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PUC Approves Settlement For Utility To Use Wholesale Auction To Procure Default Service; Change From Current Managed Portfolio The following story is brought free of charge to readers by VertexOne, the exclusive EDI provider of EnergyChoiceMatters.com
Duke Energy Ohio will soon begin pricing natural gas default service using a wholesale Standard Service Offer (SSO) auction, as the Public Utilities Commission of Ohio adopted without modification a settlement establishing an SSO auction for Duke
Currently, Duke relies on a gas cost recovery (GCR) process to price natural gas supply for non-shopping customers
Details of the SSO auction, which were unopposed, are discussed further below. Service under the SSO auction is expected to start on April 1, 2025
While the use of an SSO auction and its design were not opposed by any party, the proceeding left to litigation the question of the price to compare message to appear on bills
Under a prior settlement in several cases not related to default service but under which Duke, PUCO Staff, and the Ohio Consumers' Counsel agreed to the implementation of an SSO auction at Duke, these three parties agreed that a price to compare message should appear on utility consolidated bills for all shopping customers, which would specifically list the price to compare as the rate which a retail supplier must beat for the customer to save money
As previously reported (story here), Duke, PUCO Staff, and OCC agreed that the following message shall appear on UCBs for all shoppers:
"In order for you to save
money, a natural gas supplier must offer you a price lower than $X.XX per CCF
for the same usage that appears on this bill."
This statement would be part of, and in addition to, the typically required price to compare messaging
Retail suppliers and RESA objected to proposed Price to Compare language, arguing, among other things, that as the natural gas price to compare changes monthly, the statement that the retail supplier must beat a single, stale PTC rate on a specific month's bill cannot accurately indicate whether a customer would save money with a specific retail supplier's offer.
In adopting a natural gas SSO auction at Duke, PUCO agreed with the reasoning from retail suppliers, as PUCO expressed concern that the rate that would be listed in the PTC message (listed above) may reflect "outdated" price signals
"[T]he SSO rate on the bill is, in effect, an historical/backward looking snapshot of
the price and may vary the following month; this means that by the time a customer reviews
the PTC message on the bill, requests to switch its generation [sic] supplier to the SSO rate, and
such switch is executed, the price may very well be different," PUCO said
PUCO also agreed with retail supplier arguments that price, while an "important comparison", may not be the only consideration for customers in switching to an alternative supplier, and that customers may consider additional features or offers from competitive suppliers
PUCO agreed that, "supplier contracts offer other features that may be of value
to customers in addition to price, such as carbon offsets, fixed rates at longer terms, and
other features."
As such, PUCO rejected the PTC language from OCC and other parties, block-quoted above, referencing a rate that suppliers must beat for the customer to "save" money.
PUCO instead ordered Duke to include on bills Price to Compare language that PUCO has already established in rule as striking an appropriate balance between providing customers with transparency while not providing inaccurate information or unfairly prejudicing against the competitive market
As previously reported, in a prior rulemaking, PUCO adopted the following Price to Compare language for residential and small commercial customer bills issued by the utility (both default service and UCB bills): "When shopping for a natural gas supplier, it may be useful to compare supplier offers with the standard choice offer (SCO) rate [or, if applicable, the gas cost recovery (GCR) rate] available to eligible customers, which varies monthly based on the market price of natural gas. Price represents one feature of any offer; there may be other features which you consider of value. More information about the SCO [or GCR, if applicable] and other suppliers' offers is available at energychoice.ohio.gov or by contacting the PUCO."
Consistent with the current rule, PUCO directed that this PTC message, or a PTC message substantially similar to the foregoing, shall appear on residential and small commercial gas bills issued by Duke (both SSO and UCB) [the actual Duke PTC message will presumably refer to the "SSO"]
During the SSO proceeding, OCC objected to a modification under which Duke is to charge balancing fees to all customers on a nonbypassable basis, without markup. Retail suppliers will still be subject to various penalties for imbalances and non-compliance with delivery requirements, etc, as set forth in the tariff, but retail suppliers would no longer be subject to a general assessment for balancing as done currently
Duke Energy Ohio currently assesses balancing fees for storage directly through the GCR. Further, retail providers currently pay for storage and balancing through Rider FBS and Rider EFBS, with all revenue being credited to the GCR
OCC argued that addressing balancing fees on a nonbypassable basis would shift costs from retail suppliers to customers, but PUCO found this argument to be without merit
PUCO noted that the costs recovered under the "balancing" charges include a myriad of costs that Duke incurs regardless of actual imbalances from suppliers
PUCO said that retail suppliers remain subject to tariff provisions regarding delivery obligations, and said that the recourse available to Duke under such tariffs will prevent suppliers from "gaming" balancing, as alleged by OCC
OCC's alleged concern about suppliers gaming the new balancing structure, "is overblown and
ignores the realities of the policies found within Duke’s tariffs and resulting natural gas
scheduling practices," PUCO said
Retail suppliers, "still bear the costs and risks
associated with imbalances they cause," PUCO said
PUCO also noted that removing balancing fees from retail suppliers' rates will eliminate risk premiums embedded in such rates, since, when establishing retail customer rates under the current process, a retail supplier does not know its future balancing charges
Under the balancing fees change, retail suppliers must provide Duke with an affidavit affirming that the supplier has removed balancing and storage costs from the supplier's retail rates
As to the uncontested SSO auction itself, PUCO's approval of the stipulation will establish a wholesale SSO auction similar to the SSO initially used at the other Ohio LDCs with gas customer choice (prior to those LDCs moving to a retail SCO auction for eligible customers)
In an annual auction, suppliers will bid to serve, at wholesale, tranches of Duke's non-shopping load under the SSO. SSO Suppliers will bid a retail price adjustment (RPA) at which to serve customers in addition to the applicable NYMEX price. SSO Suppliers will not supply individual customers
Specifically, Duke will pay the winning SSO Suppliers the Retail Price Adjustment plus the monthly NYMEX Price for the scheduled quantities received at Duke's city gates which should be equal to the Adjusted Target Supply Quantity (ATSQ) per dekatherm.
For customers, the Standard Service Offer (SSO) Rate will equal the per dekatherm total price of:
(1) Duke's Retail Price Adjustment ('RPA') established for the length of the Standard Service Offer period (which will be 12 months) per DTH, plus
(2) The final settlement price of the NYMEX natural gas futures contract each month ('NYMEX Price') during the Standard Service Offer period.
The RPA plus NYMEX Price shall be expressed as the SSO Price per DTH converted to a price per CCF at the burner-tip by applying the system loss factor and the Monthly System BTU
The all-in bypassable price to SSO customers will also include a Standard Service Offer Cost Reconciliation Rider (SSOCR). The SSOCR Rider will become nonbypassable if ninety percent of Duke's total number of firm customers have switched to retail suppliers
Other terms of the stipulation -- concerning Rider FBS (related to the balancing discussion above), Rate FRAS, SSO Gas Peaking Supply Service, Retroactive Nominations, and Delivery of Gas to Zones instead of a Specific City Gate -- were adopted without modification, and details of such policies can be found in our prior story here
Case 21-903-GA-EXM, 21-0903-GA-EXM
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PUC Rejects Statement On Bills Listing Specific Price To Compare As Price That Retail Suppliers Must Beat For Customers To Realize Savings
December 4, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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