Ohio Industrials Seek to Protect Retail Market Under AES-Dayton Power & Light Merger

July 20, 2011
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The Public Utilities Commission of Ohio must ensure that the acquisition of Dayton Power & Light by AES Corp. allows consumers to have full and unencumbered access to competitive retail electric service (CRES) suppliers, and that that the debt service obligations associated with the proposed "highly-leveraged" transaction are not funded through nonbypassable charges, unduly prejudicial capacity charges that apply to shopping customers or their CRES suppliers, or other restrictions on shopping, Industrial Energy Users-Ohio said in comments to PUCO (11-3002-EL-MER).

To address such concerns, IEU-Ohio asked that DP&L be required to file an application for a successor plan for Standard Service Offer (SSO) service, and that such plan be consolidated with the merger proceeding.

IEU-Ohio said that DPL Inc. has disclosed in a proxy statement that its projections for DP&L rates beyond 2012 include an assumption that DP&L will continue to recover Provider Of Last Resort (POLR) charges from 100% of its retail distribution load.

Furthermore, DPL Inc. forecast 50% customer migration to competitive supply at DP&L, but with affiliate DPL Energy Resources retaining 80% of switched load. All switched load is also forecast to be commercial and industrial, with no residential shopping.

"[T]he highly-leveraged financing that has been designed by the Applicants to raise the approximate $3.5 billion required to close the proposed transaction raises red flags regarding the potential for misalignment between the interests of consumers and CRES suppliers, on one hand, and DPL, as the surviving company, on the other," industrials said.

"Recent SSO applications by some EDUs indicate that some EDUs are eager to raise electric bills through rate increases and, through a parade of non-bypassable charges, deprive consumers of the opportunity to reduce electric bills by obtaining competitive services from a CRES. This history and current events make it imperative that the Commission ensure that the relief requested by the Applicants does not provide the Applicants with a foundation to raise rates, block shopping or otherwise work against the pro-consumer, pro-competitive policy in Section 4928.02, Revised Code," industrials said.

IEU-Ohio further said that merchant generation affiliate DPLE's membership in the PJM Power Providers (P3) Group, and P3's complaint against New Jersey legislation to lower retail capacity prices, "suggest that local concerns may be subordinated by DPL's and AES's cash flow and earnings ambitions."

FirstEnergy Solutions sought to condition the merger on several retail market enhancements, including Purchase of Receivables and various changes to utility consolidated billing. FirstEnergy Solutions sought to add "percentage off" billing capability for supplier use under utility consolidated billing, the introduction of bill ready billing, and the reduction or elimination of various charges DP&L imposes for bill issuance and rate code registration.

FirstEnergy Solutions also recommended improved access to customer capacity and transmission peak load contribution data, reduced costs of interval meters, and adjusting the threshold (from 100 kW to the 200 kW cutoff used at other Ohio utilities) above which customers are compelled to acquire an interval meter if shopping.

Finally, FirstEnergy Solutions sought to eliminate the switching fee, shorten the 30-day enrollment window, and to allow individual meters to be enrolled by suppliers where a DP&L account contains both residential and commercial meters (currently, enrollment of individual meters onto competitive supply in such situations is prohibited).

PUCO Staff, however, raised no objections to the merger related to retail generation or the retail market, though Staff sought an additional condition regarding the sharing or targeted investment of any savings generated by the merger, and clarified its expectations of commitments made by the companies (such as requesting stronger ring fencing).

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