Duke Energy Ohio: Retail Suppliers Embrace Elimination of Capacity Obligation

June 23, 2011
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Competitive retail suppliers in Ohio have "embraced" the removal of their responsibility for a customer's PJM capacity obligation, and assumption of this obligation by Duke Energy Ohio for all distribution customers in its service area, Keith Trent, President of Duke Energy's Commercial Businesses, said yesterday.

Duke Energy Ohio's proposal to assume the capacity obligation for all distribution customers was first reported in Matters.

6/20 Story on Capacity Obligation

6/21 Story on Electric Security Plan Riders, Procurement, POR

"[A]fter our plan came out, there was a report from CRES [competitive] suppliers who evaluated the plan and actually said this is great, that they embraced the plan, that it enabled them to compete on energy only, which is what they want to compete on and can clearly compete there. And, in fact, they went on to say that they felt it was very appropriate for the capacity component to not be something that they are competing on," Trent said during an investor call.

"And if you think about it, today they really don't compete on capacity. What they are is effectively price takers on capacity, primarily through the PJM market . And so that is going to be no different in this plan. They will not be pricing capacity. They will just be pricing energy. So we think it actually will be easier for them and enable them to compete more effectively in our system," Trent added.

Duke Energy Ohio also said during the call that Rider RE -- the bypassable retail generation cost and main component of the price to compare -- will be adjusted after each procurement auction, which will occur semi-annually after the first year.

This was not apparent in Duke Energy Ohio's testimony (although, as previously reported, there is a seasonal Rider RE rate change called for). Additionally, it appears that all of the Duke Energy Ohio wholesale supply contracts, although procured twice annually, will start on June 1, and that, during the annual delivery year, there will be no change in the wholesale portfolio.

Therefore, it's unclear what the semi-annual change in Rider RE will reflect: if it will only be a reconciliation to date, if it will change the rate in anticipation of recently procured (but not yet delivered) wholesale contracts, or if Duke was merely referencing the seasonal factoring.

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