Retailer (DOE Coal NOPR): Customers Won’t Bother Shopping If 80% Of Bill A Pass-Through Charge
In comments opposing a DOE-authored NOPR under consideration at FERC which would provide cost of service regulation to certain coal and nuclear plants, BlueRock Energy, Inc. warned of providing compensation outside of wholesale market rates
The unneeded "above market" costs that would be created under the NOPR, "will not show up in wholesale electricity prices, but have to be allocated to customer[s] through 'uplift' charges," BlueRock said
"Unlike wholesale electricity prices, uplift charges cannot be hedged with counterparties or on a trading exchange. As uplift charges increase, the ability of a retail energy supplier, such as BlueRock, to manage the risk inherent in its business will decrease dramatically. The result will be much less price certainty for consumers. BlueRock believes that the Proposed Rule will result in a material increase in the costs being passed through to consumers through such an unhedgable uplift charge," BlueRock said
"An organized electricity market that demonstrates this problem is the Ontario, Canada market, operated by the Independent Electricity System Operator ('IESO'). Nearly all of the power generators operating in the Ontario market receive cost-of-service based compensation similar to that described in the Proposed Rule," BlueRock said
Citing an IESO report, BlueRock said:
• "The IESO’s Global Adjustment Charge, which is entirely comprised of above market uplift payments to generators, averages approximately C$1 Billion/month"
• "The IESO power commodity charges (i.e., charges for wholesale power exclusive of ancillary services charges) for January-February 2017 averaged C$104.69/MWh, of which $20.26/MWh was for the hourly price of energy and the remaining $84.43 was for the Global Adjustment Charge."
"BlueRock understands that most retail energy suppliers have a separate pass through mechanism for the Global Adjustment Charge. BlueRock believes that most of its customers would simply not bother to shop for electricity if 80% of their bill was a pass through charge," BlueRock said
The Pennsylvania PUC filed separate comments also opposing the NOPR, and highlighted what it saw as the risk to retail markets from the NOPR
"Disruption in wholesale electric prices will translate directly into disruption in the retail markets which put the continuing viability of retail choice programs at risk at a time when customers generally have become comfortable with choosing electric suppliers. In fact, all retail electric choice states within PJM may see their competitive retail market put at risk if this rule is adopted," the PA PUC said