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A non-unanimous settlement governing the provision of default service at UGI Utilities, Inc. that if approved would establish a default service plan for UGI for the period June 1, 2025, through May 31, 2029 (DSP V).  Generally, the non-unanimous settlement would adopt UGI’s proposed default service product mix, except for a change in the term length for one of UGI’s energy-only ATC blocks for GSR-1 customers (those under 100 kW).

Signatories to a non-unanimous settlement include UGI Utilities, Inc. (UGI), the Office of Consumer Advocate, and the Office of Small Business Advocate. Notably, Penn Renewables is not a signature to the default service settlement and is contesting the default service proceeding that proposes to change how net metered customers are assigned to a default service class.  Among other things Penn Renewables objects to UGI’s proposal that would ultimately result in a change in the price paid to impacted net metered customers for excess generation.

As background, there are two parts of this UGI Utilities, Inc – Electric Division (“UGI”) Default Service Plan (“DSP”) that concerns the procurement of electricity for UGI customers for the next four years, beginning June 1, 2025. UGI has reached a non-unanimous Settlement with the Office of Consumer Advocate (“OCA”) and the Office of Small Business Advocate (“OSBA”) that resolves that part of the case, and Penn Renewables, LLP (“Penn”) has not participated in any part of that settlement.

From Penn Renewables Brief Regarding Net Metering:

{***} “The second part of this matter is UGI’s effort to deliberately change the classification of customer-generators that wish to participate in the net metering provisions and associated benefits provided by the Alternative Energy Portfolio Standards Act (“AEPSA”), 73 P.S. § 1648.1, et seq. Regardless of UGI’s intent, the ultimate outcome of UGI’s redefining the groups of customers for whom it procures electricity will be to discourage and thwart the introduction of net metered solar energy projects into its distribution system. It is for this second reason that Penn filed a complaint in this matter, and it is these changes in UGI’s DSP V plan that Penn has addressed in this case and in this Brief.”

In the months leading up to its DSP V filing, UGI received net metering customer-generator applications for 12 net metered solar installations in the 1,000 to 2,000 kW size range from Penn. Concerned about the impact of such projects, UGI radically modified the default service model that it had used for all of its prior DSP filings in a manner that appears to have been calculated to discourage Penn Renewables’ projects from ever being built. If Penn and other developers persist, UGI’s classification of such projects will impose a payment scheme for excess generation that would compensate those projects at rates far below what is statutorily required and would treat those projects as though they were wholesale sellers rather than distribution level producers 2 entitled to full retail value. Succinctly, UGI’s rate does not comply with the AEPS statute or the Public Utility Code and the Regulations promulgated thereunder. 

UGI’s scheme is multifaceted and involves inventing a new measurement to classify customers in its existing GSR-2 procurement class – System Peak Load Impact (“SPLI”) – and then trying to convince the Commission that this new measure is the same as Registered Peak Load, which it is not. Then, UGI proposed to classify customer-generators, whose registered peak load is typically less than 25kW, as GSR-2 customers due to their output, which again, no Commission Regulation authorizes. Finally, UGI now seeks to impose a new threshold for inclusion in the GSR-2 procurement class, of 100 kW SPLI, not registered peak load as had been the standard for over 20 years. UGI’s plan, however, overlooks the fact that its proposal violates both the AEPSA and Act 1291, which requires that small business customers (defined as a customer with less than 25 kW of registered peak load)2 must have a rate available to them that changes no more frequently than quarterly, among other requirements.3 

After re-classifying customers by its newly invented measure (SPLI) into GSR-1 customers – who are charged a default service rate based on actual costs of providing default service – and GSR-2 customers, who would receive a rate that changes hourly. UGI admits, by claiming that most GSR-2 customer shop anyway, that it was intended to incentivize those large consuming customers to shop for energy.4 UGI then applied a rate mechanism to the one hundred plus customers in GSR-2 and the few customer-generators on its system, or which will be on its system – who cannot shop. Tr. 47:17-48:16. This GSR-2 rate mechanism produces a default service rate, also known as the “Price to Compare” or “PTC”, for those customers who only consume energy, that mimics the PJM locational marginal price (“LMP”). But for customer-generators5 who consume very little energy, and instead produce excess energy, the compensation for the excess energy is significantly diminished, and is far less than what 99.9 % of UGI’s a customers who may be consuming the same quantity of energy on the same power lines at the same time would be required to pay. To make things worse, the compensation for excess energy produced by customer-generators would sink below zero at certain times and will sink below the wholesale LMP on a daily basis, which means that customer-generators would be penalized for producing energy. The same is not true for the GSR-2 customers who are only consuming energy, whose rate will never go below zero. UGI’s witness characterizes a less than zero price as a market signal to encourage customer-generators to not produce – as happens with wholesale generators and characterizes customer-generators as having market savvy and the ability to move between the wholesale and retail markets, even though he admitted that he did not know what was required to move between wholesale and retail markets or how long it would take. (Tr. 49-50).

