BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION

Transcription

1 PECO ENERGY COMPANY STATEMENT NO. 2-R BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PETITION OF PECO ENERGY COMPANY FOR APPROVAL OF ITS DEFAULT SERVICE PROGRAM FOR THE PERIOD FROM JUNE 1, 2015 THROUGH MAY 1, 2017 DOCKET NO. P REBUTTAL TESTIMONY WITNESS: JOHN J. McCAWLEY, P. E. SUBJECTS: DEFAULT SERVICE PROCUREMENT, CONTINGENCY PLANS, UNIFORM SUPPLY MASTER AGREEMENT, PJM CHARGES AND STANDARD OFFER PROGRAM DATED: JUNE 26, 2014

2 TABLE OF CONTENTS Page I. INTRODUCTION AND PURPOSE OF TESTIMONY... 1 II. PORTFOLIO OF PROCUREMENT PRODUCTS... III. CONTINGENCY PLANS IV. UNIFORM SUPPLY MASTER AGREEMENT V. RECOVERY OF PJM CHARGES VI. STANDARD OFFER PROGRAM VII. CONCLUSION i-

3 REBUTTAL TESTIMONY OF JOHN J. McCAWLEY I. INTRODUCTION AND PURPOSE OF TESTIMONY 1. Q. Please state your full name, professional position and business address. A. My name is John J. McCawley. I am employed by PECO 7 Energy Company ( PECO or the Company ) as Director of Energy Acquisition. 8 My business address is 201 Market Street, Philadelphia, PA, Q. Have you previously submitted testimony in this proceeding? A. Yes. I submitted direct testimony that is marked as PECO 11 Statement No. 2. My background and qualifications are set forth in that statement Q. What is the purpose of your rebuttal testimony? A. The purpose of my rebuttal testimony is to respond to14 various issues raised by the Office of Consumer Advocate ( OCA ), the Retail Energy 15 Supply Association ( RESA ), and NextEra Energy Power Marketing, LLC 16 ( NEPM ) with respect to PECO s third default service plan ( DSP III ). My17 testimony is divided into 18 five parts. First, I respond to the direct testimony of the OCA and19 RESA regarding the procurement design of PECO s proposed default service 20 supply plan and portfolio of supply products. Specifically, I will address the direct 21 testimony of Richard S. Hahn on behalf of the OCA (OCA St. No. 1) and Richard 22 J. Hudson, Jr. on behalf of RESA (RESA St. No. 1) relating to the following issues: 2

4 Portfolio design for the Residential class (OCA1and RESA); Portfolio design for the Small Commercial class 2(RESA); 5 Default service product contract term lengths extending beyond June 1, 2017, for both the Residential class and the Small 4 Commercial class (RESA); 8 Procurement plans for the Medium Commercial6 class (RESA); and Procurement schedule for the Large Commercial 7 and Industrial class (RESA). Second, I respond to the direct testimony of Mr. Hahn on 9 behalf of the OCA recommending changes to PECO s proposed default service 10 supply contingency plans in the event that PECO does not obtain sufficient 11supply through its regular competitive procurements or a winning supplier subsequently 12 defaults on its contractual obligations to provide default service supply. 1 Third, I respond to the concerns of Sean Cheslock on 14 behalf of NEPM (NEPM St. No. 1) and Mr. Hahn regarding credit provisions in PECO s 15 uniform supply 16 master agreement ( Uniform SMA ). Fourth, I address the concerns expressed by Mr. Hahn17 regarding the Company s proposed allocation of generation deactivation charges18 imposed by PJM Interconnection, L.L.C. ( PJM ) on load-serving entities 19 ( LSEs ) in PECO s service territory. I also respond to the proposal of Mr. 20 Hudson for PECO to assume responsibility for certain PJM charges now paid 21by electric generation 22 suppliers ( EGSs ). Finally, I address several issues relating to PECO s proposed 2 continuation of the EGS Standard Offer Program ( Standard Offer Program 24 or SOP ) presented in 2

