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March 1, 2019
NEM Events

NEM's 22nd Annual National Energy Restructuring Conference will be held April 10-12, 2019, at the Hyatt Regency Washington on Capitol Hill. You may register here.

A Draft Agenda is forthcoming. Sponsorships are available. Please contact headquarters if you are interested in sponsorship.

Click here to view all past updates.
Order on Investigation into Default Service and PJM Settlement Reforms

At the Commission's January 17, 2019, Public Meeting, it adopted the Motion of Commissioner Place to open an investigation into default service and PJM settlement reforms. An Order based on Commissioner Place's Motion has now been entered. The investigation is prompted by the utilities deployment of smart meters and data sharing enabled by those meters. Utilities are also developing updated wholesale settlement procedures and integrated cost allocation methods for energy, capacity and transmission costs via actual hourly energy use and the assignment of "tickets" to individual customers based on allocation methods for capacity and transmission set forth in PJM's tariff. A customer's Peak Load Contribution ticket is used to allocate capacity costs to the customer's LSE, either a competitive electric generation supplier (EGS) or the default service provider (DSP). The Order opines that "[w]ith the installation of smart meters, the long-term benefits associated with positive customer usage behaviors can be flowed back to customers if changes in the rate design for previously non-interval customers are more aligned with wholesale cost allocation methods. Absent a change in retail rate design for default service, such benefits will only flow to the wholesale LSEs, such as wholesale DSPs or EGSs. Without direct methods for rewarding customers in a timely manner for positive behaviors, customer responses to market prices will be stunted, or suboptimal."

The Commission requested comment on the following issues:
1. Alignment of Wholesale Cost Allocation Methods with Cost Allocation
"1. What number of peak hours should be averaged to determine an optimal basis for allocation of capacity and transmission costs to LSEs? Should we include consecutive peak hours, or just one hour per peak day?
2. Should selected hours be based on RTO peak or the EDC peak usage periods for capacity and/or transmission cost allocation?
3. Should we examine seasonal cost allocators for capacity and/or transmission to incent lower usage during, for example, the summer and winter periods?
4. Assuming some reform is ultimately implemented, what transitional period should this Commission adopt, recognizing that existing contracts could, in theory, be affected by changes in wholesale cost allocation?"

2. Better Aligning Default Service Rates with Wholesale Cost Allocation
"As to energy related costs, we welcome responses to the following questions:
1. Should default service rates evolve to include time of use (TOU) structures, such as on and off peak rates, super off peak rates, critical peak pricing (CPP) periods, or peak time rebate structures? If so, what specific TOU structures do interested parties believe are most optimal, and why?
2. What other energy market structures should we consider?
3. What modifications or standardization should be considered with regard to the design of HPS rates for large customers?

As to the demand component of electricity supply service related to PJM capacity charges, we welcome responses to these additional questions:
1. Should we continue to have a simple, per kilowatt hour adder to the energy and ancillary supply price, as we do today?
2. Should we design a critical peak price to collect these PJM capacity costs from default service customers? If so, how should such a charge be designed and determined?
3. Should we switch to a demand charge equal to or similar to the PLC and NSPL tickets?
4. Should we switch to a demand charge with some other design feature, and if so, please describe the design element, and why this would be appropriate?"

3. Procurement Practices
"1. What evidence is there in PJM markets that long term contracts can be obtained in PJM markets that offer cost effective hedges relative to status quo default service plans?
2. Assuming prudent opportunities exist:
a. What type of request for proposal structure for energy or renewable attributes should be contracted for?
b. Is there an optimal length for such long term contracts?
c. Is there an optimal amount of long term contracting?
d. Should contracting be limited to resources in a certain geographical area, and if so, what geographical area? Discuss the legal and cost impacts of any geographical limited proposal."

Comments are due ninety days from the date of entry of the Order. The full text of the Order is available on the NEM Website.

Commission Declines to Adopt Third Party Notification of Supplier Switching

The Commission issued an Order adopting amendments to the regulations on standards and billing practices for residential utility service. Of import to competitive suppliers, the Commission had proposed amendments to these rules to provide for third party notification of supplier switching. The Commission had proposed to expand the current rule provision that allow a third party to receive copies of collection notices to include third party receipt of notices of customer selection of a competitive supplier.

