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Maine PUC to Set Monthly BHE Standard Offer Rates a Week Ahead of Time
August 15, 2011
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Standard Offer generation rates for the large non-residential customer class at Bangor Hydro-Electric will not be set until seven days prior to the start of the month, for the period October 2011 through February 2012, under an order from the Maine PUC (2011-203).
The departure from standard practice, in which monthly rates for the entire six-month period are set ahead of time, results from the PUC's rejection of bids to serve the large non-residential Standard Offer load at BHE (due to high prices, see 7/28), and the use of an alternative procurement mechanism.
The PUC established the September Standard Offer price for the large customer class at BHE as $0.0700/kWh. This price was set based on the current forward prices for September 2011, plus an adder for other items required to provide retail service, including capacity, ancillary services, line losses, and renewable energy credits (RECs).
For the remaining months of the term, through February 2012, the PUC will establish the actual Standard Offer price no less than seven days before the beginning of the Standard Offer service month.
The actual prices will be set based on the indicative price for the month estimated by the PUC (listed below), adjusted to reflect the difference between then-current forward energy prices for the month and the August 8 settle prices contained in the PUC order. In addition, in setting the monthly prices throughout the term, the PUC may consider any deferrals that have accrued due to the difference between the actual cost of supply and the prices paid by customers.
"In our view, this approach properly balances consideration of price certainty with the overall level of the standard offer prices and reduces the risk of large deferrals of the difference between actual costs and pre-established prices," the PUC said.
The indicative prices for the remaining months of the Standard Offer term are as follows:
Oct 2011: $0.0700/kWh
Nov 2011: $0.0730/kWh
Dec 2011: $0.0870/kWh
Jan 2012: $0.0960/kWh
Feb 2012: $0.0970/kWh
These indicative prices reflect the forward market prices for electricity, in particular the ISO New England Internal Hub Peak and Off-Peak LMP Swap Futures, as settled on August 8, 2011 through CME Group.
Consistent with the requirements of Ch. 301, Sec. 8(D)(3), the PUC will allow BHE to recover, through full reconciliation, all of its prudently incurred costs of providing Standard Offer service to the large customer class. BHE may procure the supply on its own or contract with another entity to provide the service.
BHE, "is expected to procure standard offer supply in a reasonable and prudent manner to minimize the costs and risks to ratepayers," the PUC directed.
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