5 the direct testimony of Barbara Alexander on behalf of1the OCA (OCA St. No. 2) 2 and RESA witness Hudson. II. PORTFOLIO OF PROCUREMENT PRODUCTS Q. Mr. McCawley, do any of the parties recommend modifications to PECO s proposed product mixes for the various procurement classes? A. Yes. RESA proposes modifications to the Residential class, 6 Small Commercial class and Medium Commercial class supply portfolios as 7 well as the procurement schedule for the Large Commercial and Industrial class. 8 The OCA also proposes revisions to the Residential class supply portfolio. The9following table summarizes the differences between the product portfolios 10 proposed by PECO, 11 RESA and the OCA. Plan Component PECO Proposal Other Party Proposal Residential class Transition to a 40% / 60% mix of one- and two-year fixedprice full requirements ( FPFR ) products for approximately 96% of the supply portfolio. The other approximately 4% of load will be supplied initially by a pre-existing fiveyear block product purchased in PECO s first default service program ( DSP I ) and associated spot purchases; this block product expires on December 1, 2015, at which time the supply for this portion of the load will be replaced by a 5-month FPFR product (%) and spot purchases (1%). RESA Eliminate the proposed 5-month FPFR product and, instead, procure 4% of the load through spot purchases. For the remainder of the portfolio, phase out reliance on one- and twoyear FPFR products by introducing three-month FPFR products into the supply portfolio, increasing the percentage of three-month products from % to 40% by the end of DSP III while reducing one-year products to 20% and two-year products to less than 2%. OCA Use spot market power purchases instead of a 5-month product for

6 Small Commercial class Procure one-year FPFR products with delivery periods overlapping on a semi-annual basis, approximately two to four months prior to delivery of the energy. 4% of load not served by 40% / 60% mix of one- and two-year products. Move the February 2015 and 2016 solicitations to March. RESA Utilize a mix of three-month and 12- month contracts, with the percentage of load served through three-month products increasing from 25% to 75% by the end of DSP III. Medium Commercial class Procure six-month FPFR products without overlap approximately two to four months prior to delivery of the energy. RESA Utilize three-month (non-laddered) contracts for 100% of the supply, and procure approximately two to four months prior to delivery of the energy. Large Commercial and Industrial class Procure spot-priced full requirements contracts through annual procurements. RESA Continue bidding out the provision of spot market priced full requirements contracts to wholesale suppliers, but procure three-month full requirements contracts through quarterly procurements. 1 As shown in the preceding table, RESA recommends eliminating 2 the 5-month FPFR product from the supply mix for residential customers and phasing out reliance on 12- and 24-month FPFR contracts. 1 With respect 4 to the Small Commercial class, RESA proposes a 75%/25% mix of 5three-month and one-year FPFR products. Mr. Hudson contends that utilizing a large 6 percentage of very short-term products to supply both Residential and Small 7 Commercial class load will lead to a more market-based default service product 8 portfolio. RESA also proposes a supply portfolio for medium commercial 9 customers consisting of three-month (non-laddered) FPFR contracts 10 instead of PECO s proposed portfolio of six-month (non-laddered) FPFR11 contracts. Finally, RESA 1 Specifically, under Mr. Hudson s proposal, by the end of the DSP III period, the 60 tranches of residential FPFR products would consist of 24 tranches of three-month products (40%), 1 tranches of six-month products (22%), 10 tranches of nine-month products (17%), 12 tranches of one-year products (20%), and one tranche of a two-year product (<2%). 4

7 recommends holding procurements for spot-priced full1requirements service for the Large Commercial and Industrial class on a quarterly 2 basis instead of on an annual basis, as proposed by PECO. The OCA agrees with PECO s proposal to procure one4and two-year FPFR products for the Residential Class. However, the OCA5proposes to replace the 5-month contract for two residential tranches with spot 6 market purchases. The OCA also proposes to shift the timing of PECO s scheduled 7 competitive residential supply procurements from February to March Q. Does PECO agree with RESA s proposal to shorten the term lengths of the supply products in the default service supply portfolios for residential and small commercial customers? A. No. PECO believes RESA s proposal to introduce very 12short-term FPFR products (e.g., three-month products) into the Residential 1 class and Small Commercial class portfolios by the end of DSP III is inappropriate 14 for reasons discussed in the rebuttal testimony of Mr. Scott Fisher 15 (PECO St. No. -R). As Mr. Fisher demonstrates, RESA s product portfolio will 16 expose residential and small commercial customers to substantial price volatility. 17 Notwithstanding RESA s claims to the contrary, PECO s proposed portfolio 18 is already market- based as a result of PECO s competitive procurements 19and, as Mr. Fisher explains, DSP III is expected to support retail competition 20 in light of the growth of competitive supply options for customers in PECO s 21service territory during DSP I and its current default service plan ( DSP II ), 22 when PECO procured 5

