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Consumers Counsel Says Market Rate Offers Should Be Used To Provide Default Service, Citing Maturity Of Market, "Competitive" Prices From Retail Suppliers
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A Market Rate Offer (MRO), and not electric security plans (ESPs), should be used to procure default service electricity supplies and to set default service prices in Ohio, a witness for the Ohio Consumers' Counsel said in testimony at the PUC of Ohio.
While favoring an MRO over an ESP is not a new position for OCC, OCC's instant testimony, filed in a pending application from Duke Energy Ohio for a new ESP, more broadly advocates for adoption of MROs generally, and calls for the cessation of the use of ESPs, rather than prior-case testimony which more narrowly addressed whether a specific ESP plan was more favorable than an MRO.
Ohio law provides that electric utilities may elect one of two options for supplying and pricing electricity default service -- an ESP or an MRO
To date, PUCO has not approved an MRO at any utility.
While ESPs for over a decade have relied on competitive auctions to procure and price default service, such auctions are not a statutory requirement under an ESP.
The design of default service under ESPs results from contested cases, with the ESP statute allowing various other policies to be addressed under an ESP in addition to default service, such as certain distribution costs and economic development. Most notably, a utility is authorized under the ESP statute to seek ownership of generation, with nonbypassable cost recovery, to the extent PUCO finds a need for such capacity.
The contested case nature of ESPs has also allowed various "horse trading" among parties in negotiated settlements. Negotiated settlements in ESPs have been used to implement various retail market enhancements, such as funding for smart thermostat rebate programs offered through retail suppliers, or utility CIS changes to accommodate accelerated switching and contract portability, along with addressing retail supplier customer data access issues and the ability of an EDC's CIS to accommodate certain retail supplier pricing or products
In contrast, MROs by statute must use a "competitive bidding process" for default service.
Most notably, once an MRO is approved by PUCO, the statute provides that a utility may not later use an electric security plan (obviously, this statutory language could be changed in the future)
These considerations -- the ESP's allowance of utility-owned generation and the prohibition on using an ESP once an MRO is approved for a utility -- are particularly relevant today as certain Ohio utilities, such as the FirstEnergy EDCs, float the idea of the utilities owning generation on a regulated-type basis, with the EDCs citing spiking PJM capacity prices as supporting such a policy (see story here)
In testimony in Duke's current proceeding for a new ESP, OCC's witness was asked if ESPs remain necessary, and OCC's witness responded, "I don’t believe they are."
"It's time to reassess their [ESPs'] necessity," OCC's witness said
OCC's witness said that the electric market has, "matured significantly," and said that the benefits of a "full" transition to market rates for default service outweigh the risks associated with ESPs
As a result of addressing policies not related to the Standard Service Offer, ESPs often provide various revenues to the utility that are not related to the supply of default service
OCC's witness also cited a, "reduced need for price stability," as favoring the use of MROs over ESPs. OCC's witness noted the use of market-based procurements for default service for over a decade, contrasting this with the time at which the ESP statute was adopted, where utilities were transitioning away from various rate certainty plans and rate stability plans
OCC's witness further cited the alternatives to Duke's SSO which are available through the retail market, citing 150 different offers from retail electric suppliers as listed on PUCO's rate board, with OCC's witness describing such offers as, "all at competitive prices."
See background on Duke's proposed ESP here
Case 24-278-EL-SSO, 24-0278-EL-SSO
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October 30, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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