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Proposal Would Limit SOS Suppliers' Load Risk Due To Opt-outs From Municipal Aggregation
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The Maryland Office of People's Counsel has developed a revised proposal meant to address the risk to wholesale SOS suppliers, and associated risk premiums in default service rates, from an unexpected volume of opt-outs which may occur upon the start of an opt-out government aggregation program for Montgomery County, Md.
Parties to an annual process reviewing the SOS bid plans did not reach consensus on OPC's proposal or any other changes to SOS procurements to address impacts from the forthcoming start of Montgomery County's opt-out aggregation. As such, most parties to the SOS review process believe that this CCA issue is ready for PSC action.
Montgomery County has now indicated that its opt-out aggregation will begin no earlier than June 1, 2027. As an aside, OPC does not favor June 1 start date for the CCA, "because the combination of contract uncertainty with the early-summer
period could result in an unnecessarily high risk premium in suppliers’ bids."
Parties did agree that, given the minimal number of customers in the Baltimore Gas & Electric service area that would be eligible for the Montgomery County aggregation, no changes to BGE's SOS procurement process is required at this time.
Potential changes to SOS are under consideration for Pepco, and potentially for Potomac Edison, though parties agreed that the amount of potential load returning to SOS from the CCA at Potomac Edison could likely fall within the existing "INC/DEC" load variability provisions for SOS suppliers
OPC's Proposal
In brief, OPC's proposal would cap the amount of new load for which an SOS supplier would be responsible to 15 MW. This load responsibility cap would cover potential increases in the SOS supplier's load obligations from municipal aggregation opt-outs as well as returns to SOS from competitive retail suppliers, load growth, and the PJM Scalar adjustment
The 15 MW maximum load increase exposure would actually be the combination of two caps, one which is 10 MW, and another which is 5 MW, each applicable at different times
Notably, as time passes, the SOS supplier's exposure to a load increase would be capped at 5 MW
The SOS auctions would initially set a PLC for an SOS supplier
After the completion of the SOS auction, as the start of the delivery period nears, a new "Base PLC" would be established for the SOS supplier, reflecting the supplier's updated SOS load obligation. For the launch of the Montgomery County aggregation, the Base PLC would be set after the CCA opt-out period, and about 40 days prior to the start of the SOS contract delivery period (specifically, 10 days before the start of a 30-day CCA transition period during which enrollments occur after completion of the initial opt-out period). In subsequent years, the Base PLC will be established 14 days prior to the delivery start date
The Base PLC would reflect changes in load such as those due to opt-outs from the aggregation which have occurred since the SOS auction date.
The Base PLC would be capped such that it shall be no more than 10 MW higher than the auction-date PLC
Similar to the current INC/DEC process for changes in an SOS's supplier obligation, after the Base PLC is set, an SOS supplier's exposure to any load increase would be capped at 5 MW
If the utility's SOS load requirements do not exceed 5 MW INC cap, then no additional SOS supplies are needed, and no SOS price changes are needed.
However, if the 5 MW INC cap is hit, OPC proposes that Pepco would assign the costs of any additional SOS supplies, that must be procured due to the increased load above the cap, based on the amount of INC above 2.5 MW in each county (i.e. Montgomery County, and Prince George’s County). Currently, legislation only allows Montgomery County to operate a CCA. Separate SOS rates would apply to each county as a result
PSC Staff has not endorsed OPC's proposal but is continuing to evaluate the risks that OPC's proposal may place on Prince George’s County customers.
Montgomery County has stated that it wishes to avoid further postponement of CCA planning and development, and has requested that OPC's proposal be brought to the Commission for a decision
Alternative
Prince George’s County has proposed an alternative to ensure SOS prices for customers in its service area are not negatively impacted by risk due to the Montgomery County CCA. Prince George’s County proposes that customers in Prince George’s County have a fully separate SOS procurement from the SOS procurement for Montgomery County
Under this alternative, Pepco would still be responsible for procuring SOS supplies for Montgomery County customers that opt out of the aggregation, but would do so through a completely separate procurement combining spot market purchases and gradually larger wholesale procurements as the number of Montgomery County customers that opt out of the CCA stabilizes.
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August 29, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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