8 similar default service supply products, as well as market 1 data from other large electric distribution company ( EDC ) service areas in2pennsylvania Q. Do you have any other concerns with Mr. Hudson s proposal to adopt a three-month product for residential and small commercial customers? A. Yes. Mr. Hudson s proposed addition of a three-month5 product to the Residential and Small Commercial class portfolios would require PECO 6 to hold four solicitations each year for those procurement classes instead 7 of two solicitations. This would effectively double the administrative cost of 8 default supply procurements for both residential and small commercial 9 customers Q. Does PECO agree with the proposals of the OCA and RESA to eliminate the 5-month full requirements product from the Residential class procurement? A. Both RESA and the OCA argue that inclusion of a 5-month 12 product in PECO s procurement plan for residential customers would lead1 to higher risk premiums. While PECO continues to believe its proposed 5-month 14 product is appropriate as part of a prudent mix for residential customers, PECO 15 is amenable to replacing the two tranches of 5-month product with two tranches 16 of two-year FPFR products to continue to provide price stability benefits17 to residential customers if so directed by the Pennsylvania Public Utility Commission 18 ( Commission ). The OCA s proposal to replace the 5-month product19 with spot market purchases, which will provide no price stability benefits, should not 20 be adopted. 6

9 Q. Does PECO agree with the OCA s proposed revision to the residential procurement schedule, which would move the February 2015 and 2016 solicitations to March 2015 and 2016? A. No. Mr. Hahn s proposal is not feasible in light of PECO s 4 intent to allow suppliers to continue to select their own Auction Revenue 5 Rights ( ARRs ) and Financial Transmission Rights ( FTRs ). While Mr. Hahn 6 does not believe the loss of this opportunity for suppliers will be significant, 7 he acknowledges that his proposed March procurement dates would occur after 8 PJM begins the ARR and FTR selection process. Subsequent assignment of 9ARRs by PECO, as suggested by Mr. Hahn, will not permit suppliers who 10 know their own sourcing points for power supply to have an opportunity to better 11 hedge congestion risk and thereby reduce associated risk premiums in their default 12 service supply bids Q. Mr. McCawley, please respond to OCA witness Hahn s contention that procurements should not be held in January or February because those periods are the time of the highest winter market prices. A. Certainly. To support his contention that market prices 16are high in January and February, Mr. Hahn provides an analysis of quarterly 17 real-time market prices for PJM s PECO zone from January 2012 to April 2014 and 18 emphasizes the high spot-market prices during the Polar Vortex in January As Mr. Hahn s own analysis shows, however, market prices have not20 always been substantially higher in January when compared to March in other years. 21 Mr. Hahn thus provides no basis for the Commission to conclude that 22a possible risk of high 7

10 spot-market prices in January outweighs the benefit of 1enabling winning FPFR suppliers to select their own transmission paths in the PJM 2 ARR/FTR process Q. Does PECO believe that elimination of contracts extending beyond May 1, 2017 is necessary to accommodate future changes to the default service model, as RESA witness Hudson suggests? A. No. The Commission has previously recognized the benefits 6 of PECO s procurement design, which ensures that all default service 7 supply for residential and small commercial customers will not need to be replaced 8 in a short period of time prior to the end of a default service plan. As in DSP 9 II, there is no need to eliminate contract overhang past the end of DSP III10 to accommodate possible future changes to the default service model. None of the 11 contracts with delivery periods extending beyond May 1, 2017 will be procured 12 until September 2015 at the earliest, which is more than nine months after the anticipated 1 December 2014 approval of PECO s proposed DSP III. This time period 14 leaves a significant amount of time for possible adjustments to PECO s procurement 15 plan if a 16 different default service model is adopted Q. Does PECO agree with RESA s proposal to procure three-month contracts four times a year instead of six-month contracts twice a year for medium commercial customers? A. No. As of May 2014, approximately 80% of medium20 commercial customers are shopping, with 85% of the Medium Commercial class21 load being served by EGSs. Medium commercial customers are thus participating 22 extensively in the 8

