FirstEnergy Ohio Utilities File 8-Year Default Service Plan, Would Remove 36-Month Contracts From SSO Portfolio

Includes Changes To Recovery Of UFE, NITS, Based On Customer Class

EDCs Propose To Adopt Volumetric Cap On SSO Suppliers' Exposure To Load Migration Back To SSO Service (Mitigates SSO Risk)

FirstEnergy Ohio EDCs Preparing Amendments To Their Corporate Separation Plan

April 5, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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The FirstEnergy Ohio electric distribution utilities have proposed a new electric security plan (ESP V) which would govern the procurement and pricing of the standard service offer for the period June 1, 2024 through May 31, 2032

A full copy of the FirstEnergy Ohio utilities' filing and testimony was not immediately available.

The FirstEnergy Ohio EDCs said that, "ESP V proposes continuing to provide generation supply to non-shopping customers through a CBP [competitive bid plan] generally similar to the Companies’ current approach in ESP IV."

The FirstEnergy Ohio EDCs said that the CBP would include, "a staggered or laddered schedule of procurements and a mix of products designed to smooth out generation prices."

Notably, the FirstEnergy Ohio EDCs propose to eliminate 36-month contracts from the SSO supply portfolio.

Additionally, the FirstEnergy Ohio EDCs propose to, "establish a volumetric cap on suppliers’ exposure to load migration back to SSO service."

As described by a witness in the ESP application, "Under this proposal, each tranche is set to an initial 'benchmark' level. That initial benchmark level would equal the Peak Load Contribution ('PLC') per tranche as of the first day of the delivery period (June 1 of the planning year). For two-year contracts, this initial benchmark would be subject to an annual scaling update based on PJM Interconnection, L.L.C.’s ('PJM') PLC target value for the zone at the start of the new planning year. SSO suppliers’ volumetric exposure would be limited to a maximum of 20 MW above the benchmark for the tranche. The SSO suppliers will be responsible for supplying up to the benchmark plus 20 MW, and their responsibility will be evaluated each business day by comparing daily PLC per tranche with the benchmark. Through this mechanism, the volumetric risk cap would adjust supplier obligations. As a result, suppliers are insulated from market risk for the portion of the SSO obligation above the cap. The volumetric limits would be handled physically, rather than financially, and the load in excess of exposure limits will be supplied by the Companies at real-time market prices."

The FE EDCs would physically serve excess load migration at real-time market prices.

As described by a witness in the ESP application, "The costs due to the volumetric cap would be included in the applicable SSO retail rate."

Another witness stated, "The costs of procuring power associated with the excess load migration will be reconciled through Rider GCR [the standard bypassable SSO energy rate]."

The FirstEnergy Ohio EDCs also propose to, "use a capacity proxy price to help manage the risk of potential disruptions in the wholesale capacity auctions," for situations where there is no Base Residual Auction (BRA) price available at the time of an auction

The FirstEnergy EDCs said that their ESP plan includes proposed changes to the EDCs’ Supplier Tariffs. In testimony, the FirstEnergy EDCs said the supplier tariff changes are (all characterizations are from the FE EDC witness):

"

1. Edits to implement the revised allocation of UFE [see below], to which I previously testified;

2. Updates to supplier registration requirements;

3. Updates related to the deployment of AMI;

4. Changes to credit requirements to add surety bonds as an option and to remove the reference to 'other mutually agreeable security or arrangement;'

5. Clarification of events of supplier breach and the process that will be followed;

6. Addition of a provision providing consent for settlement, resettlement, or reconciliation;

7. Updates to modernize processes, such as removing requirements to send communications by fax, submit forms in duplicate and triplicate, and provide data on CDs; and

8. Consistency, grammatical, and formatting edits. "

The FirstEnergy EDCs said that they propose rate design changes, "to help customers better manage their electric bills, including proposed modifications to their transmission cost recovery," as well as a change in UFE recovery

Presently, NITS and other non-market-based FERC/RTO charges are paid by the Companies and recovered through Rider NMB for all shopping and non-shopping customers, except for customers participating in the Companies’ Rider NMB Pilot, which was approved in ESP IV.

In ESP V, the FirstEnergy EDCs propose to change the allocation of unaccounted for energy (UFE) and include UFE charges or credits in Rider NMB. The FirstEnergy EDCs also propose to eliminate the Rider NMB Pilot, and to modify the Rider NMB rate design by adding a second rate, NMB 2, applicable to commercial and industrial customers who have interval or advanced meters.

NMB 2 will be charged to customers based upon their Network Service Peak Loads (NSPL). The current Rider NMB charges, renamed NMB 1, will remain unchanged, except for the inclusion of UFE, and apply to residential and lighting customers along with commercial and industrial customers who do not have interval or advanced meters.

The new Rider NMB 1 and NMB 2 rates would be effective as of April 1, 2025.

"These changes will allow customers to better control their individual Rider NMB charges by managing their individual NSPL, consistent with the current Rider NMB Pilot," the FirstEnergy EDCs said NMB

The FirstEnergy EDCs said, "In addition to CBP enhancements, the Companies’ proposals include important measures to mitigate bill impacts, including cost caps, delayed cost recovery, and a phase-down of credits to demand response participating customers to balance rate impacts to participating and non-participating customers."

ESP V includes various distribution-related charges. It was not immediately clear if the stated mitigation, cost caps, and delayed cost recovery relate to distribution costs, or if any apply to SSO costs, other than the EDCs saying such mitigation measures are, "[i]n addition to CBP enhancements."

As part of the ESP filing package, EDCs must note compliance with various state policies

In a section addressing corporate separation, the FirstEnergy EDCs said, "Pursuant to O.A.C. 4901:1-35-03(B)(3) and (C)(4), the Companies state that their corporate separation plan is publicly available as filed in Case No. 09-462-EL-UNC and approved in Case No. 10-388-EL-SSO. The Companies have obtained no waivers related to their approved corporate separation plan."

Notably, the FirstEnergy EDCs said, "The Companies are preparing amendments to their corporate separation plan to incorporate the recommendations of the Commission’s auditor in the audit report filed on September 13, 2021 in Case No. 17-974-EL-UNC"

The FirstEnergy EDCs said in a news release that the ESP includes, "funding to deploy energy storage supporting the distribution system."

Case 23-0301-EL-SSO

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