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RESA Seeks Delaware Proceedings on SOS Procurement, POR
June 2, 2011
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The Retail Energy Supply Association has petitioned the Delaware PSC to open proceedings to investigate the procurement mechanism for SOS at Delmarva Power, and the introduction of other retail market enhancements, such as Purchase of Receivables.
Residential and small commercial SOS at Delmarva is primarily purchased via laddered three-year full requirements contracts. Default service for most large customers is procured under non-laddered annual full requirements contracts. Default hourly pricing is only applied to a handful of transmission-level customers.
"Delaware's SOS structure, by allowing for lags in SOS rates vis-a-vis the wholesale market, leads to intermittent 'boom or bust' cycles in competitive shopping and not a sustainable competitive market that has evolved in jurisdictions where default service is more closely tied to prevailing market prices," RESA said.
Despite retail SOS prices which have exceeded wholesale market prices the past few years, Delmarva has not seen the increase in residential migration experienced in other states, such as Pennsylvania and Maryland. RESA noted that residential migration at Delmarva is only 2.9% as of the end of April, with only four active suppliers, despite above-market SOS prices.
RESA said that Delaware's boom/bust SOS structure and lack of market enabling programs is the reason for the lack of retail offers despite the savings which could be offered to customers.
"The decision to enter a new market, and to solicit mass market customers especially, requires a large, up-front investment by a retail supplier. Because of the current regulations in Delaware, retail suppliers have been inclined to invest in markets other than the Delaware mass market," RESA said.
RESA said that not only would shorter term, more market reflective SOS pricing result in greater retail competition, it would also reduce the risk premiums included in longer term SOS contracts. Such risk premiums stem from greater exposure to migration, regulatory uncertainty, fuel, heat rate, and basis risk, and the decreased market liquidity for long-term products.
Aside from changes to SOS procurement, RESA sought the introduction of POR and other market enhancements. RESA said that POR "played a large role" in the recent jumps in migration in both Maryland and Pennsylvania.
RESA also suggested providing retail suppliers with customer lists, providing greater customer education, and creating a supplier pricing website similar to Power to Choose, PA Power Switch, etc.
RESA's comments were filed Docket 10-2, Delmarva's integrated resource planning docket.
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