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PUC Defers Potential Changes To Utility’s Nonbypassable Riders
The Ohio Commission issues an order deferring FirstEnergy Ohio utilities’ current electric security plan proceeding, potential changes to the utilities’ Rider NMB and the Rider NMB opt-out pilot.
“{¶ 1} The Commission adopts the audit report filed by Exeter Associates, Inc. and finds that its specific recommendations should be considered within the context of the pending application for Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company to implement its sixth electric security plan.”
- Commission Conclusion
{¶ 32} Many parties provided the Commission with thoughtful comments in response to Exeter’s various recommendations for Rider NMB aimed to address a variety of issues, including cost shifting among the FirstEnergy electric distribution utilities (EDUs) and customer classes. While these comments were solicited while the ESP V Case was still pending, the Commission still finds the comments advocating for changes to Rider NMB and the associated Pilot Program in that proceeding to be informative and helpful for our purposes today.
{¶ 33} There appears to be overwhelming support for the continued ability for customers who have the capability to adequately respond to price signals to manage their transmission costs through an NSPL-based pricing mechanism, as currently done in the Pilot Program. As recognized in the Audit Report, the Rider NMB Pilot Program better aligns costs with cost causation, consistent with sound ratemaking principles. To explain further, Exeter states that “[w]hereas [Pilot participant] expenses are assigned * * * on the basis of NSPL, Rider NMB costs are allocated using four summer coincident retail demand (kW) peaks,” concluding that the Pilot Program exposes customers to costs consistent with cost causation. (Audit Report at 18). Exeter states that “[o]ther potential qualitative benefits of the Pilot include alignment with cost causation” and “[t]he Pilot Program aims to more accurately align the allocation of * * * costs with the causation of those costs at the PJM level, in line with the principle of cost causation.” (Audit Report at 43, 46.) In response to the concerns raised about cost-shifting, especially the impact on residential customers, Exeter found that non-participating commercial and industrial customers absorb over 75 percent of the cost shift (Audit Report at 2). Not only does it advance greater cost-alignment, but the Audit Report also concludes that the Rider NMB Pilot Program created a $231.1 million revenue requirement reduction for all customers during the audit period between March 2017 through February 2023 (Audit Report at 2).
{¶ 34} The main area of disagreement amongst the commenting parties appears to be what the Commission should do with Rider NMB itself, as opposed to the Pilot Program. As acknowledged by several parties in their comments, FirstEnergy proposed several modifications to Rider NMB and the Rider NMB Pilot Program in its ESP V application, including various changes to the rate design. Those proposed amendments were ultimately rejected by the Commission when we chose to maintain Rider NMB in its current form. In doing so, we explained that, despite support for a general NSPL-based billing approach, there was “a distinct lack of evidence regarding the bill impact of the proposed modifications to Rider NMB” and we were “unwilling to adopt modifications to Rider NMB until parties can demonstrate how classes of customers and individual customers are impacted by the proposed change.” ESP V Case, Opinion and Order (May 15, 2024) at ¶ 259-60. Moreover, in that same decision, we noted our hesitance to return to “the paradigm where load serving entities provide transmission service [that] has the potential to disrupt the CRES market as existing contracts likely do not include the costs of the nonmarket-based transmission services currently obtained through Rider NMB.” Id. This uncertainty continues to give us pause. As noted above, FirstEnergy, RESA, OEG, and OHA raised similar concerns regarding whether Exeter’s recommendation related to eliminating Rider NMB can achieve the desired cost-alignment objective without causing harm to customers, including increasing costs. Exeter itself advocated for a graduated implementation to account for these concerns even if the Commission was to adopt its primary recommendation to eliminate Rider NMB or several alternative recommendations (Audit Report at 53-54). We stress once more the importance of developing the necessary evidentiary record before effectuating changes to Rider NMB, whether they apply to rate design or otherwise. While the Audit Report represents an essential first step to this evaluation in providing critical information as to how the rider and Pilot Program currently operate and impact customers, more information is needed as to how Exeter’s recommendations could potentially impact customers and the market in general.
{¶ 35} The extension of Rider NMB is currently under consideration in the ESP VI Case. We agree with the majority of commenters that the ESP VI Case is the more appropriate proceeding to raise issues on the merits of Rider NMB and the associated Pilot Program. The Commission will take the Auditor’s recommendations, as detailed herein, under consideration when evaluating the ESP VI application and evidence produced in that proceeding to determine whether any changes to Rider NMB or the Rider NMB Pilot Program will be necessary or advantageous for FirstEnergy’s customers.7 Until that time, additional customers wishing to participate in the Pilot Program to utilize in an NSPL billing framework for transmission costs may seek approval to enroll in the program by filing an application for a reasonable arrangement pursuant to R.C. 4905.31.
{¶ 36} Finally, we find that the Companies should not be assessed a forfeiture for the alleged failure to timely respond to data requests in this audit, given the unique nature of the information requested in DR-001, subpart (h). As noted in Staff’s comments in response to this issue, FirstEnergy appears to have complied with all outstanding data requests as of May 1, 2023.
22-391-EL-RDR (04/20/2024)
(In The Matter Of The Review Of The Non-Market-Based Services Rider Pilot Program Established By Ohio Edison Company, The Cleveland Electric Illuminat)
