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PPL Would Offer Customers Time Of Use Generation Rates, Not Supplied By Retail Suppliers, Under Settlement

March 14, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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PPL Electric Utilities has filed for approval of a settlement agreement with several parties that would implement a revision to its time of use generation rate program to comply with statutory provisions that require a default service provider to offer TOU rates to customers.

Previously, PPL has relied on a TOU program in which retail suppliers offered TOU rates to customers to comply with the statutory obligation to offer a TOU option; however, a court found that such program did not fulfill the statutory obligation for the default service provider to offer TOU rates.

Under the settlement, a separate wholesale auction would be used to procure full requirements TOU supply for PPL customers electing PPL's TOU generation rate option

Wholesale suppliers would bid off-peak prices, with the single lowest overall bid per customer class winning the entirety of that class's TOU supply obligation for a seasonal 6-month term.

Under the settlement, customers would be charged distinct on-peak and off-peak rates, based upon the winning wholesale supplier's on-peak and off-peak generation prices (set using multipliers noted below), plus the following non-TOU rate components: the default service administrative cost, E-factor, merchant function charge, transmission service charge, and applicable State Tax Adjustment Surcharge

In the auction, suppliers would bid a percentage off of the generation portion of the Price to Compare ("PTC") to be in effect for the applicable six-month summer or winter period (which align with the current six-month default service pricing periods). The winning bid proposal would set the generation component of off-peak rates.

A multiplier would then be used to establish on-peak generation rates based on the auction price.

The multipliers would be calculated with the first TOU auction, and updated annually thereafter. A rolling five years of historical PJM Day Ahead Spot Market Pricing data for the PPL Residual Aggregation Zone would be used, beginning with the month the auction opens, minus one month (January or August, respectively). An on-peak to off-peak price multiplier would be derived as follows:

(a) For each calendar month, a simple average of hourly on-peak and off-peak prices will be calculated, using the applicable seasonal and peak period definitions;

(b) For each calendar month, a ratio of the average on-peak price to the average off-peak price will be calculated;

(c) The average seasonal on-peak to off-peak ratio for summer will be derived as a simple average of the monthly ratios for the 30 summer months in the historical period;

(d) The average seasonal on-peak to off-peak ratio for winter will similarly be derived as a simple average of the monthly ratios for the 30 winter months in the historical period.

The summer and winter TOU terms align with the six-month Price to Compare terms, running June through November and December through May, respectively.

For all eligible customer classes, the on-peak hours during the summer season would be 2 p.m. - 6 p.m., Monday through Friday, excluding weekends and PJM Interconnection LLC holidays.

For all eligible customer classes, the winter season on-peak hours would be 4 p.m. - 8 p.m., Monday through Friday, excluding weekends and PJM holidays.

The winning TOU supplier would be paid its bid price for net generation provided off-peak, and would be paid the calculated on-peak generation rate for net generation provided on-peak each month. Because the on-peak multiplier will be known before bidding commences for each season, bidders will be able to compute what their on-peak compensation would be, based upon their off-peak bid.

Residential and small commercial customers would be eligible for the TOU program, except that Customer Assistance Program (CAP) customers would not be eligible. Supplies for each TOU class would be procured separately, with distinct pricing.

PPL Electric projects an estimated cost of at least $1,000,000 to implement the TOU Program.

PPL would recover TOU Program costs through the E-factor (bypassable reconciliation) as a component of the GSC-1, applicable to all GSC-1 default service customers

Over/under reconciliations would be calculated in total by customer class and would be recovered from all default service customers in the respective class, regardless of whether the customer has elected a TOU rate. TOU costs and recoveries would not be separately reconciled.

Settling parties included PPL, OCA, OSBA and other consumer and C&I represenatives

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