Utilities Propose 36-Month Contracts Be Used for Default Service, Will Include More Charges in Nonbypassable Rider

The FirstEnergy Ohio utilities would continue to rely on a mix of 12, 24, and 36-month contracts to serve all default service classes under an electric security plan covering the period June 1, 2016 to May 31, 2019

The design of default service would be virtually unchanged under the latest ESP.

The FirstEnergy utilities would continue to serve all customers under the same mix of contracts, which it again proposes to be a mix of 12, 24, and 36-month slice-of-system, full requirements (except renewable compliance), load following contracts procured via descending clock auctions.

The proposed procurement schedule and term length is below:

Bid Date   Tranches    Years       Delivery Term
Oct 2015      17         3      June 2016-May 2019
Oct 2015      17         2      June 2016-May 2018
Oct 2015      16         1      June 2016-May 2017
Jan 2016      17         3      June 2016-May 2019
Jan 2016      17         2      June 2016-May 2018
Jan 2016      16         1      June 2016-May 2017
Oct 2016      16         2      June 2017-May 2019
Jan 2017      16         2      June 2017-May 2019
Oct 2017      17         1      June 2018-May 2019
Jan 2018      17         1      June 2018-May 2019

An 80% load cap would apply in the auctions, on an aggregated load basis across all auction products for each auction date such that no bidder may bid on and win more tranches than the load cap.

The FirstEnergy EDCs generally propose to maintain the current SSO rate design and components.

However, one exception is that the utilities are proposing to expand the PJM items included in the Non-Market-Based Rider (Rider NMB), which reflects various RTO/transmission charges not allocated on a market basis. For all charges covered under Rider NMB, the utilities assume the obligation for such charges for all distribution customers, and accordingly recover such costs via a nonbypassable surcharge.

Among the new charges proposed to be included in Rider NMB are:

PJM Billing Line Item 1250 – Meter Correction. Meter corrections are charges or credits levied on the distribution companies for errors in tieline or generation metering within the applicable transmission zone.

PJM Billing Line Items 1218 and 2218– Planning Period Congestion Uplift. These charges or credits are associated with allocations to LSEs for any revenue deficient transmission rights (Auction Revenue Rights (ARRs) or Financial Transmission Rights (FTRs)) remaining at the end of the Planning Period and represent a non-market based allocation of costs, the EDCs said.

PJM Billing Line Items 1260 and 2260– Emergency Energy. PJM may, from time to time, be required to purchase energy to alleviate an emergency from outside the PJM footprint. When this occurs, PJM allocates the costs of such purchases to load serving entities based on their deviations in load schedules and actual load. Such purchases are not reflected in locational marginal pricing (LMP) and represent a charge similar to an uplift cost, i.e., a cost that does not fit market-based cost causation principles, which is typically allocated to market participants, the EDCs said.

PJM Billing Line Items 1375, 1376, 1378, 2375, 2376, 2378 – Balancing Operating Reserves, Balancing Operating Reserve for Load Response and Reactive Services. Collectively, these charges represent costs of dispatching generation/demand response out of merit to meet regional transmission operating conditions and are allocated to load servers based on deviation between actual and scheduled load. Such costs are not captured in LMP and therefore represent non-market based costs more associated with an uplift cost for reliability purposes, the EDCs said. Rider NMB does currently collect portion of line Items 1375 and 1378 where associated with deactivated units.

The EDCs also propose two changes to the generation reconciliation rider relating to its potential transformation into a nonbypassable charge, one of which was explicitly said to only memorialize the previously adopted design, and another which may be a novel change.

First, the companies propose to make explicit that if the allowed balance of the reconciliation rider, Rider GCR, reaches 5% of the generation expense in two consecutive quarters, then this balance would shift to recovery through a nonbypassable charge in Rider GCR. While this is the design previously approved by PUCO, the EDCs said that their tariffs do not explicitly indicate that the balance must exceed the threshold for two consecutive quarters.

Second, in the event of a winning bidder default, pursuant to and as defined in the Master SSO Supply Agreement, the EDCs propose that they may convert Rider GCR to a nonbypassable charge, "if they believe the bidder default will cause the GCR balance to exceed the 5% threshold discussed above."