NOPEC Returning 500,000+ Customers to the SSO
More than 500,000 FirstEnergy-Ohio (FE) customers will soon see an end to high bills as a result of a recent decision by the Northeast Ohio Public Energy Council (NOPEC) to return customers served under its Standard Program Price to FE’s Standard Service Offer (SSO). NOPEC’s Standard Program Price is a variable rate that can change from month-to-month based on NOPEC’s cost to secure generation. The SSO is the default rate charged by FE’s operating companies for generation service to customers that do not contract with an alternative supplier or that are not part of a government aggregation program, like NOPEC.
In its Notice of Material Change filing submitted to the Public Utilities Commission of Ohio (PUCO) on August 24, 2022, NOPEC cited spiking electric prices that “could move even higher in 2023” as the reason for its decision. NOPEC’s Standard Program Price is currently more than double that of FE’s SSO.
It should be noted, however, that both of these facts were known, or should have been known, to NOPEC prior to its aggregation of customers. In a recent interview with Crain’s Cleveland Business, Matt Brakey, President of Brakey Energy, noted that while Brakey Energy began advising customers to revert to the more favorable SSO rate in October 2021, NOPEC “continued to put new customers on [the Standard Program Price] when they knew this was happening.”
NOPEC intends to return customers to the SSO beginning with customers’ September 2022 meter read dates. To facilitate the expedited return to the SSO, which typically requires the utilities to mail drop-notice letters to customers, NOPEC filed a motion for a one-time waiver of the drop-notice rule. NOPEC has communicated plans to resume serving customers in its aggregation program once its electric costs more closely align with the SSO rates.
In a September 7, 2022 Order, the PUCO granted NOPEC’s request for a one-time waiver of the drop-notice rule so that NOPEC customers would have an opportunity to “save money on their electric bills by receiving generation service from the SSO at a lower price.” As a result, NOPEC customers served under its Standard Program Price will begin defaulting to the utility’s SSO rate this month. This change should be reflected in customers’ October electric bills.
PUCO Rebukes NOPEC in Its Order
NOPEC’s decision to default customers to the SSO (discussed above) could have far-reaching consequences for all customers of Ohio’s investor-owned electric distribution utilities (EDUs). In its September 7, 2022 Order granting NOPEC’s request for a one-time waiver, the PUCO expressed concern that by prematurely returning customers to the SSO and then reenrolling those customers at some point in the future when economic conditions are favorable, NOPEC will adversely impact the retail suppliers that provide generation service to SSO customers, thereby resulting in higher prices in SSO auctions in the future.
Matt Brakey, President of Brakey Energy, expressed a similar concern in a recent interview with Crain’s Cleveland Business. “The auctions that determine the standard service offer…are not only going to produce higher prices because market prices have risen, they’re going to be higher because the extreme risk of the standard service offer is being laid bare for all to see.”
The PUCO Order suggested that NOPEC’s action may be grounds for suspension of its Certified Retail Electric Service (CRES) certificate. The PUCO has given NOPEC until September 28, 2022, to show cause why its certificate should not be suspended.
In addition, the PUCO is concerned that, without intervention, other government aggregators may follow NOPEC’s example and default customers en masse to the SSO. In an effort to protect the wholesale auctions that provide SSO generation service, the PUCO directed each EDU in the state to develop proposals providing for “minimum stay” requirements which would prevent aggregators from prematurely returning customers to default service and then, within a short time, reenrolling those customers in a new aggregation program.
Depending upon the terms of the EDUs’ proposals, these minimum stay requirements could become mandatory for all retail electric customers. This could be especially detrimental to new customers that opt to default to the SSO until their load becomes sufficiently established to receive favorable pricing from a CRES supplier and to established customers whose seasonable variation in usage makes CRES pricing uncompetitive compared to the SSO for a few months out of the year.
Due to the potential negative outcomes for our clients, Brakey Energy will be monitoring this case very closely and will provide updates in future newsletters.
Peak Loads for Summer 2022
For customers with electric generation contracts that pass through capacity, capacity costs are allocated according to each customer’s share of the load during PJM’s five regional load peaks (known as “Capacity Coincident Peaks,” or “Capacity CPs”). Likewise, for customers participating in FE’s or AEP’s transmission pilot programs, transmission costs are primarily allocated according to each customer’s share of the load during FE’s or AEP’s respective zonal load peaks (known as “Transmission CPs”). By actively managing load during potential CP events, these customers can mitigate future capacity and transmission costs.
Brakey Energy provides email and text alerts in advance of potential Capacity and Transmission CPs to those clients that elect to receive them. As of September 21, 2022, Brakey Energy has issued twelve Capacity CP alerts, eight FE Transmission CP alerts, and five AEP Transmission CP alerts for Summer 2022.
Capacity CPs occur during the five one-hour intervals when demand on the PJM regional grid is at its highest. Transmission CPs for FE customers occur during the five one-hour intervals when demand on FE’s zonal grid is at its highest. The Transmission CP for AEP customers occurs during the one-hour interval when demand on AEP’s zonal grid is at its highest.
