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Pa. Independent Regulatory Review Commission Disapproves SOLR Costs in Gas Price to Compare
September 19, 2011
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The Pennsylvania Independent Regulatory Review Commission has issued a written order regarding its August decision to disapprove the Pennsylvania PUC's revisions to regulations governing the natural gas Price to Compare, at 52 Pa. Code §§ 62.221 to 62.225.
The PUC's regulations (6/24) established the bypassable Price to Compare (PTC) as including the (1) the natural gas supply charge determined in the distribution company's Section 1307(f) proceeding, including the reconciliation for over and under collections (e-factor); (2) the Gas Procurement Charge; and (3) the Merchant Function Charge.
The Gas Procurement Charge consists of natural gas supply service, acquisition, and management costs, including natural gas supply bidding, contracting, hedging, credit, risk management costs, and working capital; as well administrative, legal, regulatory, and general expenses related to those natural gas procurement activities, excluding those related to the administration of firm storage and transportation capacity
However, the IRRC found that the intent of the PUC to include such Supplier of Last Resort (SOLR) costs in the Price to Compare is contrary to the statute both at 66 Pa.C.S.A. § 2207(a) and § 2203(5).
The IRRC said that 66 Pa.C.S.A. § 2207(a)(2) specifies SOLR, "is for the services of both shopping and non-shopping customers, and it further provides that there will be only one SOLR designated for these services." This IRRC reached this conclusion since the SOLR must serve, "customers whose natural gas supplier has failed to deliver its requirements."
However, the PUC's regulations would only assign SOLR costs to non-shopping customers, contrary to the IRRC's conclusion that SOLR service is for the benefit of shopping and non-shopping customers.
"Also, the statute at 66 Pa.C.S.A. § 2203(5) protects against cross-subsidization," which would occur under the PUC's regulations, the IRRC said.
Furthermore, "in the absence of an alternate SOLR, the inclusion of SOLR [costs] in the NGDC's PTC pushes the PTC higher," the IRRC said.
"With that higher PTC, the NGS [supplier] may compete with the higher PTC, rather than offer the rate paying customer the lowest price of gas the NGS can offer from the market. By including SOLR in the PTC, there may be more competitive NGS offers, but we question whether the rate paying customer would receive the full benefit of market based competition," the IRRC said.
The IRRC also asked the PUC to demonstrate in the resubmittal of the regulation that the PUC has established, by order or regulation, requirements to meet 66 Pa.C.S.A. § 2206(c) so that a retail gas customer can, "make informed choices regarding the purchase of all natural gas services offered by" the NGDC and NGS."
Though the IRRC made no specific conclusion regarding what information is required so that customers can make informed choices regarding the purchase of all natural gas services, the IRRC expressed concern that providing only the Price to Compare to customers may lead customers to believe such costs are the only costs of service, with customers unaware of distribution service costs that will apply.
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