COMPETITIVE ELECTRICITY
MARKETS
March 15, 2011
PA Customer Choice Legislation
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Distribution service remains regulated by
PAPUC.
 Transmission service regulated by FERC [PJM
tariff]. Transmission service essentially a passthrough cost for supply service
 Generation - major component of supply
service. “Unregulated” in PA
 Administrative costs for providing supply
service [back-office trading, hedging, systems,
credit, working capital, etc].
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Price to Compare (PTC)
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Includes generation, transmission and
administrative costs of providing supply service.
Provides apples to apples comparison for
consumers
PAPUC provides website for PTC comparison for
competitive suppliers and utility default supply
service.
Retail Rate Design
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Policy Drivers – (1) incentives for energy
efficiency, and (2) ease of price comparisons.
PAPUC Policy – simple cents/kwh rate.
Minimize or phase out declining block rates and
demand rates.
With smart meters – evolution towards Time of
Use or dynamic rates [Critical Peak Pricing,
Critical Peak Rebates, Time of Use, Day Ahead
hourly pricing, and Real time hourly pricing].
EGSs can customize their pricing structures to fit
their customer needs.
Wholesale Rate Design
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Energy – Locational Marginal Price [LMP];
bilateral contracts, hedges, etc.
Capacity – Each customer assigned a peak load
contribution (PLC); demand-based determinant
based on customer usage during the 5 highest
hours of usage in PJM.
Ancillary services – demand and energy based
charges; minor cost element
Transmission – Network Integrated Transmission
Service; demand charge based on customer usage
during highest hour of usage in each EDC service
territory.
Competitive Markets Segments
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Electricity Supply
 Curtailment/Conservation Service
Providers
 Meter Service Providers
 Billing Service Providers
 Future – EV charging stations?
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Customer Markets Segments
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Default Service Customer Segments – residential,
small commercial [<25kw], medium customers [25500kw], large commercial [>500kw]
Distribution/Transmission Service – residential
[heating and non-heating], small commercial
[secondary], non-profits, and primary and subtransmission industrial customers], lighting.
Economic Riders – generally just distribution cost
discounts now [not supply cost discounts] – often
related to promoting local employment/industry.; Can
be related to competitive fuel competition.
Cost Unbundling Decisions
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Generation costs
 Transmission costs
 Procurement costs
 Working capital costs
 Bad debt expense costs
 Billing and collection costs
 Overall – incremental vs. full cost
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Licensing/Regulation
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Electric Generation Suppliers [EGSs –
regulated by PAPUC and PJM].
 Conservation Service Providers [CSPs
participating in utility energy efficiency
programs – registered with PAPUC]
 Curtailment Service Providers [PJM].
 Metering Service Providers – EDC oversight,
requirements included in EDC tariffs.
 Billing Service Providers – no experience
yet with EDCs. Some EGSs may use them.
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Regulation
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Wholesale Markets – FERC
 FERC regulates via PJM tariffs in Pennsylvania
 FERC regulates wholesale generators, transmission service, and
various related ancillary services [black start, reserves, frequency
regulation, and administration of wholesale markets]
 FERC regulation entails market power mitigation of market-based
services [generation], and regulation of cost-based services
[transmission].
State - PAPUC
 Cost based regulation of distribution service.
 Approve default supply service procurement plans of EDCs.
 Lighter regulation of EGSs – don’t regulate contract pricing,
only certain consumer protection aspects of supply service.
EGS Regulations
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EGS Consumer Protection Regulations [Chapter 54, subchapter A, Sections 54.1-54.9]
 Mostly applicable only to residential and small business customers.
 Standardized industry terms must be used.
 Bill format requirements
 Contract content and disclosure requirements
 Informational disclosure requirements
 Marketing and sales requirements
 Customer information privacy requirements
 Complaint handling requirements
EGS Licensing Regulations – [Chapter 54, Subchapter B, Sections 54.31-54.43].
EGS transfers of customers to default supply service regulations. [Section 54.123]
EGS Reporting Requirements – Sales Activity [Chapter 54, Subchapter H, Sections
54.201-54.204]
License Application: http://www.puc.state.pa.us/electric/electric_suppliers.aspx
* EGSs must execute certain documents and meet credit requirements to transact in
wholesale markets pursuant to PJM tariffs and operating agreements.
EDC Regulations -Retail Choice
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Code of Conduct [deals with equal treatment of
affiliated and non-affiliated EGSs]
Quarterly Retail Choice Reporting Requirements
Prohibition on switching restrictions from EDC
default supply service to competitive EGS supply
service.
http://www.pacode.com/secure/data/052/chapter54/chap54toc.html
QUESTIONS?
http://www.puc.state.pa.us