11 competitive retail market, and there is no reason to add1volatility to the rates of those medium commercial customers who choose not to2 shop or to increase the rates of those customers to recover the costs of two additional procurements, as 4 proposed by Mr. Hudson Q. Is Mr. Hudson s recommendation to move medium commercial customers with interval meters into the Large Commercial and Industrial procurement class as those meters are deployed appropriate for PECO customers? A. No. As I explained in my direct testimony, PECO has requested 8 a waiver from the Commission s directive in the End State Order that9customers with interval meters and peak demands above 100 kw should receive 10 spot-priced products until PECO has completed the advanced metering infrastructure 11 ( AMI ) deployment for the entire Medium Commercial class. 2 Completion 12of deployment includes testing, implementation of back-office and other information 1 technology ( IT ) systems, and integration with PECO s billing system. 14 As RESA concedes, its proposed transition of medium commercial customers15 hourly-priced default service at the same time as PECO is deploying AMI meters 16 to those customers creates the potential for wholesale default service suppliers 17 to include a premium in bids to cover more uncertainty in Medium Commercial 18 class customer load. RESA s proposal would also require additional billing19 system changes with associated administrative costs at the same time that PECO 20 is integrating system 2 See Investigation of Pennsylvania s Retail Elec. Mkt.: End State of Default Serv., Docket No. I (Order entered February 15, 201) ( End State Order ), pp

12 changes in concert with the AMI meter deployment to implement 1 other 2 Commission-directed retail market enhancements. To the extent Mr. Hudson believes that automatically transferring medium customers with interval meters to the Large Commercial 4 and Industrial class will benefit the competitive market, as stated in my direct testimony, 5 the vast majority of medium commercial customers are already shopping6 and the remaining customers always have the choice to receive competitive 7 electric service from an EGS at any time. The Commission should therefore reject 8 RESA s proposal and thereby avoid creating a risk of higher bidder premiums9 for the remaining Medium Commercial class customers and additional complexities 10 in the integration of PECO s AMI deployment and billing systems Q. Mr. Hudson proposes quarterly procurements for the Large Commercial and Industrial class. Does PECO believe this is a reasonable approach? A. No. Mr. Hudson s reason for this proposal is to facilitate 14 the transfer of medium commercial customers to the Large Commercial and Industrial 15 class procurements, which should be deferred for reasons I 16 have already explained. RESA s proposal for more frequent procurements for17 the Large Commercial and Industrial class would also increase procurement costs18 for those customers. I also believe that increasing the number of procurements for 19the Large Commercial and Industrial class may increase the likelihood of failed procurements 20 due to low bidder interest associated with the relatively few large21 commercial and industrial 22 customers receiving default service. 10

13 1 III. CONTINGENCY PLANS Q. Mr. McCawley, in your direct testimony, you explained that PECO proposes to use the same contingency plans approved by the Commission in DSP II. Can you please describe and respond to changes to those contingency plans proposed by the OCA? A. Yes. OCA witness Hahn believes that any contingency6 plan should minimize the amount of time that residential customers are supplied by 7 spot market purchases and proposes two modifications to PECO s contingency8 plans. First, in the event that PECO fails to obtain Commission approval of a sufficient 9 number of supplier bids for all offered tranches for a residential product in10 a solicitation or a supplier defaults, Mr. Hahn recommends that PECO immediately 11 issue an additional request for proposals ( RFP ). Second, if the lack of 12 adequate supplier interest is likely to exist for an extended period of time, Mr. Hahn 1proposes that PECO procure a combination of block and spot products instead 14 of relying on purchases from the PJM markets to satisfy any unserved portion15 of default service load. PECO does not believe either proposal is appropriate. 16Given the short delivery lead times (i.e., 2- months) in PECO s residential procurement 17 plan, there is not enough time to re-issue an RFP, conduct bidder sessions 18 and qualify bidders in time for the start of the delivery period. Furthermore, 19 providing an alternative procurement structure (instead of only spot purchases) 20may discourage some suppliers from participating in the scheduled procurements 21 in hope of participating in contingency procurements, when fewer 22suppliers may be bidding 11