NEM filed comments on the proposals to lodge concerns that third-party notification of supplier switching poses logistical issues that are not readily apparent on its face and that could lead to negative unintended consequences including consumer confusion and unwarranted consumer complaints. NEM suggested that should the Commission pursue implementation of the third-party notification proposal that it first convene the stakeholders to review, discuss and resolve the logistical issues. NEM explained that, there is an important difference between the current third-party notice that is sent regarding collection activity as opposed to the proposed third-party notice of supplier switching activity. In the case of a third party’s receipt of notice of collection activity, if the third party receives the collection notice and responds by taking action and paying a past due balance on behalf of the customer, the net result is positive - the customer’s account is maintained and restored to good standing. Submission of the third-party payment does not require that the third party have previously been designated as having authority over the account. In contrast, under the proposal at issue, when a third-party notice is sent regarding supplier switching activity, a conceivable outcome is that the third party will seek to terminate the competitive supplier relationship, whether or not they are authorized to do so and permitted under the regulations. There is a large risk that the net result will not be positive. The third party may become upset and confused if they are unable to cancel the competitive supplier transaction and then lodge a complaint, notwithstanding that no party engaged in improper conduct. Additionally, the customer’s account with the supplier could be unjustifiably ended, the customer could lose the benefit of its contracted for products and services and perhaps incur an early termination fee if the rescission period has expired. The supplier may lose the customer and without having engaged in any improper conduct. In other words, the actions prompted by a third-party notice of collection activity versus third-party notice of supplier switching will yield significantly different outcomes for the customer that warrant serious consideration.

The Commission declined to adopt the third party notification of supplier switching proposal saying it "would be best addressed in a different proceeding" on supplier switching regulations because "the logistics of this proposal have not been thoroughly vetted" as well as unanswered questions "including the impact on utility customer databases, who could qualify for third-party status, and the ability of those third-parties to interfere with the supplier switching process." The Commission noted NEM's argument that "supplier confirmation notices and utility collection notices are distinct, very different things and, while consumers may want to use third-party notification for one of these things, it is very possible they would not want to do both."

The Commission also declined to address rule proposals related to supplier consolidated billing, saying that doing so "could give the appearance of inappropriately prejudging the ongoing SCB proceeding."

The full text of the Order is available on the NEM Website.

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Commission Denies Large Customer Petition to Aggregate Demand

The Commission decided one of many pending petitions filed by nonresidential customers requesting permission to aggregate demand of electric energy to meet statutory requirements to shop for competitive supply. Large customers with demand of five megawatts or greater have the statutory right to shop without seeking Commission approval. Other nonresidential customers may petition to aggregate demand to meet the five megawatt requirement to shop. The statute provides that the Commission may approve a petition upon a finding that: "neither such customers' incumbent electric utility nor retail customers of such utility that do not choose to obtain electric energy from alternate suppliers will be adversely affected in a manner contrary to the public interest by granting such petition" and that "approval of such petition is consistent with the public interest."

In the instant case, the customer petitioned to aggregate demand in both the Dominion and APCo service territories. The Commission denied both requests finding they "will adversely affect, in a manner contrary to the public interest, customers not purchasing from alternate suppliers," and "is not consistent with the public interest." The Commission cited residential bill impacts and cost-shifting that would purportedly be caused. It also cited new statutory mandates for utility expenditures and impacts on captive utility customers.

The Commission stated that if the customer "believes that the current statutory structure for setting vertically-integrated electric utility rates results in unreasonable or unnecessarily high rates, or that the public policy of Virginia should be to institute retail choice on a far more extensive scale than required under current law, its potential for recourse may be found through the legislative process. In conclusion, given the context of a decade of rising rates and the likelihood of even higher rates in the future, we do not find it consistent with the public interest for captive customers who do not have the legal ability to obtain lower rates - predominantly residential and small business - to suffer from the cost-shifting identified herein by enabling a large-demand customer to seek its power supply elsewhere through aggregation."

The full text of the Order is available on the NEM Website.

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