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Pa. PUC Denies Bid To Increase Cutoff Separating Fixed Priced Default Service Versus Hourly SOS Rates To 3 MW, From Current 100 kW Cutoff
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The Pennsylvania PUC denied a bid from Penn Renewables, LLC to increase the cutoff for fixed-price default service rates at UGI Utilities - Electric Division to 3 MW, from the current 100 kW threshold, and also rejected Penn Renewables' argument that hourly priced default service violates Pennsylvania's default service law
Penn Renewables' proposal concerning the cutoff for hourly priced default service at UGI arose as part of consideration of a settlement among UGI, the Office of Consumer Advocate, and the Office of Small Business Advocate to establish UGI's electricity default service plan for the term June 1, 2025 through May 31, 2029 (DSP V)
The PUC adopted the settlement without modification, as had been recommended by two ALJs
See background on the settlement and now-adopted default service plan here
The only contested issue in the proceeding was UGI's proposal to modify how it determines whether a customer is above or below the 100 kW cutoff for small customer default service.
Small customer SOS (GSR-1), for customers under 100 kW, prices default service at a rate that is fixed. Currently, the GSR-1 rate is fixed for 3 months, but the GSR-1 rate will become fixed for 6 months under the new default service plan.
For customers at or above 100 kW (GSR-2), hourly pricing, based on wholesale market prices, is used to establish default service rates
UGI did not propose any change to the size threshold which determines whether a customer receives fixed price SOS or hourly priced SOS
However, as previously reported, UGI did seek to change how the 100 kW cutoff is measured for net metering customers
Specifically, as proposed by UGI and adopted by the PUC, the new default service plan places a net metering customer into either GSR-1 or GSR-2 based on supply peak load impact
Under the adopted settlement, 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 small customer 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 the large customer GSR-2 group.
Penn Renewables objected to this modification, due to the impact on prices that would be paid for excess generation from net metered customers, for those customers formerly assigned to the GSR-1 group, but who would now be assigned to the GSR-2 group
In general, Penn Renewables argued that moving relevant customers to GSR-2 hourly pricing would make payments for excess generation volatile, with the potential for negative pricing due to negative wholesale prices
Penn Renewables had also proposed to increase the cutoff between the small customer GSR-1 class and large customer GSR-2 class to 3 MW, from the current 100 kW.
In a Feb. 20 order, the PUC broadly found that Penn Renewables had not met its burden of proof to support its proposals
The PUC also broadly found that UGI's proposal to assign net metering customer into either GSR-1 or GSR-2 based on supply peak load impact prevents residential customers from subsidizing large customer-generators. The PUC found that including large customer generators in the GSR-1 class could increase risk premiums in wholesale bids to serve GSR-1 customers, who are generally residential and small commercial customers. The PUC said that UGI's proposal appropriately assigns sophisticated customers who have significant generation into a default service class (GSR-2) comprised of similarly sophisticated large customers
Also of note to the broader retail market, Penn Renewables had argued during the proceeding that hourly priced default service violates the Pa. Code because hourly priced default service does not provide customers with a single price to compare
52 Pa. Code § 54.187 provides in part that, "a default service customer shall be offered a single rate option, which shall be identified as the PTC [price to compare] and displayed as a separate line item on a customer’s monthly bill."
Penn Renewables said that hourly rates cannot be a "single rate" under default service, as required by the Pa. Code
The PUC rejected this argument, citing, among other things, the logistical challenge in creating a PTC from hourly prices
The PUC held as follows: "UGI’s proposed GSR-2 classification does not violate the Code or the Commission’s Regulations by not showing the hourly changing PTC for GSR-2 on its bill. UGI is not required to provide an hourly changing PTC on its bill under the Commission’s Regulations. Furthermore, the record indicates that EDCs in Pennsylvania have been offering default service for many years, and the Commission has not required EDCs to include the PTC on the bill for hourly priced default service. In addition, from a practical standpoint, UGI would not be able to inform a customer as to a specific PTC until the end of the month because the PTC is not based solely on the hourly rate."
With Penn Renewables' exceptions disposed of, the PUC adopted the terms for UGI's default service plan as contained in the settlement, without modification
The new default service plan, for the term June 1, 2025 through May 31, 2029 (DSP V), was extensively discussed in our prior story here
In brief, UGI will newly implement fixed 6-month retail default service prices for GSR-1 customers. Currently, UGI's GSR-1 default service rates change quarterly
Under the adopted plan, UGI will establish unique residential and non-residential SOS rates under GSR-1 by applying an allocation factor to the Energy Cost supply rate component resulting from the GSR-1 procurements (the GSR-1 procurements are not customer type-specific). Currently, all GSR-1 customers pay the same default service rate
UGI's small customer SOS portfolio (GSR-1) will include 20 MW in ATC blocks of energy, along with staggered 12-month full requirements load-following contracts, and a long-term supply arrangement between UGI and the Allegheny Electric Cooperative, Inc. (about 250 kW)
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Denies Argument That Hourly Default Service Rates Violate State Law
PUC OKs Move To Six-Month Fixed Default Service Rates, From Current Quarterly Rate Changes
February 20, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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