Dominion East Ohio to Limit Prices Under Backstop Monthly Variable Rate Commodity Service

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November 2, 2010

Dominion East Ohio has filed tariff changes which would limit the rate that competitive suppliers could charge under the tariffed "Monthly Variable Rate Commodity Service," which serves as a backstop for customers whose competitive supply contract is not renewed.

In Dominion East Ohio's Energy Choice program, a customer whose contract with a competitive supplier terminates without renewal will, after two months of receiving Standard Service Offer commodity service, be randomly assigned to one of the competitive suppliers that has elected to provide Monthly Variable Rate (MVR) commodity service.

Monthly Variable Rate commodity service is provided by competitive retail natural gas suppliers at the supplier's posted price.  Unlike the SSO and Standard Choice Offer prices that are based on auction results approved by PUCO, Monthly Variable Rate prices are not subject to Commission approval.

Under the newly filed tariff, a competitive supplier's Monthly Variable Rate under the tariff shall be no greater than “any” of the supplier's monthly variable rates posted on the PUCO's Apples-to-Apples Chart (e.g. competitive rates) for the same billing period.  Based on the wording in the tariff, to the extent the supplier offers more than one monthly variable rate on Apples-to-Apples (such as by listing a separate rate for a military discount), the tariff-based Monthly Variable Rate may not exceed the lowest-priced rate on Apples-to-Apples.

Additionally, all competitive suppliers offering the tariffed Monthly Variable Rate commodity service are required to have a competitive rate posted on their list of active offers on the PUCO's Apples-to-Apples Chart.

The change is intended to make sure that the backstop Monthly Variable Rate is competitive, Dominion East Ohio said.  Additionally, the requirement for a supplier to offer a competitive monthly rate on the Apples-to-Apples Chart in order to offer the backstop Monthly Variable Rate service, "may expand the number of offers that customers can consider as they make their natural gas supply decisions," Dominion East Ohio said.

Dominion East Ohio further filed tariff changes to automatically provide for a supplemental Standard Choice Offer auction under certain conditions.

Dominion East Ohio's current Standard Service Offer auction structure includes a provision under which a supplemental SSO auction may be held in the event that a default causes a supplier's SSO supply obligation to increase more than 50%.

However, the current Standard Choice Offer auction structure does not include such a provision.  Instead, Dominion East Ohio must first request Commission approval to conduct a supplemental SCO auction in the event a default causes a supplier's SCO supply obligation to increase more than 50%.  The requirement to seek PUCO approval for a supplemental SCO auction, "increases the uncertainty and risk faced by [competitive] suppliers participating in the SCO auction," Dominion East Ohio noted.

Accordingly, Dominion East Ohio filed tariff changes to make the SCO supplemental auction automatic if it is necessary, similar to the SSO structure.  Current suppliers will first have an opportunity to volunteer to assume any customers of the defaulting SCO supplier, prior to the supplemental auction, on a load ratio share basis or other non-discriminatory manner as directed by PUCO Staff.

"[T]he resulting reduction in risk should promote more competitive bidding in the Company's upcoming March 2011 SCO auction," Dominion East Ohio said.

   
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