Penn’s wholly owned subsidiaries, the twelve solar projects, are such customer generators sited at small business customers that have peak loads less than 25 kW. UGI has proposed to reclassify and move these projects to GSR-2, and subject them to a less than compensatory rate, and certainly less than full retail value. The AEPSA requires that Customer generators receive “full retail value” for every excess kilowatt, not just a few.6 It is clear also that 99.9% of UGI’s customers (GSR-1) will pay a retail rate that for the vast majority of the time will be substantially greater than the rate proposed for customer-generators and even the customers in the GSR-2 procurement class who only consume energy, will regularly pay higher rates than those paid to customer-generators who would match their consumption with production. Under no regularly occurring scenario are customer-generators receiving full retail value for the energy they produce, i.e., the same rate that retail customers pay for electricity under UGI’s proposed scheme. See Exhibit JC-12. Rather, on the day of the hearing, October 1, UGI made an alteration in its filing through rejoinder testimony, yet even with UGI’s last minute “change” to credit NSLP and PLC charges, the rate remains far short of full retail value, and UGI’s last minute change does not bring the rate into compliance with the AEPSA. The General Assembly enacted AEPSA because of the benefits it provides to Pennsylvania through the “acquisition of electric energy generated from renewable and environmentally friendly sources.”7 Penn’s business plan is to develop and construct distributed generation systems that will produce excess energy and to be compensated for doing so, at full retail value. UGI has decided that the law should not apply in its territory and has done everything in its power to make sure no renewable energy is provided or procured from customer-generators larger than 100 kW. UGI’s position is contrary to law, wholly lacking in merit and must be rejected.

UGI’s DSP V plan to reconfigure the rate structure for default service customers, particularly those in the GSR-2 procurement class, is intended specifically to address UGI’s unfounded and unsupported contention that customer-generators, in this case, solar energy projects, will cause harm to its procurement for residential and small commercial customers in the GSR-1 classification. UGI St. 2, 22:19-23:2. Penn Renewable’s projects are, by the Commission’s definition, also small commercial customers. In this case, however, UGI has failed to introduce any evidence that supports its contention of harm. No actual evidence of harm, no evidence of the alleged cross subsidies, no evidence, other than conjecture that procurement would be impacted if it paid customer-generators full retail value, has been provided. The evidence of harm to customer-generators, however, is present. Mr. Crist provided numerous examples of how UGI’s GSR-2 mechanism will not fairly compensate customer generators, most strikingly, that the GSR-2 PTC is so volatile that it will regularly go below the wholesale LMP as well as negative price territory so that customer-generators will not be paid full retail value, but rather be forced to pay some non-transparent wholesale price for the energy a customer-generator is producing and which its neighbors are consuming at the full retail value. It is not possible to reconcile a negative price that charges the generator for producing with the 8 express statutory requirements that customer-generators receive full retail value for “all energy produced on an annual basis”. 73 P.S. § 1648.5 (emphasis added). The issue to be resolved is the requirement of the AEPSA that customer-generators be paid full retail value for all excess generation, and the mere allegation that doing so would impact UGI’s procurement for its default service customers. The AEPSA is clear, and nothing in the Public Utility Code contradicts its mandate for how customer-generators are compensated. 8 Considering the Commission Regulations that are violated by UGI’s proposal, it would appear that the opposite is true, that even if paying customer-generators full retail value did increase costs to customers, and there is no evidence in the record that it will, the Public Utility Code would not be in conflict. The Code does not suggest or authorize violating the AEPSA in the name of providing service to small customers. Contrary to UGI’s lack of proof, there is ample evidence of the harm that UGI would impose upon customer-generators in the name of protecting its procurement process. Harm of charging customer-generators to produce power, harm of non-transparent rates that will change hourly, but will only be knowable weeks after-the-fact. Harm of reducing the reliability of its distribution system by not adding distributed generation and free upgrades to the local grid and harm of discriminating against legal projects that the AEPSA specifically encourages to provide that generation. UGI’s witness even admitted on the stand that they invented new terminology, not authorized in the regulations, but to be included in UGI’s tariff in the effort to keep customer generators off the UGI system. Tr. 53:13-54:8. Section 1304 of the Public Utility Code prohibits unreasonable discrimination or disadvantage in rates as between localities or classes of service. 66 Pa. C.S. § 1304. Here, UGI has 8 See Hommrich v. Pennsylvania Public Utility Commission, 231 A.3d 1027 (Pa. Cmwlth. 2020, affirmed 664 Pa. 567 (Pa. 2021) (“Hommrich”). 9 created a structure whose sole purpose is to discriminate as between GSR-2 and GSR-1, by providing a stable transparent, full retail value rate to GSR-1 customers, and a wholesale market based, ever fluctuating rate to GSR-2. The UGI proposal also discriminates within GSR-2, by charging different rates to different customers, one consuming energy and one producing it, with the rate the producer is being paid being far less than the rate the consumer is paying, In short, UGI has proposed, without evidence, that it be permitted to openly discriminate between customers, in violation of Section 1304 and the Commission’s Regulations and in violation of the AEPSA. The Commission should not go along with UGI’s plan.” {***}

Jnt Pet For Approval Of Non-Unanimous Settlement With OCA- UGI Electric  (10/22/2024)

Briefs – Penn Renewables(10/16/2024)

BRIEFS – UGI (10/16/2024)

BRIEFS – OCA  (10/16/2024)

P-2024-3049343  (Opened 05/31/2024)

Petition of UGI Utilities, Inc-Electric Div for Approval of a Default Service Plan (DSP V) for the Period of June 1, 2025, through May 31, 2029.