|
Consulting |
Search |
Powelson: Retail Market Status Quo Unacceptable
June 9, 2011
Email This Story
The status quo default service model and retail market design is "unacceptable," Pennsylvania PUC Chairman Robert Powelson said at the conclusion of an en banc hearing regarding alternative methods of default service.
Powelson, however, stressed that the PUC's investigation, and any subsequent action, will be a marathon, not a sprint, stressing that the PUC will work diligently with stakeholders on improvements.
Such a measured approach could mean that any decisions regarding the end state of default service may not be made in time to affect to electric distribution companies' next default service procurement plans, whose delivery terms will begin June 1, 2013. That also raises the question of what extent, if any, the uncertainty of the instant investigation into the default service model will impact the new default service plans, which have typically run 24 months (technically 29 to synchronize the end of the plan with the PJM delivery year), and thus could foreclose any change in default service until June 2015.
Commissioners repeatedly asked panelists at the hearing of interim steps the PUC could take to improve the market given that the investigation will take some time. As previously reported, potential interim steps include requiring new delivery service customers to choose competitive supply or affirmatively select default service, the further unbundling of supply costs from delivery rates, and increased customer education.
Commissioner Wayne Gardner also said that he thinks he will have a "problem" with the electric distribution companies continuing to act as default service providers, citing unnecessary costs they must incur to run supply procurements and other functions associated with their obligation to supply generation. Gardner and Commissioner James Cawley suggested that the EDCs should be focused solely on transmission and distribution.
In response, PPL Electric Utilities President David DeCampli said that PPL Electric Utilities would prefer not to be in the procurement business so that it could focus on its core business, though DeCampli did not outright endorse any recommendations to remove PPL Electric from the default supplier role.
While receptive to an alternative default service provider, Cawley questioned how such a provider would meet the least cost, prudent mix requirement of Act 129, suggesting that a legislative change may be required for competitive suppliers to assume the default supplier role.
While much of the stakeholder comments have focused on status quo bias, which will exist regardless of whether the EDC or a competitive supplier acts as the default provider, Cawley stressed that the problem with the EDCs providing default service goes beyond the simple stickiness of customers. Cawley said two of the most cited reasons from customers for not switching is that they do not wish to be disloyal to their utility who has served them and their community for decades, and that they fear their outage and service restoration times or reliability will be affected. These problems will not arise if new, competitive suppliers with no history of providing customers with distribution service act as the default supplier.
Richard Riazzi, President and CEO of Duquesne Light Company, downplayed the two barriers to customer shopping cited by Cawley, stating that a survey of Duquesne Light customers indicated customers understand that reliability is not impacted by switching. Riazzi also said that Duquesne Light has not found that an affiliate name similar to that of the EDC is an important driver in customer shopping decisions.
Douglas Elliott, President of Pennsylvania Operations for FirstEnergy Utilities, said that the Commission must recognize that some customers simply do not want to go through what they perceive as the hassle of shopping.
Elliott also suggested adding a return component (e.g. margin) to the default service rate to provide more headroom for suppliers; however, Commissioners Gardner and Tyrone Christy both opposed the proposal, with Christy likening it to the artificial subsidization of retail suppliers.
Consumer advocates reiterated opposition to any system where customers are "forced" to take supply from a competitive supplier (such as a retail auction); however, Richard Hudson, Pennsylvania State Chair for the Retail Energy Supply Association, noted that customers were initially assigned to default service without an affirmative choice, and today customers are forced to take default service for at least one billing cycle when initiating service prior to exercising a choice.
Powelson also said that he was "violently opposed" to opt-out municipal aggregation.
Additionally, Powelson asked the EDCs whether they believe it is appropriate to offer optional products for default service customers, such as dynamic pricing, and none of the EDCs on the panel (PPL, PECO, Duquesne Light, and the FirstEnergy companies) said such offerings are appropriate for a default service provider. However, the EDCs are required by statute to offer various dynamic pricing options for generation supply.
Email This Story
Copyright 2010-
Be Seen By Energy Professionals in Retail and Wholesale Marketing
Run Ads with Energy Choice Matters
Call Paul Ring
954-
|
Consulting |
Search |