incur during the period from April 1, 2014, through June 30, 2014, for energy, capacity, transmission, ancillary services, congestion, losses, and administrative costs," Citizens' said.

However, also starting April 1, Citizens' is seeking to institute a nonbypassable surcharge to recover an undercollection of about $817,000 from extreme January pricing, as such costs were not recovered under the default service rates as established prior to January. Click here for background on petition

Under the current tariff, such undercollection would be collected through bypassable default service rates (though not until July under an annual reconciliation process for certain costs). However, Citizens' claimed that recovering the undercollection in this manner would lead to a "substantial" reconciliation factor that would "distort" the Price to Compare.

Citizens' said that having an accurate Price to Compare has taken on new significance given that a retail supplier is ready to begin marketing in its territory, suggesting (though not explicitly) that Citizens' is concerned with a potential "death spiral" should the undercollection be included in bypassable default rates.

However, the proposed nonbypassable surcharge is only 1.1 cents per kWh. If this amount were simply added to bypassable default rates starting April 1, the default rate would only be increased by 0.3 cents per kWh versus the currently effective default rate which has led to zero migration (10¢ on April 1 versus the current 9.7¢).

Citizens' proposal to actually lower its bypassable rate starting April 1, 2014, while at the same time seeking the extraordinary relief of a nonbypassable surcharge, belies its argument that including the undercollection in default rates would lead to a too "substantial" increase which necessitates the departure from current practice under both its tariff, and the Pennsylvania market generally.