Emerging opportunities for direct access cited as reason

Update courtesy of Utility Regulatory News #4056: Finding that customer response to the state’s resurrected direct access (DA) program was likely to be more robust than some investor-owned electric utilities (IOUs) were predicting, the California Public Utilities Commission has told the state’s three largest IOUs that in developing their strategies for procuring electric supplies for their bundled customers, they should base their power purchase decisions on an assumption that DA offerings will be fully subscribed during future procurement planning periods. One IOU, Southern California Edison Co. (SCE), had already embraced the notion that DA service would prove popular and be fully subscribed, meaning that the IOU would not need to procure as much supply for those customers that remained “bundled” as it might otherwise need to secure. However, the state’s other two large IOUs, Pacific Gas & Electric Co. (PG&E) and San Diego Gas & Electric Co. (SDG&E), had expressed “serious reservations” about standardized planning assumptions that presume greater shifting of load from bundled service to DA service. The commission deemed SCE’s approach to be the more reasonable, noting that updated data showed growing interest in DA. It held that absent recognition of a DA load factor in their bundled procurement plans, PG&E and SDG&E would end up overstating their electric supply needs, thereby incurring unnecessary and excessive costs, to the detriment of ratepayers. For the full story, subscribe to URN.

Posted: February 6th, 2012 under energy markets, retail competition.
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Ruling permits Columbia Gas to switch auction protocols.

Update courtesy of Utility Regulatory News #4037: In authorizing a natural gas local distribution company (LDC), Columbia Gas of Ohio, to begin following a standard choice offer (SCO) bidding structure rather than continue adhering to its longtime standard service offer (SSO) process, the Ohio Public Utilities Commission has in essence paved the way for the LDC to depart from the natural gas supply market.

Ohio has traditionally deemed an LDC that switches from the SSO auction method to the SCO format to be “exiting” from the natural gas merchant business. Under the SCO approach, every customer eligible to participate in the state’s choice program is assigned to a supplier based on competitive bidding outcomes, but with all SCO customers actually paying the same monthly rate as other SCO customers, regardless of who their individual supplier may be. With an SSO auction, on the other hand, the LDC solicits bids for gas supplies on behalf of its customers, such that the LDC itself remains the customer’s listed supplier. The commission stated that its previous experience in switching to SCO-based auctions had produced favorable pricing results for consumers, and it rejected contentions from the Office of Consumers’ Counsel that residential customers generally receive no quantifiable cost savings or other benefits from SCO procedures.

The commission explained that there was no direct evidence that SCO protocols inhibit market entry by competitive suppliers or depress participation by smaller-volume customers. The commission said that education and awareness are always key to successful solicitations, whether auctions are conducted according to SCO or SSO principles. For the full story, subscribe to URN.

Posted: October 18th, 2011 under natural gas, retail competition.
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Finds it would amount to an improper rebundling of electric rates

Update courtesy of Utility Regulatory News #4034: In disapproving a request by Public Service Co. of New Hampshire (PSNH) for authority to institute a special generation-related surcharge mechanism applicable to all customers, the New Hampshire Public Utilities Commission has determined that not only would the proffered charge have a repressive effect on customer choice programs, but that it also would be tantamount to repackaged generation and distribution service rates, in contravention of the state’s industry restructuring law which requires that rates for electric generation and distribution services be unbundled.

The utility had asked that it be allowed to recover from all customers a portion of the fixed costs of maintaining its generation assets. According to PSNH, the surcharge should be equally applicable to those customers who now purchase their electric supply from competitive providers, in that there is a possibility that they could return to utility-provided generation at some point. The utility asserted that recouping all its generation costs from other non-shopping customers had produced default energy service rates that were as much as 8 percent higher than they need be. The commission, however, found that the concept of a non-bypassable generation surcharge would violate state law that mandates that generation costs be unbundled from distribution service costs. While nixing the proposed non-bypassable surcharge proffered by PSNH, the commission nevertheless agreed that the utility should be able to impose a fee on customers who migrate elsewhere for supply service and then later return to utility-provided supply. It therefore authorized the utility to submit an associated tariff proposal for just such situations. For the full story, subscribe to URN.

Posted: September 13th, 2011 under generation, ratemaking, retail competition.
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Universal Service Fund Can Be Tapped to Pay Marketers

Update courtesy of Utility Regulatory News #4031: The Georgia Court of Appeals has determined that the Georgia Public Service Commission (PSC) acted responsibly when, following the bankruptcy of a competitive natural gas supplier, the PSC tapped the state’s Universal Service Fund (USF) as part of its efforts to equitably divide the entity’s supply liability among remaining natural gas marketers.

The supplier, Catalyst Natural Gas, had filed for bankruptcy at a time when it was unable to fulfill its customers’ actual consumption quota. In fact, its supply deficit was so great that other natural gas marketers could not meet the needs of Catalyst’s customers without incurring substantial losses of their own. Neither, however, did Catalyst have the financial resources to pay the true-up charges that ordinarily would apply in such a situation, leaving the other marketers without full compensation for their service. The commission, although acknowledging that it could not make the marketers whole, nevertheless attempted to mitigate the marketers’ losses by ordering that some of the monies normally placed into the USF be redirected to the marketers, but the commission capped the marketers’ recovery at 60%. Not surprisingly, the marketers were dissatisfied with that limit, and appealed the ceiling to the court, arguing that it constituted an impermissible taking. The court, however, said that the marketers’ losses were caused by Catalyst’s bankruptcy and a free market economy, not by the commission taking private property for a public purpose. Moreover, the court pointed out that the marketers had entered into Georgia’s competitive natural gas market voluntarily and with full knowledge that there is always an element of risk in any market venture.

The court added that far from the PSC appropriating any of the marketers’ property rights for its own use, the commission had actually gone the extra mile in trying to devise a plan that would ensure at least some amount of compensation for their losses. For the full story, subscribe to URN.

Posted: August 25th, 2011 under energy markets, natural gas, retail competition.
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Migration still small, but growing quickly

Update courtesy of Utility Regulatory News #4028: In its fourth annual report to the Illinois Commerce Commission, the state’s Office of Retail Market Development (ORMD) has provided data showing that greater numbers of competitive power suppliers have been entering the retail electric markets traditionally served by both Commonwealth Edison and AmerenIllinois.

According to the ORMD, of particular note are figures showing “significant” movement among alternative suppliers by residential customers in ComEd’s service territory. The ORMD related that as of the end of 2010, the number of residential customers availing themselves of the choice option had been only about 1,100. However, it said, that number had swelled to almost 21,000 by the end of May 2011. While the report indicated that such numbers reflect only a very small fraction of ComEd’s overall customer base, the ORMD posited that they nevertheless also demonstrate strong growth in switching within a very short period of time. Although the ORMD acknowledged that choice programs had been much slower to take off within AmerenIllinois service areas, a discernable trend toward increased growth in switching was seen there as well, by virtue of the fact that several competitive suppliers had recently amended their operating certificates to include service to residential customers.

The report pointed out that participation in customer choice programs remains much more robust for nonresidential customers, with more than 70% of such customers now taking supply service from alternative power providers. For the full story, subscribe to URN.

Posted: August 25th, 2011 under energy markets, retail competition.
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