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Pa. PUC Approves Use Of Capacity Proxy Price For Duquesne Light Default Service Auction

January 14, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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The Pennsylvania PUC approved, without modification, the petition of Duquesne Light Company to modify its supplier master agreement to implement use of capacity proxy price (CPP) in its upcoming March 2021 procurement of default supply contracts

The specifics concerning the use of capacity proxy price are discussed in our original story below:

Original Story From December 4, 2020

Duquesne Light Company petitioned the Pennsylvania PUC to modify its supplier master agreement to implement use of capacity proxy price (CPP) in its upcoming March 2021 procurement of default supply contracts

"The delays in PJM capacity markets that precipitated the Company’s April 2020 DSP VIII Petition have persisted. It is now clear that the market price for capacity in the 2022/2023 delivery period will not be known by March 2021, when Duquesne Light must procure certain fixed-price full requirements ('FPFR') supply contracts," that extend into the 2022/2023 unpriced capacity period, Duquesne Light said

Duquesne Light noted that, per a recent PJM presentation, the BRA for the 2022-2023 delivery period is to be held in May 2021, with results to be released June 2, 2021.

Duquesne Light's proposed CPP, which is calculated as a straight average of the actual capacity prices from the two preceding delivery periods, is illustrated below:

• 2020/2021 Delivery Year. 3rd Incremental Auction. Final Zonal Net Load Price ($/MW-day): $77.31

• 2021/2022 Delivery Year. 2nd Incremental Auction. Adjusted Zonal Net Load Price ($/MW-day): $142.71

• Proposed 2022/2023 Capacity Proxy Price ($/MW-day): $110.01

"This proposed change would apply only to the Company’s scheduled March 2021 RFP for Residential and Small C&I default supply. It would not apply to any subsequent RFPs or RFPs for default supply for other customer classes. Once PJM sets capacity prices for this period, which is currently anticipated to occur in early June 2021, any differences between the CPP and the actual capacity price would be reconciled," Duquesne Light said

"Winning wholesale suppliers of the Company’s 24-month FPFR contracts procured in March 2021 will be paid the auction closing price, subject to subsequent true-up for the portion of the contracts that extend into the 2022/2023 delivery period. Once the PJM capacity price is set, the suppliers will be debited or credited (as applicable) any differences between the CPP and the PJM capacity price. Effective in June 2022, the Company will make an adjustment to its Rider No. 8 – Default Service Supply rates to compensate for any differences between the CPP and the final PJM 2022/2023 capacity price. The Company would then refund/recoup any remaining differences through its next section 1307(e) reconciliation of default supply rates. Thus, the impact of the CPP on customers over time will be neutral," Duquesne Light said

Duquesne Light said that its CPP proposal follows the same approach as the CPP proposal of the FirstEnergy Pennsylvania utilities, which the PUC approved by Order entered October 13, 2020, at Docket Nos. P-2020-3021424 et. al.

Duquesne Light had initially addressed the 2022/2023 unpriced capacity period by truncating the affected contracts procured in September 2020.

However, Duquesne Light said that this was not an appropriate remedy for the upcoming auction

"Truncating upcoming default service contracts is not a durable solution because, with each successive RFP, a more aggressive truncation is necessary to avoid the 2022/2023 unpriced capacity period. Additional truncations would also move the Company further from the mix of 12- and 24-month contracts initially approved in DSP VIII (and proposed for DSP IX, see Docket No. P-2020-3019522). Moreover, given that the actual PJM capacity price is expected to be established shortly after the Company’s March 2021 default supply solicitation, such additional truncations are not necessary at this time," Duquesne Light said

Docket P-2020-3023149

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