Extension of ComEd Residential Real-Time Pricing Program Projected to Result in Net Loss for Customers

June 27, 2011
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Extending Commonwealth Edison's residential real-time pricing program (RRTP) for another 10 years would result in significant net costs to ComEd customers as a whole, as well as ComEd residential customers, according to a report by Navigant.

The real-time pricing program is an optional generation product offered by ComEd.

An evaluation of the real-time pricing program conducted by Navigant (filed in ICC Docket 06-0617) found that if the program were extended through 2020, the net benefit since its 2007 inception would be a cost of $7.1 million to all ComEd customers, and a cost of $9.4 million to ComEd residential customers.

To date, the annual net benefits of the program to ComEd residential customers has been a cost of $1.9 million in 2007, a cost of $1.7 million in 2008, a cost of $784,000 in 2009, and a net benefit of $24,000 in 2010.

Nonetheless, Navigant recommended that the residential real-time pricing program should be extended for at least another four years.

"The evaluation presented in this report concludes that in aggregate RRTP program net benefits to ComEd customers over the past four years were either negative or close to break-even, and the baseline forecast of program net benefits to ComEd customers is negative. Nonetheless, several considerations mitigate against the conclusion that the RRTP program should be terminated," Navigant said.

Such consideration include:

a) There is considerable uncertainty about program net benefits to ComEd customers, with several reasonable scenarios indicating positive net benefits.

b) At the PJM level net benefits to consumers are substantial even under the baseline scenario.

c) Navigant believes that if its recommendations regarding program modifications are followed, program net benefits for ComEd customers are likely to be positive in the future even under baseline assumptions.

Should the ICC wish to continue the program, Navigant recommended that administration costs be reduced. "Navigant found the administrative costs for the RRTP program to be much higher than the costs for a similar program of similar size." Navigant also called reducing administrative costs a "key issue" if net benefits are to be realized.

Annual administration costs under Navigant's base case are $810,000, while administration costs would need to be reduced to $276,000 for the program to be break-even with respect to ComEd residential customers.

The issue of administrative costs is salient particularly as more retail suppliers enter the ComEd residential market, and could provide alternative real-time pricing options.

Regarding Ameren's Power Smart Pricing program (Docket 06-0691), Navigant projected net benefits of $270,000 to Ameren residential customers and net benefits $480,000 to all Ameren customers if the program were extended through 2020.

The ICC is accepting comments on both Navigant reports.

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