British Columbia Utilities Commission Information Request No. 1.72.1 Dated 15 May 2003 British Columbia Hydro 8 Power Authority Response Issued 29 May 2003 A Proposal by the British Columbia Hydro and Power Authority Regarding a Heritage Contract, Stepped Rates and Access Principles
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72.0
Reference:
72.1
Volume 2, Appendix A Stepped Rate Design Report by E3, p. 19
On page 19, the report states that customers must be meaningfully able to choose retail direct access, free of the onerous requirements that have accompanied such a choice in other jurisdictions. Please provide a summary of the other jurisdictions surveyed and the “onerous requirements” related to retail direct access imposed in each.
RESPONSE:
BC Hydro asked E3 to provide an answer to this question and E3 provided the following:
“E3did not conduct a comprehensive survey of barriers to meaningful retail choice in other jurisdictions. Such a survey was beyond the scope of the stepped rate report. Nevertheless, through its experience working in many jurisdictions, E3 can point to the following examples of requirements that might be considered “onerous”, and which have formed effective barriers to retail access.
“Oreaon In Oregon, utilities conduct a single direct access enrollment period each year. The utilities announce at the beginning of the period what the cost-of-service rate will be for the following year. Customers then have a maximum of 48 hours to decide whether stay with the utility or opt for a third-party supplier. Once a customer makes this choice, it cannot return to utility service for at least five years. Customers have argued that these requirements leave them with insufficient time to find a third-party supplier to beat the utility’s price, and an unacceptable risk that it won’t be able to find competitive supplies for the full five-year period. The stated reason for these requirements is to prevent costshifting. Because the default rate is a cost-based rate, the rate will vary depending on the size of the customer base. This means that customers moving back and forth between utility and third-party service shift costs to and from other customers. In this case, it is prudent to protect non-participatingcustomers from the decisions of direct access customers through stringent safeguards. “Ontario In Ontario, the barrier to effective competition was a shopping credit that varied based on market conditions and could not be determined in advance. For large industrial customers, the shopping credit was the hourly spot market price. However, in order to allow customers to continue to benefit from historically low rates, Ontario Power Generation (OPG) was to refund half the difference between the hourly spot market price and its historical rate of 3.8 @kWh the end of each year. This meant that at industrial customers could not determine what their total energy bills would be until the
British Columbia Utilities Commission Information Request No. 1.72.1 Dated 15 May 2003 British Columbia Hydro & Power Authority Response Issued 29 May 2003 A Proposal by the British Columbia Hydro and Power Authority Regarding a Heritage Contract, Stepped Rates and Access Principles
Page 2 of 2
end of the year, making it difficult for customers to make commitments to third-party suppliers. “California California’s shopping credit, like Ontario’s, was based on the daily spot market price. However, California also levied a Competitive Transition Charge (CTC) to collect “stranded costs” that was equal to the difference between the spot market price and the utility’s historical rate (less a legislated 10% reduction). Thus, any savings a customer achieved by going to market were effectively recaptured by the utility as a stranded cost charge. “Massachusetts Massachusetts has been criticized for setting a shopping credit that is too low to allow retail customers to realize savings by moving to competing suppliers. Massachusetts’ shopping credit is said to fail to accurately account for advantages that the utility has in billing, customer acquisition, and supporting infrastructure. These advantages may be more important for competitive suppliers to residential and small commercial customers, where customer acquisition costs are substantial.”