14 and prices could be less competitive. The Commission1should therefore approve PECO s contingency plans as proposed, consistent with2 DSP I and DSP II. IV. UNIFORM SUPPLY MASTER AGREEMENT Q. OCA witness Hahn generally agrees that the Uniform SMA is reasonable, but expresses concern over certain provisions regarding creditworthiness. How do you respond? A. Mr. Hahn s concern about limiting supplier default risk7 relates to language in Sections 6.1 and 6.5 of the Uniform SMA that provides8 PECO with discretion to agree to less restrictive creditworthiness requirements for 9 suppliers than those set forth in the RFP. While Mr. Hahn does not propose any 10 changes to the Uniform 11 SMA, I believe his concerns are misplaced. Section 6.1 is designed to ensure that suppliers have clear 12 obligations to maintain creditworthiness requirements during the term of the Uniform 1 SMA. The language in the Uniform SMA is intended to give PECO 14 flexibility to address changing market conditions while maintaining default15 service supply for customers. While this language did not appear in the 16 supply master agreement used by PECO in DSP II, identical language in other supply 17 master agreements used by Pennsylvania EDCs was approved by the Commission 18 in other default service proceedings and this language was therefore adopted 19 by the EDCs in the 20 development of the Uniform SMA. Section 6.5 provides a mechanism for the Company to21 manage credit requirements for suppliers which can vary based upon22 market conditions and 12

15 changes in supplier creditworthiness. Article 14 of PECO s 1 Commission- approved supply master agreement for DSP II includes2a similar provision, and language similar to Section 6.5 has also been previously approved by the 4 Commission in other default service proceedings. PECO has not been required to exercise its discretion under 5 Article 14 of its DSP II supply master agreement. In the event that circumstances 6 change, PECO intends to exercise its discretion under both Section 6.17 and 6.5 consistent with the Uniform SMA provisions and ensure that all suppliers 8 are treated equally in 9 those circumstances for the benefit of customers Q. Have you reviewed NEPM s criticisms of the minimum unsecured debt rating requirements for issuers of Letters of Credit ( LOCs ) proposed by PECO as part of the Uniform SMA developed through the Commission s Office of Competitive Market Oversight ( OCMO ) procurement working group collaborative process? A. Yes. NEPM opposes the A/A2 minimum unsecured debt 15 rating requirement for financial institutions that issue LOCs to wholesale suppliers 16 in Section 6.7(b) of the Uniform SMA, which represents an increase of one 17level from the A-/A minimum unsecured debt rating for LOCs under PECO s 18 DSP II supply master agreement. Mr. Cheslock contends that this increased19 rating is inconsistent with wholesale power supply agreements adopted by the Edison 20 Electric Institute, and may limit the financial institutions and banks that can21 issue LOCs to wholesale 22 suppliers. 1

16 1 17. Q. Do you agree with Mr. Cheslock s rationale? A. No. Mr. Cheslock has not offered any evidence that the2 Uniform SMA s slightly elevated credit ratings will limit the availability of financing through LOCs for wholesale suppliers or diminish bidder participation in 4PECO s procurements in any material way. Notably, the A/A2 credit rating for issuers 5 of LOCs proposed in Section 6.7(b) of the Uniform SMA is the same minimum 6 requirement employed in the agreements used in the New Jersey basic 7 generation service ( BGS ) auctions. Indeed, a recent BGS auction in February resulted in eight winning suppliers for FPFR products, including NEPM, 9 notwithstanding the A/A2 minimum credit rating for issuers of LOCs. The 10Commission should therefore approve the Uniform SMA as submitted by PECO V. RECOVERY OF PJM CHARGES 18. Q. Mr. McCawley, have you reviewed the testimony of OCA witness Hahn that addressed PECO s proposed change in this proceeding relating to the allocation of PJM Generation Deactivation charges under the Uniform SMA? A. Yes. Mr. Hahn does not oppose collection of Generation 17 Deactivation charges via transmission rates, but expresses concern that these charges 18 will not be collected ratably from all customers (default service and shopping 19 customers). See I/M/O The Provision of Basic Generation Service for the Period Beginning June 1, 2014, N.J.B.P.U. Docket No. ER (Order entered February 12, 2014). 14

