Pennsylvania OKs default service plan for Met-Ed, Penelec

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Related Companies FirstEnergy Corp. (FE) Metropolitan Edison Co. Pennsylvania Electric Co.

Related Documents Misc (Misc.) FirstEnergy Corp. 11/6/2009 Industry Document "PUC Approves Plan for Met-Ed, Penelec to Acquire Electricity Supply for Use after 2010 Expiration of Rate Caps" presented on 11/6/2009

Related Articles 11/6/2009 Research & Analysis: Pennsylvania PUC approves POLR procurement plan for FirstEnergy subsidiaries

Two FirstEnergy Corp. subsidiaries in Pennsylvania have plans to acquire electricity supply for use after 2010, now that state regulators have signed off on a settlement.

The Pennsylvania Public Utility Commission on Nov. 6 approved a settlement for the default service programs for Metropolitan Edison Co. and Pennsylvania Electric Co. Under the settlement, the plan will have a 29-month term, beginning Jan. 1, 2011, and ending May 31, 2014.

The companies, required to provide default service to customers who do not choose an alternative generation supplier, will use a competitive procurement plan that provides for a mix of spot purchases and short- and long-term contracts. The plan will include use of a descending clock auction to procure the full-requirements component of the supply mix and requests for proposals.

Met-Ed and Penelec also will include a mix of supply resources designed to obtain least-cost generation supply contracts on a long-term, short-term and spot-market basis. The companies will further conduct a separate solar procurement process designed to meet the solar photovoltaic requirement for the duration of the programs, the PUC said.

Those who signed off on the settlement include the companies, the state Office of Consumer Advocate, the state Office of Small Business Advocate and the Retail Energy Supply Association.

The commission voted 3-1 in favor of the settlement. PUC Vice Chairman Tyrone Christy voted against it.

In a dissenting statement, Christy said he did not think the plan complies with requirements that companies enter into a prudent mix of spot-market purchases, short-term contracts and long-term contracts.

"There are no long-term contracts, which Act 129 defines as more than four and not more than 20 years," he said. "Second, Act 129's 'least cost' requirement, in my opinion, is not met by this DSP. In lieu of the DSP's full requirements approach, which adds unnecessary risk premium to supply acquisition, a managed portfolio plan would have provided a better opportunity to obtain the lowest cost supply for Met Ed's and Penelec's customers."