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PUCO Staff Reports on Migration to Fixed Price Contracts Under DEO SCO
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December 9, 2010
Staff of the Public Utilities Commission of Ohio filed a report examining whether a Standard Choice Offer (SCO) supplier's direct relationship with a retail customer at Dominion East Ohio provides that supplier with an advantage in enrolling those customers onto other choice products, particularly fixed price products.
However, the report, as will be explained below, only examines the experience at a single SCO supplier. Thus, unlike at Vectren Energy Delivery, where Staff performed a similar analysis (10/5), few conclusions can be drawn.
Five suppliers split nine SCO tranches in Dominion East Ohio's most recent SCO auction. Winning suppliers were Interstate Gas Supply, Hess Corporation, Lakeshore Energy Services, DTE Energy Trading, and Just Energy.
Six of the nine tranches are being supplied by marketers that do not solicit or serve choice customers outside of the SCO, and thus do not provide any insight on whether SCO suppliers have an advantage in enrolling customers onto other products. Though Staff did not identify these suppliers, Hess and DTE Energy Trading do not solicit individual residential customers in Ohio outside of the SCO.
Two of the remaining three tranches are being served by marketers, "that either do not have a fixed price product or were not promoting a fixed price offer to SCO customers," Staff said. While Staff did not identify the two suppliers not offering a fixed price product, one of them is likely Lakeshore Energy Services, which currently does not offer a fixed residential rate at Dominion East Ohio and did not have one listed in several of the archived apples to apples charts.
It's unclear which of the two remaining suppliers, IGS Energy and Just Energy, Staff is describing as not offering, or "promoting," a fixed rate product, as both have at least posted a fixed rate on apples to apples throughout the year.
In any event, Staff explained that only one marketer serving a single tranche has data useful for evaluating the issue of movement of SCO customers to fixed price choice offers. For this marketer, 47 percent of its initially assigned SCO customers moved from the SCO to choice. Of those migrated customers, only 15 percent stayed with that marketer.
The remaining 85 percent enrolled with other choice suppliers.
Of the 15 percent that stayed with their SCO marketer but on a choice product, 97.5 percent enrolled on a fixed price contract. This compares to 52.7 percent of all choice and aggregation customers in Dominion East Ohio's service territory that are served under fixed price contracts.
While the percentage of customers who remain with the SCO marketer and take a fixed price choice product may seem unusually high, Staff stressed that, aside from the small sample size, the result is somewhat expected, since the SCO itself is a variable rate, and customers are unlikely to leave the SCO variable rate for a different variable offered by the same marketer.
Regardless of the explanation, the total number of SCO customers that have moved to a fixed price contract is a miniscule 0.8 percent of all SCO customers.
Staff noted that the results are also consistent with its study of customer migration
at Vectren Energy Delivery, in which Staff found that 90.8 percent of Vectren Energy
Delivery's SCO customers that moved to a choice product with their SCO provider chose
a fixed price option. This compared with 14.4 percent of Vectren Energy Delivery's
non-
"Given the small number, Staff does not believe the data supports a hypothesis that SCO customers are being unduly influenced to switch to fixed price contracts. Furthermore, given the large number of SCO suppliers that do not even offer a fixed price contract, it does not appear that the ability to market fixed price offers to its SCO customers is a primary motivating factor in a marketer's decision to participate in the SCO auction. Staff is not recommending any specific action by the Commission at this time."
Staff's report is filed in Case 07-
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