17 Currently, these costs are paid by all LSEs in the PECO1 Zone i.e. EGSs and PECO on behalf of FPFR suppliers in proportion to the 2 load they serve. Mr. Hahn s concern is based on the incorrect view that PECO s proposal would shift responsibility for Generation Deactivation charges from4 EGSs as LSEs to PECO in its role as the EDC. However, PECO s proposed charge 5 will result in Generation Deactivation charges being collected directly 6 by PECO from default service customers under PECO s bypassable default service 7 transmission rate instead of indirectly as part of the price for default service 8 supply paid to wholesale suppliers, which is ultimately included in default 9 service rates. Under PECO s proposal, EGSs will continue to pay for Generation 10 Deactivation charges associated with the load they serve (which the EGS may 11 or may not pass on to 12 shopping customers as part of its competitive price) Q. Does Mr. Hahn oppose PECO s proposal if Generation Deactivation charges continue to be the responsibility of all LSEs? A. I do not believe so. Because EGSs will continue to be15 responsible for Generation Deactivation charges as LSEs, Mr. Hahn s concern that 16those costs will not be 17 collected from all PECO customers is unwarranted Q. Mr. McCawley, please describe the proposal of RESA to transfer PJM costs from LSEs to PECO for recovery from both shopping and non-shopping customers. A. Mr. Hudson, on behalf of RESA, has proposed that PECO 21 undertake responsibility for collecting and recovering from customers 22 certain PJM 15

18 transmission charges, including Generation Deactivation 1 and Network Integration Transmission Service ( NITS ), and costs associated with 2 transmission upgrades ( RTEP ), as well as unaccounted for energy ( UFE ). Mr. Hudson asserts that because the future amount of these costs is unknown and 4 suppliers cannot hedge these risks, suppliers may charge customers a premium5that is much higher than the actual charges. For this reason, he believes that shifting 6 these unknown costs from all EGSs directly to all customers through PECO, 7via a non-bypassable tariff charge, will reduce market prices and benefit all8stakeholders Q. Is the Commission currently considering a similar proposal in any other proceedings? A. Yes. In the default service proceedings of Metropolitan 11 Edison Company, Pennsylvania Electric Company, Pennsylvania Power12 Company and West Penn Power Company (collectively, FirstEnergy EDCs ) at 1Docket No. P , et al., the FirstEnergy EDCs proposed to assume 14 responsibility for PJM Generation Deactivation charges, UFE costs and PJM15 charges for tie line, generation and retail customer meter data errors discovered 16 after financial settlement ( Meter Adjustments ) and recover the associated 17 costs on a non- bypassable basis under their Default Service Support Riders 18 ( DSSRs ). This would be in addition to DSSR recovery of RTEP and 19 Expansion Cost Recovery Change ( ECRC ) costs, which the Commission approved 20 in a prior default service proceeding involving the FirstEnergy EDCs. In 21the pending case, both RESA and FirstEnergy Solutions ( FES ) recommended 22 expanding the FirstEnergy EDCs proposal to include NITS, which the 2 FirstEnergy EDCs 16

19 subsequently endorsed. On May 6, 2014, Administrative 1 Law Judge Susan D. Colwell issued her decision recommending approval of2 a joint petition for settlement ( FirstEnergy Settlement ) that provides, among other things, that the FirstEnergy EDCs will recover Generation Deactivation4 charges, UFE and Meter Adjustments through their non-bypassable DSSRs. 4 With 5 respect to the recovery of NITS costs, which was reserved for litigation by the6parties to the FirstEnergy Settlement, Judge Colwell concluded in the Recommended 7 Decision, p. 8, that while there was sufficient evidence to support a finding8 that inclusion of NITS in the DSSR was now justified, she was constrained to deny 9 the RESA/FES proposal because of the Commission s treatment of NITS costs10 in the FirstEnergy EDCs 11 prior default service proceedings Q. In light of the developments in the FirstEnergy EDCs proceedings, does PECO agree to assume responsibility for any of the non-market based charges set forth in RESA s proposal? A. No, as the Commission has not ruled on Judge Colwell s 15 Recommended Decision. Consistent with DSP II, PECO believes that 16LSEs, including EGSs, should be responsible for PJM charges assigned to LSEs. 17 However, as noted in my direct testimony, PECO will continue to monitor the 18 FirstEnergy EDCs proceedings and will take into consideration any Commission 19 direction to the FirstEnergy EDCs as it may apply to PECO s proposals 20for DSP III. 4 See Secretarial Letter, Joint Petition of Metropolitan Edison Company, Pennsylvania Electric Company, Pennsylvania Power Company and West Penn Power Company for Approval of their Default Service Programs, Docket Nos. P et al. (entered May 6, 2014) ( Recommended Decision ). 17

