Dayton Power & Light‘s Electric Security Plan
History of Electric Deregulation in Ohio
A law enacted in 1999 restructured Ohio’s electric industry by changing the way customers shop for electricity. The law, which took effect on Jan. 1, 2001, provided a five-year market development period. During this period, the utilities’ rates were frozen to allow a competitive resale market to develop.
As the end of the market development period neared, there was a growing concern that, due to the limited number of competitive electric suppliers and low degree of market activity, an immediate shift to market-based rates in 2006 would not be in the best interest of customers. To minimize the effects of rate “sticker shock” and gradually transition customers to market-based rates, the Public Utilities Commission of Ohio (PUCO) worked with Ohio’s electric utilities to develop rate stabilization plans (RSPs). The RSPs, along with other changes, eliminated market uncertainty and provided customers with stable rates. Most of these plans expired at the end of 2008.
In 2008, the Ohio General Assembly passed Senate Bill 221 to keep electric rates stable going forward, create jobs, implement energy efficiency and expand Ohio’s alternative energy industry. The new law incorporated a system under which rates would be approved by the PUCO beginning in 2009. Senate Bill 221 also outlined alternative paths for electric utilities to implement different forms of market-based pricing.
What did Dayton Power and Light Company request?
In December 2012, Dayton Power and Light Company (DP&L) filed an application to establish an electric security plan (ESP) proposing a five-year term that would use current rates blended with rates from a series of competitive bidding process. Also proposed were various riders to ensure rate stability in order to provide safe and reliable service as the company transitions to a distribution-only utility throughout the term of the ESP.
DP&L also proposed modifications to its alternative energy rider (AER), which recovers costs for complying with Ohio’s alternative energy portfolio standard, as well as establishing a new nonbypassable rider to recover costs for its Yankee Solar Generating Facility.
Additionally, DP&L requested a phase-out of maximum charges to certain customer classes and the creation of an economic development fund.
How did the PUCO rule on DP&L’s application?
In September 2013, the PUCO modified and approved DP&L’s application to establish an ESP, effective through May. 31, 2017. The approved ESP will move DP&L towards a fully competitive market based structure. In approving the ESP, the PUCO established a significantly excessive earrings test (SEET) threshold of 12 percent.
During the term of the ESP, DP&L will conduct an auction for 10 percent of its standard service offer load for the period of Jan. 1, 2014 to Dec. 31, 2014; 40 percent for the period of Jan. 1, 2015 to Dec. 31, 2015; and 70 percent for the period of Jan. 1, 2016 to May 31, 2017. At the end of the ESP, the company is expected to have divested all of its generation assets.
DP&L will establish a service stability rider (SSR) in order for it to provide a stable standard service offer as it divests its generation assets during the term of the ESP. The SSR will collect $330 million from Jan. 1, 2014, through Dec. 31, 2016. DP&L will have the option to seek future approval from the PUCO for a five month extension not to exceed $45.8 million.
The PUCO also established that the company’s AER will be trued-up quarterly, as opposed to annually, to more accurately align costs with revenues. The PUCO, however, denied the company’s proposal to recover costs for the Yankee Solar Generating Facility on a nonbypassable basis, noting the facility should be included in the company’s asset divestiture plan.
The PUCO approved a number of enhancements to improve the interaction between competitive suppliers and DP&L to ensure a smoother customer choice process, similar to those already implemented by Ohio’s other electric distribution utilities.
The PUCO also established a gradual phase-out provision for certain secondary and primary rate schedules, which limits the rate per kilowatt hour charged to customers that have a poor load factor. The maximum charge will increase 2.5 percent per year during the term of the ESP.
Finally, the ESP provides incentives for economic development through an economic development fund. DP&L shareholders will contribute $2 million annually from 2014 through 2016 to support economic development efforts in its service territory.
Did the PUCO consider public opinion in this case?
Yes. The PUCO held two public hearings in DP&L’s service territory in January 2013.