PSC Approves Phase II Settlement Agreement Regarding Standard Offer Service In Case No. 8908
MD PSC Approves Settlement Agreement Regarding Standard Offer Service In Case No. 8908
|FOR IMMEDIATE RELEASE
April 29, 2003
|For More Information, Please Contact:
Chrys Wilson, Manager
Office of External Relations
MD PSC Approves Settlement Agreement
Regarding Standard Offer Service
In Case No. 8908
Baltimore, MD - Today, the Maryland Public Service Commission issued Order No. 78400, which requires electric utilities to continue to provide electric supply to their customers. The Order approves the settlement that establishes the procurement and pricing methodology for this service. Standard Offer Service ("SOS") is the alternative to purchasing electric supply from a competitive supplier. By law, the availability, procurement, and pricing of SOS are overseen by the Commission.
The Settlement Agreement represents phase one of a two-part process. This phase establishes the policy framework for a competitive wholesale supply procurement methodology. It will be used to implement utility-provided Standard Offer Service at market prices to Maryland's retail electric customers after their utility-specific restructuring settlements expire beginning as early as 2004. Phase two will establish the technical details supporting the policy framework.
The Commission is requiring the investor-owned utilities operating in the State to provide these services based on its conclusion that a competitive retail electricity supply market in Maryland has not yet developed. Thus, the Commission can not relieve these utilities of their obligation to provide electric supply. The investor-owned utilities in the State include The Potomac Edison Company, d/b/a Allegheny Power, Baltimore Gas and Electric Company, Potomac Electric Power Company and Delmarva Power & Light d/b/a Conectiv Power Delivery. No changes will be made to how cooperative utilities provide SOS to their customers. Twenty diverse parties signed the settlement reflecting appropriate accommodations of their often adverse interests.
Chairman Catherine I. Riley states, "the Commission approved the settlement because it is consistent with the Electric Act and will provide stable, reliable electric supply. The law charged the Commission with fostering the development of competitive markets. Since this has not yet occurred for a variety of reasons, extending SOS services is necessary to provide assurances to Maryland business and residential customers."
The settlement establishes four types of SOS services utilizing the traditional definitions in each utility territory. Each utility's historic rate structure and corresponding rate infrastructure are largely maintained within these categories. Each type of SOS will be available for varying terms beginning with the dates that the respective utility's restructuring rate caps/freezes end. The types and terms are as follows:
- Residential, four years;
- Type I - small commercial service, four years;
- Type II - medium commercial service, two years; and
- Type III - large commercial service, one year.
A true default service known as Hourly Priced Non-Residential Service ("HPS") will also be available to certain large, interval-metered customers. HPS is subject to the terms of the utility's tariffs and PSC regulations.
After passage of the Electric Customer Choice and Competition Act of 1999 ("the Electric Act"), the Commission approved restructuring settlements for each of Maryland's investor-owned utilities and cooperatives. Those restructuring orders set forth the framework for retail competition in each service territory and include a variety of price protection mechanisms (including the availability of SOS at capped or frozen rates) during the transition period to competitive markets. Under the restructuring settlements, many of these price protections are due to expire soon. The provisions of this settlement will become effective as early as July 1, 2004 throughout the State. Only Allegheny Power and Baltimore Gas and Electric residential customers have rate cap protections beyond 2004.
Riley further states, "When the price reductions and price freezes/caps contained in restructuring agreements expire, prices may increase. The extent to which that occurs will be determined by market conditions and the effectiveness of the procurement mechanism contained in this SOS settlement. We will actively monitor this process to assure compliance."
To ensure the continued orderly transition to competition and in compliance with the Electric Act, the settlement provides that utility SOS customers will be paying a market price for their electric service. Also, the utilities will be able to recover their verifiable and prudently incurred costs to procure electric supply.
The Commission believes the settlement offers the best approach for continuing to provide SOS. Its procurement and pricing will be designed to facilitate movement to a competitive electric retail market. The Commission concludes that the use of a multi-year, blended-price methodology will level out the effect of market volatility while at the same time providing stability and ensuring reliability of supply contract performance. The Commission will continue to utilize its full powers to ensure that this process is implemented in a manner consistent with the public interest.
SETTLEMENT AGREEMENT SIGNATORIES
- Baltimore Gas & Electric
- Building Owners and Managers Association of Metropolitan Baltimore, Inc.
- Choptank Electric Cooperative, Inc.
- Constellation NewEnergy, Inc.
- Delmarva Power & Light d/b/a Conectiv Power Delivery
- Maryland Energy Administration
- Maryland Energy Users Group
- Maryland Industrial Group
- Maryland Office of People's Counsel
- Maryland Public Service Commission Staff
- Maryland Retailers Association
- Mid-Atlantic Power Supply Association
- Mirant Mid-Atlantic, LLC
- Pepco Energy Services, Inc.
- Power Plant Research Program of the Department of Natural Resources
- The Potomac Edison Company d/b/a Allegheny Power
- Potomac Electric Power Company
- Southern Maryland Electric Cooperative, Inc.
- Strategic Energy, LLC