The tables below list PJM’s and FE’s five highest loads and AEP’s single highest load this year, as well as the day and time of each occurrence. This is based on preliminary data.
Table 1: Five Highest Loads for PJM through September 21, 2022
Table 2: Five Highest Loads for FE through September 21, 2022
Table 3: Single Highest Load for AEP through September 21, 2022
Although we were able to provide notice in advance of all PJM CP events, we did not accurately predict the FE Transmission CP event that occurred on August 8 or the AEP Transmission CP event that occurred on June 22. Our missed FE Transmission CP was the result of load clearing materially higher than originally forecast. Our missed AEP Transmission CP was the result of heavy curtailment in the AEP zone during days when Brakey Energy issued AEP Transmission CP and PJM Capacity CP alerts. These curtailments drastically reduced metered peak loads on those days. As a result, AEP’s Transmission CP occurred on a day when no Transmission or Capacity CP alerts were issued. These heavy curtailments will make forecasting future AEP Transmission CPs very difficult.
Based on current weather forecasts, we do not anticipate any further potential CP events for the year. PJM can adjust metered load data for up to 90 days. Brakey Energy will continue to monitor metered loads and will provide an update on the Capacity and Transmission CPs once they are finalized by PJM.
Electric Costs Decreasing on October 1 for FE SSO Customers
Electric costs will be decreasing slightly on October 1 for FE customers that take electric generation service under the utilities’ SSO. The SSO is the default rate charged by the utility for generation services to customers that do not contract with an alternative supplier. The SSO generation rate is higher during the three summer months of June, July, and August than it is during the other nine months of the year.
The current and October 1, 2022 SSO rates per kilowatt hour (kWh) for customers served under Ohio Edison (OE), the Illuminating Company (CEI), and Toledo Edison (TE) Residential (RS), Secondary (GS), Primary (GP), Subtransmission (GSU), and Transmission (GT) rate schedules are shown in the tables below. These rates will change again on January 1, 2023.
Table 4: OE SSO Rates
Table 5: CEI SSO Rates
Table 6: TE SSO Rates
If you would like more information about how FE’s SSO rate update will impact your monthly electric costs, please contact Jennifer Lemley.
The highly competitive generation offers we highlighted in the past for residential customers have long disappeared. We have been recommending for about a year that customers with expiring contracts default to the SSO until Spring 2023. We will provide a new contracting recommendation then. The SSO rate varies by electric distribution utility but is likely materially below current market conditions. To the extent you are in an expiring contract, make sure you provide notice to your supplier that you would like to default back to the SSO as to avoid being swept up in an extremely expensive holdover provision.
On August 26, 2022 we highlighted a fixed price natural gas offer from Direct Energy. Unfortunately, that same offer is now $1.50 per MCF higher despite gas prices actually decreasing during this period. For those that did not grab the offer, defaulting to the distribution utilities’ Standard Choice Offer (SCO) remains a prudent strategy for natural gas supply. We encourage our readers to employ this strategy if they are comfortable riding the highly volatile natural gas market.
Natural Gas Market Update
The NYMEX price for September settled at $9.353 per Million British Thermal Units (MMBtu) on August 29, 2022. This price is up 7.7% from August’s price of $8.687 per MMBtu. This settlement price is used to calculate September gas supply costs for customers that contract for a NYMEX-based index gas product.
The graph below shows the year-over-year monthly NYMEX settlement prices for 2018, 2019, 2020, 2021, and 2022 to-date. Prices shown are in dollars per MMBtu of natural gas. Natural gas prices are now the highest they have been since we began tracking them in January 2009.
Figure 1: NYMEX Monthly Natural Gas Settlement Prices
Figure 2 below shows the historical September 20, 2020 through September 20, 2022 Around the Clock (ATC) forward NYMEX natural gas prices in dollars per MMBtu for calendar years 2023, 2024, 2025, 2026, 2027, and the 12-month strip price of October 2022 through September 2023 (labeled “Custom Strip” in the graph below). Although forward prices have softened slightly since early September, they are still near two-year highs.
Figure 2: ATC Calendar Year and 12-Month Strip NYMEX Natural Gas Prices
*Pricing courtesy of Direct Energy Business.
Electricity Market Update
Figure 3 below shows the historical September 20, 2020 through September 20, 2022 ATC forward power prices in dollars per Megawatt hour (MWh) for calendar years 2023, 2024, 2025, 2026, 2027, and the 12-month strip price of October 2022 through September 2023 (labeled “Custom Strip” in the graph below) for the AD Hub.
Forward power prices for the 12-month strip and calendar year 2023 are continuing to trade at extreme premiums relative to outlier years. Power prices continue to follow the natural gas market but have not quite seen the pullback one would expect given the recent sell off in gas.
Figure 3: ATC Calendar Year and 12-Month Strip Power Prices for the AD Hub
*Pricing courtesy of Direct Energy Business.