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Congratulations Kathleen and Peter. This ought to make this week's ARM=20
meeting, well, sort of interesting.=20 Viva New Power! Best, Jeff =09"PennFuture" <pennfuture@pennfuture.org< =0911/03/2000 03:48 PM =09Please respond to "PennFuture" =09=09=20 =09=09 To: <Undisclosed-Recipient:@mailman.enron.com;< =09=09 cc:=20 =09=09 Subject: PennFuture's E-cubed PennFuture's E-cubed is a commentary biweekly email publication concerning= =20 the current themes and trends in the energy market.=20 =20 November 3, 2000 Vol. 2, No. 22 =20 Pennsylvania's First Successful CDS Auction =20 An important new regulatory skirmish has broken out before the Pennsylvania= =20 Public Utility Commission (PUC) over which company has won the right to=20 provide default generation service to 300,000 customers of PECO Energy, an= =20 Exelon Company. This skirmish is actually good news for consumers and is th= e=20 fruit of the 1998 PECO Energy restructuring settlement agreement, a landmar= k=20 document that ended a ferocious regulatory war when all combatants signed i= t.=20 =20 The =01&peace treaty=018 includes a requirement that PECO Energy bid out de= fault=20 service for 20% of its customers, and PECO has done so. Green Mountain Ener= gy=20 Company is now challenging PECO Energy=01,s decision that New Power won the= =20 auction to provide the settlement=01,s mandated default service.=20 =20 Both Green Mountain and New Power are offering those 300,000 consumers smal= l=20 rate reductions compared to customers receiving default service from PECO,= =20 and more electricity generated from renewable energy resources. Specificall= y,=20 New Power and Green Mountain are offering generation service to Rate R=20 residential customers for approximately 5.54 cents per kilowatt-hour. That= =20 offer is 3.11 cents per kilowatt-hour less than PECO Energy=01,s unbundled= =20 generation and transmission rate of 8.65 cents per kilowatt-hour and 0.11= =20 cents per kilowatt-hour less than the shopping credit of 5.65.=20 =20 The consumer savings that these offers represent is masked or reduced by th= e=20 stranded cost payments that consumers must pay PECO Energy. Indeed, were it= =20 not for stranded cost payments, the New Power and Green Mountain offers wou= ld=20 reduce total bills by about 3.11 cents per kilowatt-hour, or 20%.=20 =20 The dispute between New Power and Green Mountain is noteworthy because it= =20 proves that companies will compete vigorously to provide default service if= =20 shopping credits and lengths of contracts are set at reasonable levels. It= =20 also shows that renewable energy portfolio standards can be met economicall= y.=20 Finally, the result of this case will switch more customers to competitive= =20 suppliers in one day than the total number who switched in California over = a=20 period of nearly three years.=20 =20 When the PUC anoints New Power or Green Mountain as the winner, if all=20 299,300 consumers opt to stay with the CDS provider, the total number of=20 customers in Pennsylvania that will be served by a competitive supplier wil= l=20 jump to more than 850,000. Of this total, 504,000 will be residential=20 customers of PECO, a number equal to 37% of the PECO residential class. =20 CDS Background: In Pennsylvania, there must always be a =01&default=018 sup= plier or=20 =01&provider of last resort=018 to assure that service is always available = to all=20 customers. The incumbent utility is the default supplier, unless the PUC=20 decides otherwise. The default supplier must provide generation service to= =20 customers who do not have a competitive supplier either because they chose= =20 not to shop or did not find a willing supplier at an acceptable price. The= =20 PECO Restructuring Case Settlement initially defined CDS service in paragra= ph=20 38: =20 =01&On January 1, 2001, 20% of all of PECO=01,s residential customers -- de= termined=20 by random selection, including low-income and inability-to-pay customers, a= nd=20 without regard to whether such customers are obtaining generation service= =20 from an EGS -- shall be assigned to a provider of last resort-default=20 supplier other than PECO that will be selected on the basis of a=20 Commission-approved energy and capacity market price bidding process. This= =20 service shall be referred to as Competitive Default Service (=01&CDS=018).= =018 =20 The same approach was used in the other Settlements in the GPU, PPL and APS= =20 restructuring cases. CDS reflects an effort to assure that there is at leas= t=20 one other large competitor in each market. CDS also has a renewable portfol= io=20 standard (RPS), even though there is no RPS for regulated utilities in=20 Pennsylvania. The winning bidder must supply:=20 =20 =01&=01(2.0% of its offered energy supply for CDS service from renewable re= sources=20 of solar, wind, sustainable biomass (including landfill gas but excluding= =20 incineration of Municipal Solid Waste), geothermal or ocean power. The=20 renewable energy increment shall increase by annual increments of 0.5%=20 thereafter.