20 1 VI. STANDARD OFFER PROGRAM 2 2. Q. Mr. McCawley, do any of the parties recommend modifications to PECO s SOP? A. Yes. The OCA generally opposes continuation of the SOP 4 pending a statewide Commission review of the referral programs5 for all EDCs. To aid in that evaluation, OCA witness Alexander recommends that 6 PECO perform a survey or customer focus group to obtain information about 7 participating customers understanding of the SOP. She also recommends 8 that PECO implement the following changes: (1) revision of the SOP 9 training materials and scripts to clearly convey that the SOP rate may be higher 10 or lower than the Price- to-compare ( PTC ) in the future; and (2) modification 11of the SOP RFP and Rules to require EGSs who acquired SOP customers before 12 revisions to the 1 Commission s regulations at 52 Pa. Code promulgated in Final-Omitted Rulemaking Order become effective to conform the content 14 of their end of term 15 notices and contract offers to those new regulations. 5 RESA proposes that PECO convene a stakeholder collaborative 16 in January 2015 to review the success of the SOP and solicit feedback 17 on ways to improve the program. RESA also recommends that PECO implement 18 the following changes: (1) publication of the discounted SOP price to its supplier-support 19 website at the time each quarterly PTC is published; (2) elimination 20 of the SOP requirement that 5 See Final-Omitted Rulemaking Order, Rulemaking to Amend the Provisions of 52 Pa. Code, Section 54.5 Regulations Regarding Disclosure Statement for Residential and Small Business Customers and to Add Section Regulations Regarding the Provision of Notices of Contract Expiration or Changes in Terms for Residential and Small Business Customers, Docket No. L (entered April, 2014) ( Final-Omitted Rulemaking Order ). 18

21 EGSs serve both residential and small commercial customers; 1 () quarterly training of PECO customer service representatives about 2 presenting the SOP; and (4) issuance of communications to customers about thesop on a quarterly basis Q. Does PECO support the collaborative proposed by RESA and the generic review of referral programs proposed by the OCA? A. Yes, the Company supports both processes as means to6evaluate and identify potential improvements to the SOP. However, the completion 7 of these reviews should not be a prerequisite to the continuation of the SOP 8 for the term of 9 PECO s DSP III Q. Mr. McCawley, does PECO agree with any of the specific SOP design changes proposed by the OCA or RESA? A. Not at this time. PECO believes that the collaborative12 proposed by RESA is the appropriate venue to consider operational and design changes 1 to the SOP, including the appropriate allocation of additional administrative 14 costs incurred as 15 a result of those changes. I would, however, like to respond to the OCA s proposal 16 that PECO modify 17 requirements for end of term notices in light of the recent Final-Omitted Rulemaking Order. The Company believes that the current 18 Commission- approved SOP Rules include clear and appropriate customer 19 protections regarding end of term notices and reporting requirements for participating 20 EGS. These protections and reporting requirements provide the Commission 21 with ample information to monitor the actions of those suppliers and 22 enforce its new 19

22 regulations promulgated as part of the Final-Omitted Rulemaking 1 Order. The Company does not believe it is appropriate to shift enforcement 2 responsibilities for the Commission s regulations to PECO Q. Do you agree with the OCA s recommendation to perform a survey or convene a focus group of customers participating in the SOP? A. PECO does not believe that information generated from6 such a survey or focus group is relevant to continuation of the SOP consistent7with the Commission s observation in the End State Order (pp. 12-1) that standard 8 offer customer referral programs will improve the overall operation of 9 the competitive market in the near term. Similar to proposals to change SOP design, 10 the collaborative or generic review proceeding would be appropriate venues 11 for deciding what data should be collected and how the data will be used to evaluate 12 the SOP Q. Is PECO taking any steps to improve the presentation of the SOP during eligible customer contacts with the Company s call center? A. Yes. To endeavor to increase SOP enrollments, PECO15 has consulted with other Pennsylvania EDCs and stakeholders to share best practices 16 on implementation of standard offer customer referral programs. As a result17 of those discussions, PECO is in the process of revising its call handling process 18 to transfer all eligible calls to a third-party servicer (Allconnect) used by other 19 Pennsylvania EDCs to provide further information regarding the SOP after a20 customer s initial contact 21 with PECO s call center

23 1 VII. CONCLUSION Q. Does this conclude your rebuttal testimony? A. Yes, it does. 21