Pennsylvania Utilities Seek Bypassable Adder To Default Service Rates To Spur Retail Competition

As part of a newly filed default service plan, for the period beginning June 1, 2019, the FirstEnergy Pennsylvania EDCs have proposed implementing a new bypassable adder to residential default service rates, to incent shopping for a competitive supplier

The FirstEnergy Pennsylvania EDCs are proposing, "a bypassable retail market enhancement rate mechanism," for residential customers as part of the plan, "in order to incent residential retail shopping," the EDCs said

"A bypassable retail market enhancement rate mechanism ('PTC Adder') is a surcharge added to the utilities’ default service rate with the purpose of incentivizing non-shopping customers to participate in the retail market," the EDCs said

The PTC Adder is based on the $30 Customer Referral Program Charge (CRP Charge) applicable to EGSs for each customer enrolled by the EGS under the utilities' Customer Referral Program. The $30 CRP Charge is divided by an assumed EGS customer retention period of twenty-four months. Regarding the use of 24 months as an assumed EGS retention period, the EDCs said that, "the Companies have no direct knowledge of the EGS actual average retention period as this information is considered proprietary EGS information and the Companies have no access to data from which to make a more informed calculation."

The calculation described above results in a charge of $1.25 per residential default service customer per month.

The $1.25 per month charge is then divided by the average residential usage for the four FirstEnergy EDCs to arrive at a per kWh charge which will be a component of the bypassable PTC Rider rate calculation. This charge will remain constant for the four-year default service plan term (through May 2023).

Specifically, the EDCs propose to divide the monthly CRP charge per customer of $1.25 by the EDCs' average monthly residential usage of 869 kWh for the twelve-month period ended August 31, 2017.

This calculation results in a proposed PTC Adder (retail market incentive adder) of $0.00144 per kWh for the June 1, 2019 through May 31, 2023 DSP term, with such adder being applicable only to residential customers

"The Companies propose the PTC Adder be applicable only to the residential customer class, as this class has the lowest level of customer shopping. On average, only about 30% of the Companies’ residential customers are shopping. By contrast, commercial and industrial customers are shopping in significantly greater proportion and are generally more aware of their electricity purchasing options. Therefore, it does not appear that commercial and industrial customers require additional incentive to shop for electricity," the EDCs said

The adder is designed to be revenue neutral "95% of the revenues collected will be returned to all customers -- shopping and non -- through the Companies’ nonbypassable DSS Riders. The Companies propose to retain 5% of the revenue collected through the PTC Adder to the PTC Rider to recover expenses associated with administering the PTC Adder. As such, the mechanism is designed to be revenue neutral to the Companies," the EDCs said