=018 =20 This increasing renewable requirement continues indefinitely, meaning that = in=20 year four of the CDS there will be a 3.5% renewable requirement, 4% in year= =20 five and so on. This is significant, as each extra percent of renewable=20 energy used to serve the 299,300 customer block prevents approximately 950= =20 tons of NOx, 3200 tons of SO2, and 390,000 tons of CO2 from being emitted b= y=20 fossil fuel burning power plants. =20 PECO=01,s CDS RFP: Importantly, the PECO/Unicom merger case modified the CD= S=20 bidding process as established by the 1998 settlement. Of particular note,= =20 the revisions eliminated the =01&customer care=018 functions from CDS, made= the=20 contract three years long to help spread out return of start-up costs, and= =20 instituted several rounds of selection in the event that prior efforts=20 yielded no successful CDS contract.=20 =20 PECO issued its initial RFP for CDS on April 6, 2000, and Shell Energy=20 Services submitted the only bid. However, the PUC rejected the bid as=20 non-conforming and denied Shell=01,s Petition for Reconsideration of its=20 decision. Pursuant to the modifications in the merger settlement, PECO=20 entered into bilateral negotiations based on an August 24, 2000 RFP.=20 =20 Three suppliers submitted conforming bids, and PECO selected New Power as t= he=20 winner on October 18, 2000. New Power is the new competitive supplier=20 actively marketing residential and small commercial customers in the PECO= =20 service territory and is backed by Enron, AOL, and IBM.=20 =20 PECO and New Power negotiated a complete contract that is before the PUC fo= r=20 approval on November 9, 2000. Under the proposal, PECO and New Power expand= ed=20 the size of the CDS requirement to include 22% (299,300) of non-shopping=20 residential customers instead of 20% of all residential customers, whether= =20 shopping or not. This change was designed to implement paragraph 39 of the= =20 Restructuring Settlement, requiring adjustments to the numbers assigned to= =20 CDS in order to have 35% of all PECO residential and commercial customers= =20 obtaining competitive generation as of January 1, 2001. There also will be = a=20 second round of assignment of non-shopping customers as of October 15, 2002= =20 if New Power is providing CDS to fewer than 20% of all PECO residential=20 customers =20 New Power electricity will be 2% renewable in 2001, 2.5% renewable in 2002,= =20 and 3% renewable in 2003 as required, but does not include a commitment to= =20 exceed the requirements or provide cleaner power for the non-renewable=20 portion of the product.=20 =20 The price for New Power=01,s CDS for Rate R customers would be 2.02% below = the=20 shopping credit, while residential heating customers on Rate RH would pay= =20 1.02% less than their shopping credit. For a Rate R customer, this would me= an=20 that overall rates would fall .8% (as energy and transmission falls from 5.= 65=20 to 5.54); for Rate RH rates would fall .44%. Customers assigned to CDS may= =20 still choose any competitive supplier, or opt out and retain default servic= e=20 from PECO without penalty or charge. New Power will be able to offer its fu= ll=20 slate of energy and non-energy related products to these customers. =20 Green Mountain asserts that approval of the PECO/New Power contract is =01&= not=20 in the public interest,=018 arguing that PECO ignored Green Mountain=01,s o= ffer=20 that included CDS pricing 2% below the shopping credit for all residential= =20 customers, including those on residential heating or off-peak service. Like= =20 the New Power proposal, the Green Mountain proposal would lower Rate R and = RH=20 rates .8% and .44%, respectively. Green Mountain asserts that the New Power= =20 rate cut for Rate R is only 1.83%, and not 2% and argues that its product i= s=20 better for the environment because the non-renewable portion of the product= =20 would come from natural gas and hydro instead of system power generated=20 primarily from coal and nuclear fuels. If not declared the winning bidder,= =20 Green Mountain proposes in the alternative that both they and New Power=20 receive CDS contracts. =20 In response, PECO states that all three bidders had the opportunity to subm= it=20 revised bids and that the Green Mountain revised bid was not submitted unti= l=20 October 12, 2000, 13 days after the deadline and nine days after the=20 selection of New Power as the winning bidder.=20 =20 The PUC will sort out the facts and arguments on November 9. Some think tha= t=20 the PUC may very well split the 300,000 customer block between Green Mounta= in=20 and New Power.=20 =20 Whatever the result, customers in the Philadelphia area should receive yet= =20 another small price reduction, more renewable energy, and the opportunity f= or=20 a more competitive electricity market.=20 E-cubed is available for reprint in newspapers and other publications.=20 Authors are available for print or broadcast.=20 Support E-cubed by becoming a member of PennFuture =01* visit our secure on= line=20 membership page at www.pennfuture.org by clicking on =01&Support Our Work.= =018 =20 PennFuture, with offices in Harrisburg, Philadelphia and Pittsburgh, is a= =20 statewide public interest membership organization, which advances policies = to=20 protect and improve the state=01,s environment and economy. PennFuture=01,s= =20 activities include litigating cases before regulatory bodies and in local,= =20 state and federal courts, advocating and advancing legislative action on a= =20 state and federal level, public education and assisting citizens in public= =20 advocacy.=20 =20 We hope you found this informative and interesting. However, if you would= =20 prefer not to receive future issues, please reply to this email and type=20 =01&unsubscribe=018 in the subject line.
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