PUC Directs EDCs To Procure Longer Default Service Product, Use Capacity Proxy Price -- EnergyChoiceMatters.com

PUC Directs EDCs To Procure Longer Default Service Product, Use Capacity Proxy Price

Allows Another EDC To Procure Only 12-Month Product

January 10, 2024

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Public Utilities Commission of Ohio today issued orders concerning separate requests from the FirstEnergy EDCs, and AEP Ohio, for interim relief to conduct default service auctions for supply for the period beginning June 1, 2024 while the respective EDCs' proposed new electric security plans governing default service remain pending before PUCO

With respect to the FirstEnergy EDCs, PUCO denied the FirstEnergy EDCs' request to hold two separate auctions, approximately in early February and early April, respectively, in which 100% of load for the 12-month period June 1, 2024 to May 31, 2025 would have been procured solely through 12-month products (50% each auction)

The FirstEnergy EDCs had proposed the use of only 12-month products due to the lack of a PJM auction capacity price beyond May 31, 2025 (the FirstEnergy EDCs' request was filed the same day PUCO generically directed EDCs to resume longer-term SSO products via capacity proxy price).

For the FirstEnergy EDCs, PUCO instead ordered that 50% of the load should be procured under a 24-month product, with a capacity proxy price used for the 24-month product

"[W]e authorize FirstEnergy to conduct two auctions to procure 50 tranches of 12-month product and 50 tranches of 24-month product, which should utilize a capacity proxy price as authorized by the Auction Order [PUCO's recent capacity proxy price order]," PUCO said

PUCO still authorized the FirstEnergy EDCs to conduct two auctions (rather than one auction for both products); PUCO did not specify during which specific auction each product should be procured

"We ... note that utilizing various product lengths helps reduce price volatility," PUCO said

PUCO's order was limited to the conduct of the interim auctions and did not address or pre-judge the pending ESP application of the FirstEnergy EDCs, or any terms thereunder

In contrast, PUCO granted interim relief to AEP Ohio to allow AEP Ohio to procure the remaining 50% of supply for the 12-month period starting June 1, 2024 via only a 12-month product.

In approving the use of a 12-month product for AEP Ohio's March 2024 auction, PUCO's order states, "we acknowledge that AEP Ohio’s November 2023 auction incorporated a mix of products."

However, while AEP Ohio initially received, in September 2023, interim relief to procure both 12- and 24-month products in the November 2023 auction, PUCO's order approving the November 2023 auction results, as well as a post-auction report from the auction manager, indicate that only a 12-month product was procured in November 2023, with 50 tranches produced under a 12-month product with a term of June 1, 2024 to May 31, 2025

In any case, PUCO said as follows in permitting AEP Ohio to procure only a 12-month product in the March 2024 auction: "AEP Ohio is authorized to conduct an SSO auction in March 2024, consistent with the provisions of its current ESP. The Commission strongly encourages AEP Ohio to procure generation supply products of various lengths in subsequent auctions to reduce price volatility; however, we acknowledge that AEP Ohio’s November 2023 auction incorporated a mix of products and, for that reason, we will not alter the Company’s request to offer only a 12-month product. In response to Constellation’s comments, we note that AEP Ohio has not only committed to a capacity proxy mechanism in its pending ESP proceeding, but the Company, as well as all other EDUs operating within Ohio, have been directed to develop appropriate CPP mechanisms with their respective auction managers for auctions that contain products for delivery years in which the capacity price remains unknown. CPP Order at ¶ 35. Notwithstanding this instruction, we recognize that the capacity price is known through May 31, 2025. As such, requiring a capacity proxy mechanism to be implemented prior to AEP Ohio’s March 2024 auction, which is limited to 12-month products, will not be necessary; however, we fully expect AEP Ohio to adhere to our directives contained in the CPP Order for future SSO auctions. For these reasons, the Commission grants AEP Ohio’s motion for interim relief."

PUCO's order was limited to the conduct of the interim auctions and did not address or pre-judge the pending ESP application of AEP Ohio, or any terms thereunder

Also, as is customary, PUCO's order concerning both utilities included language similar to the following: "As a final matter, the Commission notes that we reserve the right to review and modify any feature of the SSO auction process, as the Commission deems necessary based upon our continuing oversight of the process, including any reports on the auctions provided to the Commission by the independent auction manager, AEP Ohio, Staff, or any consultant retained by the Commission."

CASE NO. 23-23-EL-SSO

CASE NO. 23-301-EL-SSO

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