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Pa. PUC Approves West Penn Power Dynamic Generation Rates with Modifications to Prevent Pricing Distortions
June 15, 2011
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The Pennsylvania PUC approved West Penn Power's modified dynamic pricing program as contained in a settlement, with direction to clarify when a reconciliation charge will apply to non-residential customers who have taken Critical Peak Pricing (P-2011-2218683 et. al.).
Under the settlement agreement, West Penn Power had substantially revised its dynamic pricing program to make the residential program competitively neutral, and to limit any potential market distortions from the non-residential program.
As only reported in Matters (5/4), the residential program will be a critical peak rebate program open to all customers regardless of generation supplier, with administrative costs recovered from all residential customers. West Penn Power withdrew its original proposal to offer Time of Use generation rates to residential default service customers.
For non-residential customers, West Penn Power will still offer a Critical Peak Pricing program to default service customers only, but with several modifications so that retail market pricing is not distorted.
Among other things, the summer Critical Peak and Off-Peak rates will now be based on the underlying default service rates, with a scaling factor used to raise or lower the prices based on the time of use. Originally, West Penn Power had proposed to establish Critical Peak Rates based on forward prices, which could have led to distorted price signals given that the otherwise applicable default service rates reflect power procured over several years.
Outside of the summer period, customers on the optional Critical Peak Pricing plan will receive the otherwise applicable default service rate.
Beginning with the summer 2012 period, a Critical Peak Pricing reconciliation rate, to align actual generation costs and revenues, will be applied to customers who take, or have taken, service under the optional product. This reconciliation factor will still be applied to customers even if they migrate to a competitive supplier.
The Commission ordered West Penn Power to clarify for how long the reconciliation rate will be applied to customers.
Customers electing Critical Peak Pricing must remain on that type of default service pricing through May 31, 2013 (the end date of the program) as long as they remain default service customers. Nothing prevents these customers from taking service from an electric generation supplier. Customers who take Critical Peak Pricing, and then leave for competitive supply, would still be served under Critical Peak Pricing if they elect to return to default service.
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