A newly filed bill in the Ohio House of Representatives (H. B. No. 247) which requires the use of a "market rate offer" to procure and price default service (standard service offer or SSO) would require, in considering and adopting any MRO plan from an electric utility, that the Public Utilities Commission of Ohio, "ensure that the resulting market rate offer shall not contain any rate, price, term, condition, or provision that would have an adverse effect on large-scale governmental aggregation in this state."

See EnergyChoiceMatters.com for more discussion of the requirement to use an MRO for default service

Such overly broad language providing that "any term, condition, or provision" of a default service plan not be "adverse" to large-scale municipal aggregation is not in the current statute.

Current statute does require PUCO to, "encourage and promote large-scale governmental aggregation in this state."

With respect to electric security plans only (a mechanism which would be eliminated under the bill), the current statute also requires PUCO to consider the impact of any nonbypassable charges on large-scale municipal aggregation

While the new language that PUCO not adopt any provision via an MRO that is "adverse" to large-scale municipal aggregation may be seen as an attempt to maintain the status quo, and while we wish to stress we do not ascribe any intent to the language, the overly broad language in the filed text of the bill could, over time, be used to block policies and provisions intended to facilitate the development of the retail choice market (individual customer choice), if certain stakeholders allege such retail choice provisions would have an "adverse effect" on large-scale governmental aggregation

Although it is unclear at this time whether certain retail market design issues could be appropriately addressed in an MRO proceeding (versus the "kitchen-sink" ESP cases), prior Ohio default service proceedings have addressed a host of retail market issues including proposals for retail market enhancements such as purchase of receivables, customer referral programs, or other policies which could make it easier for retail suppliers to market to and win customers.

Such policies could allegedly have an adverse impact on municipal aggregation due to the following:

• Generally, increased individual customer choice may result in declining participation in municipal aggregation

• Municipal aggregators may allege that increased individual customer shopping results in higher risk premiums for pricing for aggregations, due to migration risk

• To the extent municipal aggregations fund administration or other services through adders to the rates of aggregation customers, increased individual customer shopping may lower such revenue and adversely impact the aggregation

It would not be difficult to imagine a scenario where retail market enhancements sought under an MRO would be challenged due to their impact on government aggregation.

And while certain non-rate retail market enhancement may be outside the scope of an MRO, even default service rate design and policy issues beneficial to retail choice may be hindered under the proposed language. For example, the recovery of the administrative costs of the EDC's provision of default service (perhaps via a proxy bypassable adder) would seem germane to an MRO proceeding (and is a "live" controversy in Ohio that has been raised in numerous ESP proceedings). While any such adder would make aggregation rates (and retail supplier rates) more competitive with SSO rates, since large-scale municipal aggregations ostensibly have lower acquisition costs, such large-scale aggregations may see little benefit to the creation of such adder, and may oppose the adder on the grounds that the attendant increase in individual shopping would be adverse to large-scale government aggregation

Without opining on whether large-scale municipal aggregation should enjoy any policy advantages, RetailEnergyX.com would merely point out that there is a significant difference between encouraging and promoting large-scale government aggregation (as is required currently), versus the proposed language prohibiting PUCO from approving an MRO that contains, "any rate, price, term, condition, or provision that would have an adverse effect on large-scale governmental aggregation."