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Pennsylvania continues national leadership role in energy

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Pennsylvania’s Public Utility Commission (PAPUC) and its staff continue to take steps to transition its electricity market into one of the most robust in the nation. Some customers are receiving more value for their energy dollar and have the option to participate in innovative products and services such as Free Power Days and half off nights and weekends – both not envisioned in a traditionally regulated, vertically integrated market.

Policy makers, the competitive supplier community and other stakeholders are recognizing the significant efforts by the PAPUC. Since the enactment of the Electricity Generation Choice & Competition Act, 2.1 million customers have switched, representing 66% of total electricity usage being provided by competitive suppliers. This transition has successfully occurred with utilities continuing to provide delivery services, and seamlessly responding to outages or other service emergencies as they had done prior to restructuring the market.

What do customers have to look forward to in Pennsylvania? The answer: an even more robust marketplace. As part of its recent Retail Markets Investigation Order, it has been reported that the PAPUC is expected to release an Order this fall on steps needed to fully transition its market by selecting companies other than utilities to provide default service for customers who have not chosen to buy power from a competitive supplier. Pennsylvania’s competition statute already allows utilities to petition the PAPUC to exit the role as default service providers and the current PAPUC effort could quantify what the petitions would look like, how the PAPUC would select an alternative default service provider (ADSP) ensuring they have the fiscal and operational capabilities and what the alternative default service provider’s product would look like.

Staff is contemplating that utilities would file petitions with the PAPUC no later than December 1 of this year, so ADSPs could be selected and begin providing default service by June 1, 2015.The utilities’ petitions would also include their future roles and responsibilities, and a listing of customer classes that the utility no longer wants to serve as the default service supplier. Staff has indicated that the ADSPs should be selected through a competitive process, with an “administrative adder” that prices the risk involved. Additionally, ADSPs will not be assigned more than one third of the default service load. Staff is recommending that default service prices for residential and small commercial customers should be based on a transparent market index, and in the first year, it should be a fixed price based on the index plus an administrative adder. In the second and third years, quarterly prices should be based on the index plus the administrative adder. For large commercial and industrial customers, staff is recommending that the prices should be based on a day-ahead energy and a capacity price plus an administrative adder.

From Direct Energy’s perspective, the initial transition to a competitive electricity market in Pennsylvania has gone incredibly well, and further steps, like the ones that the PAPUC and other policymakers are contemplating, will likely ensure that residential customers and businesses get the benefits originally envisioned more than a decade ago with the passage of the Electricity Generation Choice & Competition Act: competitive energy prices and access to innovative products and services.

Posted: August 30, 2013