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Stipulation For Default Service Plan Drops Utility's Sought "Flexibility" To Reduce Risk Premiums & Likely Volumetric Risk Cap
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A settlement by major parties in Duke Energy Ohio's electric security plan would implement limited changes to reduce risk premiums in default service auctions, but would eschew Duke's original proposal for "flexibility" to seek greater changes to default service design and procurements in the middle of the ESP term if the initial limited changes do not adequately address risk premiums
The settlement, supported by Duke, Staff of the PUC of Ohio, Ohio Consumers' Counsel, IGS Energy, the Retail Energy Supply Association, Constellation, Ohio Energy Leadership Council, Ohio Energy Group, and other parties representing large customers and also small consumers, would establish Duke's ESP V, which would run for a term of June 1, 2025, through
May 31, 2028
Settling parties agree to limited, customary changes originally proposed by Duke as "initial" measures to reduce risk premiums in the Standard Service Offer auctions
Such changes included in the stipulation are:
(1) Removing 36-month contracts from the default service portfolio, relying exclusively on 12- and 24-month contracts
(2) Using a capacity proxy price for SSO auctions which are held at a time at which the PJM base residual auction price has not yet been established
Specifically, in the first year and third year of the ESP, 70% of the SSO portfolio would consist of 12-month contracts, and 30% of the SSO portfolio would consist of 24-month contracts. During the second year of the ESP, 12-month contracts would constitute 40% of the SSO portfolio, while 60% would be sourced under 24-month contracts
A chart showing the laddering and procurement dates can be seen here
Two annual procurements would be held for the SSO contracts, with a change in one of the procurement dates -- but not the change Duke had originally proposed
Excluding the procurements for the initial year, whose dates are impacted by the timing of ultimate approval for the ESP, Duke would conduct SSO auctions in October and February of each delivery year.
Currently, SSO auctions are held in September and February
In Duke's original ESP application, Duke had proposed maintaining the September auction, but accelerating the February auction to December of the preceding year. Duke had said that moving the February SSO auction to an earlier date would allow wholesale suppliers to participate on their own in the PJM Auction Revenue Rights process which occurs in February and March. As noted above, the second SSO auction in a delivery year will continue to be held in February as is current practice
Most notably, under the settlement, Duke withdraws its prior sought authorization for "flexibility" to seek implementation of further SSO changes, in the middle of the current ESP and default service plan, to reduce risk premiums
As previously reported by ECM, Duke had said in its original application that the "most likely" next step to reduce SSO risk premiums would have been a volumetric risk cap applied to SSO suppliers, with Duke assuming the responsibility for any increases in SSO load above this cap
Other potential solutions to reduce SSO risk originally raised by Duke, as potentially included in such sought flexibility, had consisted of including a new generation build component under the ESP, as well as further measures to limit risk from opt-out aggregation load swings
While Duke withdraws its request for flexibility in being permitted to seek SSO design changes during the term of the ESP, the stipulation does provide that Duke will convene a
collaborative to discuss potential "enhancements" to future SSO auction processes.
Retail default service rate design is unchanged under the stipulation, but the settlement does include a change impacting the (typically) bypassable Rider SCR, which addresses SSO reconciliation
As under the current tariff, Rider SCR (Supplier Cost Reconciliation Rider) will remain bypassable, except that if the balance under SCR exceeds 10% of SSO revenues, Rider SCR, upon PUCO approval, will become nonbypassable
Notably, the stipulation provides that Duke will cease recovery through Rider SCR of credits paid to net metering customers for excess generation, thus lowering the balance of Rider SCR, all else equal
Additionally, if a capacity proxy price is used for SSO wholesale contracts, Duke will reflect the actual PJM capacity price in the SSO bypassable capacity rider (Rider RC) once such PJM capacity price is known (including changing the established Rider RC rate if the rate was already set using a proxy price), to reduce potential retail rate reconciliations arising from the use of a CPP
The stipulation provides that Duke will conduct a campaign to educate default service customers about increases in SSO rates due to PJM capacity prices
"The customer awareness campaign shall be
competitively neutral and shall not be designed to encourage, steer, or direct customers to SSO
service, or any particular supplier," the settlement provides
Duke shall consult with PUCO Staff concerning the capacity price messaging, and OCC agrees to help promote the awareness campaign by posting information on OCC's website
Duke's education communications about capacity-driven rate increases shall include bill messages, emails, or texts (based on customer preference), and information
located on Duke's website.
Duke's purchase of receivables program is untouched by the stipulation, but the settlement will require reporting, separated by shopping and non-shopping customers, and by customer class, of the amount of disconnection notices issued by Duke (and the customer arrearages at such time), the amount of actual disconnections for nonpayment, and the customer's arrearages at the time of disconnection
The POR program will continue to have zero discount, with all customers paying the generation-related uncollectibles rider (Rider UE-GEN), except shopping customers whose receivables are not included in POR do not pay Rider UE-GEN
Under the settlement, Duke withdraws several EV programs, including most notably a proposed fleet advisory program in which the utility would have provided incentives to customers to have a vendor assist the customer in navigating EV business cases, undertaking studies, understanding various government incentives, and learning about managed charging.
While Duke had not specifically proposed any utility battery storage assets in the ESP, it had proposed a placeholder rider to recover the costs of any future battery storage installations. This program is withdrawn under the stipulation
Duke also withdraws its Solar for All proposal that was, again, meant as a placeholder for potential future programs aimed at low-income and disadvantaged customers and communities, leveraging federal dollars
The stipulation remains subject to PUCO approval
Case 24-278-EL-SSO, 24-0278-EL-SSO
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Utility To Educate Default Service Customers About Rate Increases Due To PJM Capacity Price Spikes
November 27, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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