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Utility Proposes Several Changes To Default Service Products To Reduce Risk Premiums
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UGI Utilities, Inc. – Electric Division has filed at the Pennsylvania PUC for approval of a new default service plan (DSP V) that includes proposed changes to the default service portfolio to reduce risk premiums to customers
DSP V would cover the period June 1, 2025 through May 31, 2029
As noted in further detail below, UGI proposed to increase its use of 12-month fixed price full requirements [FPFR] products, while maintaining a revised fixed MW around-the-clock (ATC) block product which UGI said adds price stability
For GSR-1 customers (those under 100 kW), UGI's proposed default service portfolio would include: 1) 24-month ATC block products; 2) staggered 12-month full requirements load-following contracts; and 3) a long-term
supply arrangement between UGI and the Allegheny Electric Cooperative, Inc. (about 250kW)
Once over-hanging contracts from DSP IV expire, the "base" of the GSR-1 portfolio would consist
of 20 MW of ATC block supply. There would be two staggered tranches
of ATC block contracts. Each of the blocks would be for 10 MW of load and would be for a 24-month term.
In contrast, DSP IV used monthly block contracts under 6-month periods, including solicitations for 5x16 (peak) blocks, resulting in variable block sizing which changed throughout the course of DSP IV and impacted the supply needed to be served under DSP IV's fixed price full requirements contracts
UGI has further proposed the ability to change the block procurement based on the level of customer shopping, to reduce the erosion of load served by fixed price full requirements suppliers and thus reduce associated risk premiums
If shopping has grown, "to a point that it has eroded or is likely to erode FPFR
tranche size (MW) during the planning horizon," UGI Electric proposes to reduce the amount of
24-month ATC Block supply by not procuring the full size and term of the ATC Block in the next auction.
Instead, UGI would procure a 6-month 10 MW ATC Block contract to ensure there
is de minimus impact on currently effective FPFR contracts through the remainder of their
term, UGI said
In DSP V, once UGI reaches a steady state with the end of over-hanging contracts, UGI proposed to procure two
tranches of 12-month fixed price full requirements contracts. Each contract would be for 50% of the fixed price full requirements supply
above the 20 MW ATC block purchases, the Allegheny supply, and customer-generation purchased through net metering.
The 12-month fixed price full requirements contracts will be staggered at 6-month intervals
UGI said that it is taking various measures to reduce risk premiums in the fixed price full requirements contracts
These include the use of a fixed MW ATC block to provide more certainty of the load that will be served under the fixed price full requirements contracts, and removing non-market-based (NMB) transmission charges from the responsibility of fixed price full requirements suppliers. These NMB charges include Network Integration Transmission
Service Charges, Non-firm Point-to-Point Transmission Service Charges, Regional Transmission Enhancement Planning (RTEP) Charges, and Generation Deactivation
Notably, while wholesale suppliers will be relieved of NMB charges, UGI would still recover such costs through default service rates. UGI would be billed NMB charges from PJM for the fixed price full requirements load (in addition to its block load)
Additionally, UGI proposes to address uncertainty regarding future PJM capacity prices by providing "relief" to fixed price full requirements suppliers
Specifically, if the term of the fixed price full requirements contract overlaps with
a future capacity period for which PJM has not yet issued a final capacity price, UGI proposes to instruct wholesale suppliers to utilize the most
recent capacity price in preparing their bids.
When billed, UGI will compensate
wholesale suppliers for the difference between the capacity price upon which bids are based, and the
actual capacity price. If the delta is negative, meaning the price used is less than the actual price, suppliers will credit UGI
UGI proposes to provide more time between the auction date for procurements, and the delivery start date, which currently is about 1.5 months
UGI said that, among other things, the "just-in-time" nature of the current schedule resulted in little flexibility to account for a market event.
UGI proposes to use a one-to-three month "window" for future procurements, with the latest month in such window typically being about 2 months before the delivery date (meaning procurements could occur up to 5 months before delivery)
See UGI's proposed default service portfolio products, procurement dates, and term lengths here
UGI proposes to change to fixed 6-month retail default service prices for GSR-1 customers. Currently, UGI's GSR-1 default service rates change quarterly
Furthermore, UGI proposes to implement unique residential and non-residential prices for customers in the GSR-1 procurement class. Currently, all GSR-1 customers pay the same default service rate
UGI would establish unique residential and non-residential rates under GSR-1 by applying an allocation factor to the Energy Cost supply rate component resulting from the GSR-1 procurements (the procurements are not customer class-specific)
Based on a study, the residential Energy Cost rate would be established by multiplying by 1.02 the Energy Cost (EC)
component resulting from the procurements. The non-residential Energy Cost rate would be established by applying a factor of 0.93 to the EC
component resulting from the procurements
GSR-2 default service customers (at and over 100 kW) would continue to be served under hourly pricing
While UGI does not propose a change in cutoff between fixed price default service (GSR-1) and hourly prices (GSR-2), UGI does propose a change in how the 100 kW for the two classes is measured for net metering customers
Specifically, UGI proposes to place a net metering customer into either class based on supply peak load impact
If a net metering
customer’s supply peak load impact is assessed to be less than 100 kW, that customer will
be included in the GSR-1 group. If a net metering customer’s supply peak load impact
is greater than or equal to 100 kW, that customer will be assigned to GSR-2.
UGI said that there are no current net metering customers that will be impacted by this change. The
impact of the change is prospective in nature only, UGI said
UGI proposes to continue its existing New/Moving Customer Referral Program and Standard Offer
Customer Referral Program without any changes
UGI reported that, "While the Company stands ready to support a Standard Offer Program, there are
no retail EGSs that are currently participating in UGI Electric’s Standard Offer
program."
Docket P-2024-3049343
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Wholesale Suppliers Only (Not Retail Suppliers) Relieved Of Responsibility For Non-Market Based Charges
Proposes Separation Of Residential, Small C&I Default Service Rates Under Common Procurement
Longer Fixed Default Service Rates
May 31, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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