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PUCO Allows Columbia Gas to Proceed with Transition to SCO Auction in 2012
September 8, 2011
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Columbia Gas of Ohio shall proceed with the transition to a Standard Choice Offer (SCO) auction for default service under an order issued yesterday by the Public Utilities Commission of Ohio (08-1344-GA-EXM).
Columbia Gas of Ohio currently procures wholesale supplies for default service customers through a descending clock Standard Service Offer auction. Under the SCO, retail suppliers will bid for the right to serve individual customers, rather than tranches of wholesale supply, for a period of one year.
The first annual SCO delivery period will begin April 1, 2012.
PUCO found that marketers and other proponents of the SCO provided sufficient evidence to proceed with the previously stipulated transition, citing, in particular, lower pricing under the SCOs now in place at Dominion East Ohio and Vectren Energy Delivery.
The Commission rejected arguments from the Ohio Consumers' Counsel that proceeding with the SCO auction would be inferior to maintaining the current SSO process.
Among other things, OCC noted that the customer's tax obligation for the purchased commodity differs under the SSO and SCO, with SCO sales subject to a higher rate. However, PUCO stressed that the type and the amount of taxes is determined solely by legislative authorities in Ohio.
"The bottom line is that taxes will not be increasing as a result of this case and for OCC to assert that there is such an increase is a misrepresentation of the issues before us and the purpose of this case," PUCO said.
PUCO also dismissed OCC's "speculation" that larger wholesale suppliers currently active in the SSO auction may not participate in the SCO auction because SCO suppliers must be certified as retail suppliers, as OCC argued certain wholesalers may not wish to pursue a retail license.
The Commission cited the high participation rates in the SCO auctions at DEO and Vectren to dismiss OCC's claim. As only noted by Matters, at least one wholesaler sought a retail license for the express and sole purpose of participating in the SCO auction (5/11).
As with the DEO and Vectren SCO auctions, the Commission reserves the right to reject the auction results and require that Columbia return to an SSO auction or the Gas Cost Recovery mechanism in the event that the Commission finds that it is no longer in the best interest to continue the SCO auction.
Additionally, similar to the process at DEO and Vectren, PUCO directed Staff to develop information on SCO customer migration from the SCO to Choice offers, including the number of customers that chose fixed price Choice contracts. Staff shall file the report in appropriate case docket by September 1, 2013.
During the proceeding, retail suppliers had sought to change the requirement that winning SCO bidders shall provide cross-collateral security in the form of a cash deposit. Such cross-collateral security is held for the benefit of other SCO suppliers who are called upon to cover the obligations of an SCO supplier that defaults.
Rather than posting cash for cross-collateral, suppliers had sought to permit the use of a letter of credit or surety bond from a bank or financial institution.
Because the requirement for cross-collateral to be in the form of cash was contained in the previous three-year SSO/SCO transition stipulation, which runs through March 31, 2013, PUCO declined to adjust the cash requirement during the term of the stipulation.
However, the Commission said that if Columbia continues to require cash deposits for cross-collateral, it should pay a "reasonable" amount of interest to the suppliers in order to reflect the opportunity cost to suppliers from losing the ability to invest the cash deposit elsewhere.
PUCO directed Columbia to work with Staff to amend the SCO program to either pay interest on cash cross-collateral, or allow the use of letters of credit (but not surety bonds) as a form of cross-collateral. Additionally, PUCO directed Columbia to consider the use of other forms of cross-collateral security, such as letters of credit and surety bonds, for the period beyond March 31, 2013.
Another contested issue was raised by North Coast Gas Transmission, LLC which argued that Columbia's capacity allocation process under the SCO provides for insufficient use of North Coast's firm transportation capacity. As the capacity allocation mechanism was contained in the prior stipulation, PUCO again declined to revise such terms at this time.
However, PUCO said that Columbia should work with Staff, North Coast, and other affected stakeholders prior to the end of the stipulation in an effort to resolve the capacity issue situation and implement a solution in the short term.
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