The Public Utility Commission this week approved a new default service plan for PECO Energy Co., which establishes generation rates for default service customers as electric rate caps are lifted.

The Commission voted 4-1 to approve the settlement. PUC Chairman James H. Cawley issued a statement and PUC Vice Chairman Tyrone J. Christy dissented in part and concurred in part.

 

The Commission voted 5-0 to approve a motion by Vice Chairman Christy that clarified the PUC has made no determination on the Nuclear Decommissioning Cost Adjustment Clause included in PECO's tariff, which was attached to the settlement.

 

In a separate action, the Commission voted 5-0 on a motion by PUC Commissioner Wayne E. Gardner to investigate the lawfulness of the NDCA. This investigation has no bearing on the Commission's approval of PECO's default service and rate mitigation plan.

 

The settlement approved by the Commission today is designed to ensure reliable provision of electric supply service at the least cost to customers, remove certain barriers to competition, and enhance universal service protections at a reasonable cost. Several parties participated, including the company, consumer advocate groups and multiple electric generation suppliers.

 

Under the plan, PECO will rely on the competitive wholesale market for a portfolio of spot, one, two and five year purchases of energy to obtain power for the company's default service customers. The new generation rates will be effective from January 1, 2011, through May 31, 2013. The plan provides for a prudent mix of long-term, short-term and spot market purchases.

 

“Although future projected prices have moderated, we know our customers may continue to be concerned about how the end of rate caps will impact their bill,” said Denis O'Brien, PECO president and CEO. “To make this transition as easy as possible, we can now begin purchasing the electricity we need to serve customers beginning January 1, 2011. By taking advantage of current lower wholesale market prices, and other purchasing strategies, we will be able to provide electricity to our customers at the best possible price. Today's approval also ensures that adequate assistance will be available to our low-income customers who may be struggling.”

 

Approved as part of this settlement, the default service program will incorporate a market rate deferral program for residential and small commercial customers. When the generation rate cap expires, this will allow qualifying customers that voluntarily opt into this program to receive a credit on their bills in the first year in order to mitigate the initial financial impact of any rate increase, followed by higher payments in the later years to make up the first year credits and accrued interest.

 

At the Public Meeting of March 26, 2009, the Commission approved PECO's voluntary market rate transition phase-in plan. This mitigation plan allows participating customers to make advance payments from July 1, 2009 through December 31, 2010. The payments are then credited to customer bills, with 6 percent interest, between January 1, 2010, and December 31, 2012.

 

The 1996 electric competition law requires electric companies, or a Commission approved alternative supplier, to provide electric generation service to customers who have not selected an alternative generation supplier. The default service prices for electric generation service are required to result in a procurement strategy to produce the least cost to customers over time.

 

The generation rates for the state's electric customers were capped as a result of the settlement agreements reached during the state restructuring proceedings. Wholesale electric generation prices are not set by the PUC, but rather are set by the wholesale market, over which the PUC has no jurisdiction. PECO's rate caps expire December 31, 2010.