NGI The Weekly Gas Market Report
In complying with its 1998 Pennsylvania restructuring settlement, GPU Energy has issued a request for proposals (RFP) from electricity suppliers interested in providing competitive default service (CDS) to customers in its Metropolitan Edison Co. and Pennsylvania Electric Co. service territories.
CDS is the competitive bid process used to assign retail electric choice customers to a “provider of last resort.” The provider of last resort acts as a safety net to ensure that no one within the service territory is left without an electricity supplier, according to Pennsylvania’s electricity competition law. This provider is also obligated to serve consumers who do not choose an electric supplier or who cannot find a supplier willing to take them.
Under its Pennsylvania restructuring settlement, which implemented electric competition, GPU was ordered to bid out its provider of last resort obligation over several years. Under the RFP, licensed suppliers with the Pennsylvania Public Utility Commission (PUC) may bid for the opportunity to provide CDS at no more than GPU’s capped generation rate.
Bidders accept that they could be responsible for supplying electricity to up to 40% of the company’s customers for one year beginning June 1 of this year. GPU said that suppliers would also be able to choose whether they want to provide customer-care functions such as billing and collections as well.
“It started off last year with 20%, it grows to 40% this year and 60% up to 80%,” said Ray E. Dotter, spokesman for GPU. “Last year we did not receive any bids. The goal of this [RFP] is to give a jump start to competition so that a competitive supplier can come in and have a chunk of customers.”
GPU said subject to PUC review, over the next two-year period, provider of last resort service could be competitively bid for up to 80% of GPU’s customers.
If GPU selects a CDS supplier from this bidding process, it will then conduct a lottery to select customers to receive provider of last resort service from the new supplier. Any of the customers selected will have the option of returning to GPU Energy at no charge, to receive electric service.
“We are hopeful that the market will respond to the RFP and make this successful, but based on what happened last year, and current market conditions, that doesn’t seem likely,” said Dotter. “We still think it is in our customers’ interest to try to take advantage of opportunities to help develop competition.”
Late last year, a similar bidding process for competitive default service in PECO’s Pennsylvania service territory led to months of protesting over fairness. After a bidding period in October 2000, The New Power Company was awarded 299,300 electricity customers by PECO Energy, but Green Mountain Energy Co. disputed the transfer (see NGI, Dec. 11, 2000). The Pennsylvania PUC, however, overruled Green Mountain’s charge that PECO did not negotiate in good faith pertaining to the bidding process, and sanctioned awarding the customers to New Power.
Dotter assured that GPU Energy’s bidding process has been approved by the Pennsylvania PUC and provides for fair bid evaluation. Interested suppliers should contact Andrew Wildrick, manager power contract origination for GPU Energy, at (610)-375-5354. GPU Inc.’s three electric utility subsidiaries in the U.S. — doing business as GPU Energy — serve two million customers in Pennsylvania and New Jersey.
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