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Powelson: PPL Time of Use Rate Implementation a "Complete Debacle," Says TOU Should be Competitive Offering
August 26, 2011
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"I do not believe it is an exaggeration to say that PPL's TOU [Time of Use] offerings have been a complete debacle since being implemented," Pennsylvania PUC Chairman Robert Powelson said in a statement accompanying an order regarding the reconciliation of PPL's Generation Supply Charge-1 Rider, including its Time of Use generation rates.
PPL's TOU generation option went into effect January 1. The initial TOU rate was priced such that the on-peak rate was a full penny per kilowatt-hour cheaper than the lowest competitive offer. The TOU offering under default service quickly became a popular offering as a result, with thousands of customers selecting the option.
"This initial rate predictably did not allow PPL to recover a substantial portion of its costs. Consequently, PPL's second quarterly TOU rate, which ends August 31, 2011, contained a substantial under-collection adder," Powelson said.
Powelson reported that 80% of TOU customers have since migrated off of the TOU product since implementing the second quarterly TOU rate -- "hopefully to competitive suppliers," Powelson added. About 5,000 customers remain on the TOU rates.
"Unfortunately, due to this large migration of customers and the high spot electricity market prices experienced over the past few months, PPL was yet again unable to recover a substantial portion of its TOU costs, on an even greater basis than with its previous TOU rate. As a consequence, PPL's current TOU filing seeks to recoup yet another significant undercollection," Powelson noted.
"This undercollection, coupled with high forward electricity market prices, is causing PPL's current TOU rate to practically triple, and once again both the Commission and Company must consume resources to provide a solution to protect consumers in a very short timeframe," Powelson continued.
Specifically, for residential TOU customers, the September on-peak rate was proposed to be 33 cents per kWh, with the off-peak rate proposed at 28 cents per kWh. Similarly high rates would have applied to small commercial customers, and also for the months of October and November (See Docket M-2011-2258733 for details).
As a result, Powelson said that the Commission is suspending the current filing and allowing the current TOU rates to remain in effect, with PPL directed to design and submit an all-new TOU plan. For residential customers, the current on-peak rate is about 12 cents, and the off-peak rate is about 10 cents.
"Unfortunately, no matter how artful PPL is in designing its new TOU plan, the offering will never be reflective of market rates, because of both the large undercollections already incurred and the manner in which the TOU rates must be priced because of system and default service plan constraints. That is to say that PPL's, and likely every other electric distribution company's, TOU plans will always fail at their core purpose: providing customers with accurate price signals designed to drive behavioral changes in electricity consumption," Powelson said.
"Once again, this is an example of why utility default service should be a 'plain vanilla' offering designed only to be a backstop service. It is clearly the time and place here in PA to allow competitive markets to foster innovation and expand product offerings such as TOU rates," Powelson added.
Only PPL's proposed TOU generation rates were suspended. The fixed price default service rates (and associated Prices to Compare) were permitted to be implemented as proposed and reported earlier this week.
EDCs must offer a TOU option to customers under Act 129. At some EDCs, this mandate has been addressed by using a competitively neutral peak-time generation rebate which is open to all distribution customers and credits them on a per kWh basis for reducing usage (as opposed to applying a peak-time rate to usage during those hours). As a result, the peak-time rebate does not alter the default service rate paid by customers.
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