Pennsylvania’s Commonwealth Court made it clear last week that the state Public Utility Commission (PUC) has the ultimate say over how best to ensure reliability for Pennsylvania’s electric system, saying that the PUC needs to have wide latitude in being able to order customers to curtail energy usage during periods of peak demand in order to avoid brownouts or blackouts.

The matter wound up in the commonwealth court’s hands after a coalition of commercial and industrial customers in Pennsylvania Power & Light’s (PP&L) service territory complained about alleged changes to PP&L’s billing method. The PP&L Industrial Customer Alliance claimed the utility was altering its billing method so that customers on certain rate schedules paid higher distribution rates for service that was of a lesser quality. The alliance believes that certain customers who have contracted with an electric generation supplier for firm generation supply are being forced to choose between curtailed usage during a PJM emergency interruption, or continued usage at the contracted-for level but at higher rates.

But the PUC found that interruptible service was needed to preserve system reliability in the state. Although deregulation would not be fostered if a customer was, in effect, penalized by buying firm power on the open market, the PUC found that allowing PP&L to have control over the interruptibility of its supply purchased from an electric generation supplier was needed. In effect, what the PUC determined was that all power on the PJM grid, no matter where bought and no matter firm or not, was always subject to interruption for system reliability.

The alliance’s argument that it should not be penalized because it has purchased firm power and should not be forced to curtail usage “encouraged” by increased distribution rates and penalties, and not by any shortage of capacity to distribute power, shows one of the seams in a deregulated scheme, wrote Judge Dan Pellegrini in an opinion for the court. “While every customer, as envisioned under that scheme, should be able to shop for the lowest rate and highest quality of service, there has to be some mechanism so that there is overall system reliability for all customers on the grid.”

Pellegrini noted that prior to deregulation, there only existed one entity that could be charged with overseeing the interruptibility of service — the local utility that originally provided supply, transmission and distribution of service. “However, since deregulation, some mechanism has to be in place so that during periods of peak demand, there are no brownouts or blackouts on the system.”

While the alliance is essentially questioning the fairness of allowing a supply distributor such as PP&L to control the interruptibility of the service, the judge said that only the distributor is in a position to enhance reliability due to the myriad of generators and transmission companies that place power in a particular distribution grid. “To allow shopping customers to receive discounted rates under the interruptible service rate schedules, but disregard PP&L’s calls for emergency interruptions would jeopardize the reliability of service because shopping customers would purchase firm electric supplies from [electric generation suppliers] because there would be no incentive for them of reducing power during times of peak capacity.”

Pellegrini emphasized that the PUC cannot, under the mantra of system reliability, re-regulate the power industry by favoring a distribution company, since such an action would thwart the state’s electric competition act. However, the judge also ruled that the PUC “can, as long as it provides substantial reasons why there is no reasonable alternative so competition needs to bend to ensure overall system reliability, order customers by whatever scheme to curtail usage during abnormal peaks.”

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