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Pa. PUC Orders Implementation Costs of PECO Dynamic Pricing to be Bypassable
April 18, 2011
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The Pennsylvania PUC ordered that costs of PECO's optional dynamic pricing plan shall only be recovered from default service customers through the Generation Supply Adjustment (M-2009-2123944).
The decision is consistent with the treatment of dynamic pricing costs at PPL and Duquesne Light. However, the Office of Consumer Advocate had attempted to distinguish PECO's program, since the initial phase will be a pilot intended to "test and learn" effective combinations of dynamic rate design, technology, marketing, and educational strategies. As the results of the pilot will be shared with all stakeholders, including competitive suppliers, OCA said that all customers will benefit from the information learned during the pilot, and costs should be recovered on a nonbypassable basis.
The PUC denied OCA's argument. "[T]he extent to which other energy suppliers may benefit from this information is speculative and cannot be quantified," the Commission found.
"PECO's Dynamic Pricing Plan is being offered only to default service customers in response to PECO's statutory requirements under 66 Pa. C.S. 2807(f)(5) as a default service provider, not an EDC ... Consequently, the costs of the Dynamic Pricing Plan should only be recovered from PECO's default service customers that receive generation service and not from the shopping customers that only receive jurisdictional transmission and distribution service," the PUC said.
PECO estimated that the costs of implementation to be recovered from default service customers will be $6 million. Specifically, costs will be recovered from Default Service Procurement Classes 1 (residential), 2 (small commercial and industrial), and 3 (medium C&I) through the GSA. Customers in Procurement Class 4 (large C&I) will not be assigned any costs because customers in this class are not eligible to participate in the pilot's dynamic rates.
PECO's initial dynamic pricing pilot will include a Time of Use option and Critical Peak Pricing option. Customer solicitations for dynamic pricing are scheduled to begin in the fall of 2012, and the products will only be available to customers with installed smart meters.
PECO's current default service plan runs through May 31, 2013. Given that pilot participation will not start until the fall of 2012, and the minimal expected participation, PECO does not expect that the dynamic rates will lead to any significant under-recovery of generation supply costs under the default service plan.
Accordingly, PECO will not perform any reconciliation between projected generation revenues and revenues actually billed resulting from changes in load or shifts in demand for pilot program participants. PECO will also will forego recovery of any revenue collection shortfall associated with plan participants and will reflect changes in usage patterns with respect to its dynamic pricing programs in its future rate proceedings.
Under various incentives and marketing approaches for dynamic rates to be tested under the pilot, PECO will offer some customers bill protection features that protect them from paying more than they would have paid under the company's otherwise applicable rates for default service for the same number of kWh during their first year on the dynamic rates.
The dynamic rates will be based on historic market conditions prior to the tariff's effective date of June 1, 2012. Accordingly, current rates are not available.
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