PUCO Staff Recommends that Duke Energy Ohio File Electric Security Plan

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December 9, 2010

Staff of the Public Utilities Commission of Ohio believes that Duke Energy Ohio should submit an electric security plan as an alternative to its proposed market rate offer (10-2586-EL-SSO).

In preliminary comments concerning whether Duke Energy Ohio's market rate offer application meets statutory criteria for such applications, Staff said that, "an electric security plan could offer significant advantages for the Applicant, stakeholders, and the public at large."

The comments were not formal testimony, and Staff said that it is not taking a position on several granular aspects of the market rate offer at this time (and merely commenting on whether the application as filed meets the statutory criteria).  

Still, Staff did say that, "[t]he success of Duke's current electric security plan demonstrates that the additional attributes of an electric security plan may provide value to both consumers and the electric utility."

"Therefore, Staff recommends that the Applicant consider building on the successful electric security plan rather than proceed with the more limited market rate option," Staff said.

Staff expressed similar reluctance regarding the FirstEnergy Ohio utilities' second filed market rate offer (to be implemented starting June 2011), and review of the FirstEnergy companies' filed market rate offer was essentially in limbo until the FirstEnergy companies eventually filed a stipulated electric security plan, which was eventually approved by PUCO.

Staff found that Duke Energy Ohio's market rate offer rate application met most of the statutory criteria (such as clear product definition, third party procurement manager, market monitoring presence, available pricing information for relevant products, etc.), but Staff raised concern with Duke Energy Ohio's proposed transition to the market rate offer.

As previously reported, Duke Energy Ohio proposed to blend the electric security plan rate and market price for the first two years, with fully market-based rates in year three.

"The statute appears to delineate specific percentages associated with specific transition years that the Commission must observe in making its determination regarding the first five years of the phase-in process," Staff said, though Duke Energy Ohio has argued that PUCO retains the ability to establish the actual percentages.

Staff said that, "the Company's application anticipates a transition to generation rates that are established 100 percent by a competitive bid for the third year of its MRO.  At this time, Staff is not convinced that the Company's proposed phase-in for its MRO is in compliance with the statute.  Such a concept appears to Staff to be better suited for consideration within an ESP [electric security plan]."

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