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PUC Seeks Comments on Strategy to Ease Transition From Electric Rate Caps

The Public Utility Commission this week asked for public comment on proposed regulations and a policy statement that will establish the criteria on how electric generation service is provided to customers who choose to not obtain generation service from an alternate supplier.

The Commission also asked for input on proposed strategies to mitigate potential electricity price increases.

As part of an overall strategy for addressing generation rates, the Commission voted 4-0 to issue an Advanced Notice of Final Rulemaking on default service regulations and a policy statement. Commissioner Kim Pizzingrilli issued a statement. Commissioner Terrance Fitzpatrick also issued a statement.

The Commission also voted unanimously on a motion by Commissioner Pizzingrilli to issue proposed policies to mitigate potential electricity price increases. Commissioner Fitzpatrick made a statement on the mitigation policies. The actions represent a comprehensive strategy for addressing retail electricity rates in the context of the expiring generation rate caps.

The default service regulations are one of the most important rulemakings for the Commission since the restructuring of the electric industry. The Commission reopened the public comment period for the regulations in November 2005 to address conditions in the wholesale market and the relationship between the default service rulemaking and the Alternative Energy Portfolio Standards Act of 2004.

Advanced Notice of Final Rulemaking for default service regulations

About 40 parties filed comments in response to the Commission's proposed regulations. As a result, the Advanced Notice of Final Rulemaking significantly modifies the previous proposals. The changes include:

· Allowing regular adjustments to default service rates to reflect changes in the actual incurred costs of the default service provider (DSP);

· Requiring individual procurement plans to be submitted by DSPs that may include a mix of fixed term and spot market energy purchases;

· Encouraging procurement plans that include purchasing generation supplies in multiple steps to reduce risks of unusual price volatility rather than purchasing all supply at one time;

· Simplifying rate design and providing normal incentives for energy conservation and facilitating customer choice; and

· Offering each default service customer a single rate option known as the "price-to-compare," which represents a blend of all generation and transmission related costs.

Policy statement

In reviewing the comments and considering revisions to the proposed default service rules, the Commission recognized that some elements of the default service rules should be addressed in a policy statement that provides guidance to the industry rather than strict rules. The policy statement, which provides a framework for DSPs, addressed:

· Electric generation supply purchases;

· Alternative Energy Portfolio Standards compliance;

· Competitive bid solicitation processes;

· Default service cost elements;

· Interim price adjustments and cost reconciliation;

· Retail rate design; and

· Rate Change mitigation.

The proposed policy statement also establishes a Retail Markets Working Group to develop policy recommendations, which are aimed at removing barriers to retail market development including rate-ready billing, customer referral programs, uniform statewide supplier tariffs and a retail choice ombudsman at both the Commission and Electric Distribution Companies.

Policies to mitigate potential electricity price increases

On May 19, 2006, the Commission began a process that may lead to the development of policies to mitigate higher electricity prices. Most Pennsylvania electricity consumers are paying capped generation rates and will continue to do so until the end of 2009 or 2010. Recent events in Pennsylvania, Maryland and Delaware have shown that consumers of electricity can be exposed to sudden dramatic price increases when long-term generation caps expire. The long-term caps were agreed upon during state restructuring proceedings.

More than 30 parties filed comments with the Commission regarding ideas to assist in addressing potential significant price increases. The proposed policy changes and plans for future action include:

· Initiating statewide and utility specific consumer education campaigns to educate consumers about the real price of electricity, responsible energy usage and alternative electric generation suppliers;

· Developing recommendations for alternatives to mitigate abrupt price increases that include final development of the default service regulations;

· Examining energy efficiency, conservation and demand side response. On Sept. 28, 2006, the Commission initiated an investigation into cost-effective and reasonable efforts that electric utilities can take to help consumers conserve energy and use it more efficiently. Further recommendations in these areas are expected this spring;

· Improving low-income programs. The Commission proposes to become more of an advocate for state funding of the Low Income Home Energy Assistance Program (LIHEAP). The Commission also will continue with a rulemaking to modify its Customer Assistance Program rulemaking and policy statement; and

· Continuing active participation before the Federal Energy Regulatory Commission on wholesale market issues.

The Advanced Notice of Final Rulemaking and the proposed policy statement will be docketed separately at the Commission. In both cases, interested parties have until March 2 to file comments. Reply comments to both are due by March 23. The comments will be posted to the PUC Web site at

An original and 15 copies of comments or reply comments should be marked with the appropriate docket numbers for either the Advanced Notice of Rulemaking or the proposed policy statement and submitted to: Pennsylvania Public Utility Commission, Attention Secretary, P.O. Box 3265, Harrisburg, PA 17105

Comments on the proposed policies to mitigate potential electricity price increases are due 20 days after the entry of the Order.

All comments also should be marked with the appropriate docket numbers and submitted electronically to Shane Rooney at . Attachments may not exceed 3 megabytes.

NewsClip: PUC Seeks Comment on Electric Rate Strategy


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