Pike County Light & Power Files New Default Service Plan

July 18, 2011
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Pike County Light & Power has petitioned the Pennsylvania PUC to maintain its current default service procurement methodology through May 31, 2014.

Specifically, Pike County filed for approval of a default service plan for the period June 1, 2012 through May 31, 2014 which would continue its current practice of procuring default supply on the New York ISO spot market.

Pike County would also maintain its current generation rate structure, with the default service rate comprised of two components: (1) the Market Price of Electric Supply, and (2) the Electric Supply Adjustment Charge. The Market Price of Electric Supply is a quarterly forecast of NYISO prices, while the Electric Supply Adjustment Charge is a quarterly adjusted reconciliation factor.

The Electric Supply Adjustment Charge would continue to be capped at a charge or a credit of 2.0 cents per kWh for any single period, with any remaining costs/credits deferred (with interest) until the next reconciliation.

Alternative Energy Credits for compliance purposes would continue to be procured through a competitive solicitation.

Pike County said that spot procurements remain appropriate given its unique situation, including its location in NYISO, small customer base, and prevalence of competitively served load. Pike County serves 4,700 residential and commercial distribution customers, whose 2010 annual requirements were 79,000 MWh, with a peak demand of approximately 18 MW.

Direct Energy, which retains customers from the former aggregation program absent affirmative action by the customer, serves approximately 56% of Pike County's peak load, while another retail supplier serves 6% of Pike County's peak load.

Only 38% of Pike County's peak load, and 29% of customers, are served under default service.

Pike County said that an alternative default service approach would not be feasible given the uncertain size of its default service load. "PCL&P cannot provide a definitive estimate of its default service load as of June 1, 2012. While it seems likely that the majority of customers currently receiving generation service from Direct Energy will remain with Direct Energy despite the expiration of the Aggregation Program, the Company cannot be sure. If PCL&P is required to estimate its default service load prior to June 1, 2012, it runs the distinct risk of overestimating such load. Overestimating the default service load involves a real risk of generating stranded costs which would have to be absorbed by PCL&P's customers," Pike County said.

"[T]he small size of the load served by the Company, combined with the large percentages of customers served by EGSs, makes it exceedingly difficult to negotiate favorable long-term generation supply contracts," Pike County added.

Pike County also presented results from an analysis it was required to conduct as part of the prior default service proceeding regarding the feasibility of applying an energy block procurement for hedging 75% of default load and hedging 50% of default load for the June 1, 2012 to May 31, 2013 period.

Based upon its analysis, Pike County has concluded that, "customers would likely derive little to no benefit from hedging."

Specifically, Pike County analyzed the feasibility and outcome of the following two scenarios for 2007-2010: (1) hedging 75% of average Pike County load using a one-year around-the- clock (7x24) block energy purchase or (2) hedging 50% of average Pike County on-peak load using a one-year on-peak (5x16) block energy purchase.

Under the 75% hedging scenario, the annual impact of hedging was an increase in costs equal to 6% in 2007, 0% in 2008, 98% in 2009, and 8% in 2010. Under the 50% hedging scenario, the annual impact of hedging was a decrease in costs equal to 3% in 2007 and 3% in 2008, and an increase in costs of 20% in 2009 (with no impact for 2010).

"[U]using either the 75 Percent Hedge or the 50 Percent Hedge, may increase costs to default service customers, perhaps significantly," Pike County said.

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