Direct Energy To Seek Judgment On Ability To Serve Virginia Retail Electric Customers, Applies For License

Direct Energy has applied for a Virginia electric competitive service provider license, and told EnergyChoiceMatters.com that it intends to seek a declaratory judgment from the State Corporation Commission concerning permissible service by retail suppliers to customers under certain of the limited carve-outs for electric choice in Virginia

Virginia ended market-wide retail electric choice effective January 1, 2009; however, the legislation ending choice provided for two exceptions.

The first is that retail suppliers can serve customers with, "electric energy provided 100% from renewable energy," if the utility, "does not offer an approved tariff for electric energy provided 100% from renewable energy." While certain utilities have filed green tariff programs with the SCC, to date, the SCC has not found that any utility offers a tariff that meets that statutory requirement that would preclude such competitive retail sales (for example, the SCC has ruled utility REC-only programs do not meet the statuary standard which triggers the prohibition on competitive retail sales)

There is some uncertainty regarding whether this renewable energy exception applies to all customers, or only residential customers, which is one of the issues Direct Energy will seek to have the SCC clarify. While obviously not legal opinions, we note with interest that Dominion Virginia Power's website says all customers are eligible for the renewable exception, while Appalachian Power's website says that renewable exception is only applicable to residential customers.

The second exception is that customers with annual demands more than 5 MW (or, upon SCC approval, non-residential customers aggregating to >5 MW) can shop, and such customers are not limited to purchasing renewable energy (the statute excludes from this ability to shop customers whose load is more than 1 percent of the incumbent utility's load, except statute provides an exception to the 1 percent native load limit for customers with demand of 90 MW or greater).

Direct Energy applied to serve customers at Dominion Virginia Power and said that it will likely be amending its application to include customers at Appalachian Power (AEP).

Direct Energy told EnergyChoiceMatters.com that it specifically applied to serve residential customers under the renewable exception.

Noting that several million customers are eligible to be served under the renewable exception, Ron Cerniglia Director of Government & Regulatory Affairs for Direct Energy, said, "it's a great opportunity to open up the market to competition and to expose customers to choice."

"At some point, if it is successful, we can decide whether or not the next step needs to be taken at the legislature perhaps to open up the market more fully," Cerniglia said

While Direct Energy is interested in serving customers under the 5 MW exception as well, Cerniglia noted that regulations governing such service -- specifically a five-year notice required prior to any customer return to utility supply -- make such market challenging.

Cerniglia said that Direct Energy will be filing a petition with the SCC for a declaratory judgment addressing certain retail market issues that have not yet been addressed. For example, Direct Energy is seeking a determination concerning the treatment of 100% renewable competitive supply customers, who are under 5 MW, if a utility does implement a tariff found to comply with the statutory language which ends the ability of customers to choose a competitive renewable retail product

Although not cited by Cerniglia, one key issue for any retail supplier will be the allocation of capacity costs from the utilities, due to the utilities' use of the fixed resource requirement in PJM. Under a now-defunct renewable self-supply program (a form of pseudo choice), APCo allowed retail suppliers to self-supply a limited amount of capacity, but otherwise charged retail suppliers a formula rate capacity charge (click here for story)

Direct Energy currently serves both residential and business natural gas customers in Virginia