PUC Rules On Sought Retail Market Enhancements In Default Service Proceeding

PUC Addresses Bypassability Of Generation-Related Charge

November 21, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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The Public Utilities Commission of Ohio has issued an order on a contested stipulation in Dayton Power & Light's electric security plan (ESP)

As previously reported, PUCO in 2017 adopted, with a modification, a stipulation among parties in DP&L's ESP case, which includes various provisions governing default service and other retail market issues

In such 2017 order, PUCO modified the stipulation to make the Reconciliation Rider nonbypassable, rather than bypassable as provided under the terms of the stipulation. The Reconciliation Rider recovers costs/benefits arising from the sale of OVEC (of which DP&L owns a share) generation into the PJM market.

As previously reported, PUCO's modification of the Reconciliation Rider into a nonbypassable rider, rather than a bypassable rider, prompted IGS Energy to withdraw from the stipulation, and the case was subject to further litigation

As exclusively reported by EnergyChoiceMatters.com, IGS sought various retail market enhancements in litigating the modified stipulation

Also, during the pendency of the case, the Supreme Court of Ohio struck a nonbypassable Distribution Modernization Rider (DMR) at the FirstEnergy utilities. A similar DMR was included in the DP&L ESP stipulation, which IGS opposed after withdrawing from the stipulation. Despite its name, Rider DMR was essentially intended to provide financial support to DP&L

In an order today concerning the ESP stipulation, as modified by the 2017 order, PUCO struck the DMR from the stipulation and approved the stipulation with such change

PUCO denied all of the retail market enhancements sought by IGS outside of the stipulation, as further discussed below.

As the stipulation (and ESP) have been modified by PUCO, DP&L retains the right to withdraw its ESP

In terms of PUCO's order today, the Commission found that Rider DMR cannot be authorized by the Commission, citing court precedent.

"The line of cases from Columbus S. Power Co., 2011-Ohio-1788, to Ohio Edison demonstrates that nonbypassable riders, established to promote the financial integrity of EDUs, are unlawful and are not authorized by R.C. 4928.143, the statute creating electric security plans. Any modifications to the DMR proposed by DP&L would do nothing to address this fundamental point," PUCO said

Other than removing the DMR, PUCO approved the stipulation, and denied changes sought by IGS

PUCO affirmed that the Reconciliation Rider will be nonbypassable

"Under the Reconciliation Rider, DP&L will sell its share of the output from two generation plants into the PJM wholesale marketplace and will net the proceeds against DP&L’s share of the generation plant costs. Customers will be credited or charged with the difference between those amounts," PUCO noted

"With respect to whether the Reconciliation Rider should be bypassable or nonbypassable, we do not agree with [IGS witness] Mr. White’s claim that making the Reconciliation Rider bypassable would avoid an anticompetitive subsidy," PUCO said

"We also find that making the Reconciliation Rider bypassable has the potential to create an indirect subsidy for CRES [retail] providers because a bypassable Reconciliation Rider would increase the SSO rate against which CRES providers compete for customers, making competing against the SSO easier for CRES providers," PUCO said

"We find that the full record of this proceeding demonstrates that the Reconciliation Rider should be nonbypassable. Making the Reconciliation Rider bypassable would create the risk for escalating bill impacts as shopping increases (Tr. II at 351). Thus, we continue to be persuaded by the testimony of OCC witness Kahal that making the Reconciliation Rider bypassable would artificially inflate SSO prices and that any costs recovered (or credits provided) by the Reconciliation Rider should be shared by all distribution customers on an equitable basis (OCC Ex. 12 at 38)," PUCO said

In contesting the stipulation, IGS and retail suppliers had raised concerns regarding DP&L’s collateral requirements, DP&L’s switching and interval data fees, and the alleged subsidization of SSO service by distribution customers, with suppliers proposing the reallocation of costs currently in delivery rates to SSO customers.

PUCO found that all of these issues were recently litigated in DP&L's distribution rate case. In such case, PUCO rejected a proposal from the Retail Energy Supply Association and IGS Energy to implement a revenue-neutral rider that would make certain costs related to default service (Standard Service Offer, or SSO) bypassable, with revenues collected under the rider refunded to all distribution customers, as "fatally flawed." PUCO in the distribution rate case also declined to revisit the level for the interval data and switching fee, and PUCO had also found that the evidence in the record did not support modification of the credit and collateral requirements in the supplier tariff (though PUCO did express some concerns and direct development of a separate proceeding). See details on the distribution rate case order here

As these issues were again raised by suppliers in the ESP case, PUCO held that, "[t]he issues regarding DP&L’s collateral requirements, DP&L’s switching and interval data fees, and the reallocation of distribution costs to SSO customers were adjudicated in the distribution rate case and cannot be relitigated here."

As previously reported, the stipulation previously modified by PUCO (prior to IGS's withdrawal) included a supplier consolidated billing (SCB) pilot and the modified stipulation adopted by PUCO today retains an SCB pilot

PUCO denied changes to the SCB pilot versus the original stipulation

For example, suppliers had sought that the SCB program should be modified so that CRES providers purchase receivables at a discount

The Commission found that addressing this discount issue would be premature at this point.

"The Amended Stipulation provides for the development of a two-year pilot program for supplier consolidated billing. The Amended Stipulation specifically provides that receivables should be purchased at 100 percent (Jt. Ex. 1 at 22). Until the pilot program can provide actual data regarding the collection rate for EDU receivables under supplier consolidated billing, we are not persuaded that the agreement of the signatory parties, which includes RESA on behalf of marketers, should be disturbed. We may revisit this issue once the SCB program is up and running and actual data is available," PUCO said

Case No. 16-395-EL-SSO et al.

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