FE Announces Updates to SSO Rates

Electric costs will be increasing by approximately 0.3¢ per kilowatt hour (kWh) on April 1 for FirstEnergy’s (FE) Ohio customers that take electric generation service under the utilities’ Standard Service Offer (SSO). The SSO is the default rate charged by the utility for generation and ancillary services to customers that do not contract with an alternative supplier. The SSO generation rate is higher in the three summer months of June, July, and August than it is in the other nine months of the year.

Many Brakey Energy clients are currently electing to default to the SSO because of high wholesale market power prices. Despite the increase in the SSO, it still remains incredibly attractive relative to current market conditions.

The current and April 1 SSO per kWh rates for 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 June 1, 2022.

Table 1: OE SSO Rates

Table 2: CEI SSO Rates

Table 3: TE SSO Rates

If you would like more information about how FE’s SSO rate updates will impact your monthly electric costs, please contact Jennifer Lemley.

FE Files Revisions to March 1, 2022 NMB Rider Rates

Transmission costs for OE GT and CEI GSU customers will be slightly higher in 2022 than previously anticipated, but still sharply less than prior year rates. FE filed revisions to its March 1, 2022 Nonmarket-Based Services (NMB) rider rates on February 25, 2022. The NMB rider is used to recover FE’s nonmarket-based costs for transmission and ancillary services.

Compared to the March 1 NMB rider rates filed by FE in December 2021, the revised OE GT rate is approximately 11.1% higher and the revised CEI GSU rate is approximately 3.5% higher. The revised March 1, 2022 NMB rider rates for all other customer classes are lower compared to rates in the original filing.

Current NMB rider rates for OE, CEI, and TE RS, GS, GP, GSU, and GT rate schedules are shown in the table below. Also shown are the previous NMB rider rates that were in effect from March 1, 2021 through February 28, 2022. Rates are per kWh for RS customers and per kilowatt (kW) or kilovolt-ampere (kVa) for GS, GP, GSU, and GT customers.

Table 4: OE NMB Rider Rates

Table 5: CEI NMB Rider Rates

Table 6: TE NMB Rider Rates

NMB rider rates decreased for all customers of FE three Ohio operating companies on March 1. These decreases are primarily the result of FE’s overcollection of an estimated $96,862,970 in NMB rider revenue through February 2022.

Clients that are participating in FE’s transmission pilot program are opted out of paying the NMB rider. If you have any questions about this pilot program or how the new NMB rates will impact your electric costs, please contact Jennifer Lemley.

FE and AEP Announce Results of Latest SSO Auctions

FE and American Electric Power’s (AEP) Ohio customers that take generation service under the utilities’ SSO will likely see increases in electric costs beginning June 1. FE and AEP use a series of Competitive Bidding Process auctions to secure SSO load (i.e., energy and capacity) for each June 1 through May 31 delivery year (DY). The final auctions for the June 1, 2022 through May 31, 2023 DY (“2022-2023 DY”) were held in early March.

FE’s final SSO auction for the 2022-2023 DY was held on March 7, 2022. The auction secured 34% of FE’s SSO load for the DY and cleared at a price of 6.811¢ per kWh. Two previous auctions held in August and October 2021 secured the remaining SSO load for the DY. The table below summarizes the results from these auctions.

Table 7: Results of FE SSO Auctions for the 2022-2023 DY

FE’s SSO auctions resulted in a weighted average price of 5.342¢ per kWh for the 2022-2023 DY. This is approximately 16.4% higher than the average price for the auctions used to secure SSO load for the current (June 1, 2021 through May 31, 2022) DY. However, we believe this SSO rate will be below prevailing market prices for most customers.

AEP’s final SSO auction for the 2022-2023 DY was held on March 8, 2022. The auction secured 50% of AEP’s SSO load for the DY and cleared at a price of 6.927¢ per kWh. Another auction held in November 2021 secured the remaining SSO load for the DY. The table below summarizes the results from these auctions.

Table 8: Results of AEP SSO Auctions for the 2022-2023 DY

AEP’s SSO auctions resulted in a weighted average price of 6.221¢ per kWh for the 2022-2023 DY. This is approximately 39.2% higher than the average price for the auctions used to secure SSO load for the current DY.

FE and AEP will use the SSO auction prices to calculate 2022-2023 DY rates for their Generation Riders (“Rider GEN”) for individual customer classes. Rider GEN is the primary component of generation costs for customers served under the SSO. It has separate energy and capacity components. The energy component of FE’s Rider GEN is higher for the summer months of June, July, and August than it is for the remaining nine months of the year. AEP’s Rider GEN has no seasonal differences.

FE and AEP have until the beginning of May to file Rider GEN rates for the 2022-2023 DY. Although we do not yet know what SSO rates will be for specific customer classes, we believe it is likely that rates will increase (perhaps significantly) on June 1 for most, if not all, FE and AEP customers. If you have any questions about the recent SSO auctions, please contact Jennifer Lemley.

Residential Corner

The highly competitive generation offers we highlighted in the past for residential customers have long disappeared. We are now recommending customers with expiring contracts default to the SSO until further notice. The SSO is the default price customers pay that are not competitively sourcing power. This rate varies by electric distribution utility but is likely below current market conditions. To the extent you are in 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 extremely costly holdover provisions.

Brakey Energy has long and often found defaulting to distribution utilities’ Standard Choice Offer (SCO) a prudent strategy for natural gas supply. We encourage our readers to employ this strategy if they’re comfortable riding the highly volatile natural gas market. Despite the runup in natural gas prices, we’re seeing the SCO produce better pricing than many other competitive offers.

Natural Gas Market Update

The NYMEX price for March settled at $4.568 per Million British Thermal Units (MMBtu) on February 24, 2022. This price is down 27.1% from February’s price of $6.265 per MMBtu. This settlement price is used to calculate March 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 decreased at the end of February in anticipation of warmer temperatures and decreased heating demand.

Figure 1: NYMEX Monthly Natural Gas Settlement Prices

Electricity Market Update

The graph below shows the Around-the-Clock (ATC) 12-month price strip for electric generation and how it has changed over the past 36 months for three Ohio utility service territories: AEP, FE (the ATSI zone), and AES-Ohio (formerly Dayton Power & Light (the DAY zone)). Prices have increased sharply since February, coinciding with Russia’s invasion of Ukraine.

Figure 2: 12-Month Energy Price Strip

*ATC pricing as of March 21, 2022. Data provided by Direct Energy Business.

The graph below provided by Direct Energy Business shows the March 21, 2020 through March 21, 2022 ATC forward prices for calendar years 2023, 2024, 2025, 2026, and 2027 for the AD hub. Forward calendar year price for 2023 is continuing to trade at an extreme premium to outlier years.

Figure 3: AD Hub Calendar Year Strip Prices

*ATC pricing as of March 21, 2022.