Pennsylvania Utility Seeks To Shorten Default Service Contract In Upcoming Procurement To 12 Months Due To Lack Of PJM Capacity Price

Duquesne Light Company petitioned the Pennsylvania PUC for a modification of its upcoming September 2020 procurement of certain tranches of Residential and Small Commercial & Industrial (C&I) default electricity supply contracts, in recognition of an ongoing proceeding at the Federal Energy Regulatory Commission (FERC) concerning PJM Interconnection, Inc.’s (PJM) Base Residual Auction (BRA) for capacity, and the delay in several PJM BRAs.

Specifically, Duquesne Light noted that the terms of the twenty-four (24)-month Fixed Price Full Requirements (FPFR) supply contracts scheduled for procurement in September 2020 would extend into the 2022/2023 PJM planning year, for which the capacity price has not yet been established.

Duquesne Light therefore proposes to shorten the terms of these to-be-procured FPFR supply contracts from 24 months to 12 months.

More specifically, the September 2020 procurement is scheduled to procure 24-month contracts, with a December 1, 2020 start date, representing 12.5% of Residential and Small C&I default service load

Under the proposed change, this contract for 12.5% of Residential and Small C&I default service load would be changed to a 12-month contract, with a start date of December 1, 2020. Duquesne Light's procurement schedule already includes in the September 2020 procurement a 12-month contract for 25% for Residential and Small C&I default service load with a December 1, 2020 start date; this contract would not be impacted and would remain separate.

"Under the Company’s proposal, the first FPFR supply contract extending into the 2022/2023 delivery period would not be procured until March of 2021. This interim solution is intended to allow additional time for the 2022/2023 capacity price (and subsequent capacity prices) to be established, or in the alternative, for the development and implementation of a more comprehensive approach with respect to long-term uncertainty in the PJM capacity markets," Duquesne Light said

Duquesne Light further said, "The Company will address procurement of the 'out year' of the applicable default supply (i.e., that portion of default supply for the period from December 1, 2021 through November 30, 2022, which would otherwise be procured through the September 2020 RFPs) as part of its upcoming DSP IX proposal."

"In the event that a capacity price is established for the 2022/2023 delivery period by September 1, 2020, such that prospective wholesale suppliers could reasonably incorporate such capacity price into their September 2020 bids for the FPFR supply contracts, the Company would not truncate the 24-month FPFR supply contracts, and would instead procure the 24-month contracts as usual," Duquesne Light said

Duquesne Light proposed shortening the contract length rather than using a proxy capacity price, as done in some other states. Duquesne Light said that it, "is not proposing such a proxy price approach at this time, as they present more complex issues that might not be finally resolved in time for the Company’s September 2020 default supply procurement. But the Company observes that such [proxy price] approaches may present useful examples to consider should the present uncertainty in PJM capacity markets continue."