Changes could be coming in 2015 to how PPL Electric Utilities in Pennsylvania sets its electric rate for default service generation supply.
Default service is power supply provided by PPL to customers who do not shop for an alternative electric provider. PPL has filed with the Pennsylvania Public Utility Commission (PUC) for approval of a plan covering how default service should be designed and procured for the two-year period starting June 1, 2015. The plan includes significant changes for both large and small customers.
For larger non-residential customers, PPL is proposing to lower the demand cutoff at which default service customers are subject to "hourly pricing" -- meaning the customer's electric rate varies during each hour of the day based on wholesale market prices.
Currently, customers with demands of 500 kW or more at PPL are subject to hourly pricing for default service, unless they switch to an alternative electric supplier. These customers include big box retail stores and larger users.
Consistent with prior direction from the PUC, PPL is proposing to lower its hourly pricing cutoff to 100 kW, effective June 1, 2015, which would make more medium and smaller business customers subject to hourly pricing for default service. Hourly pricing is seen by policymakers as being more efficient, in that it sends price signals to customers to use power during times of the day when electricity costs less, thereby lowering demand (and stress) on the grid at peak times. Customers who can't shift their usage and who do not want to be subject to volatile hourly prices can shop for an alternative electric supplier that can offer a variety of pricing plans.
Significant changes have been proposed for residential and small business default service as well. Currently, the default service electric rate for these small customers changes every three months to reflect changing market conditions.
Under PPL's proposal, the small customer default service electric rate would only change every six months. This can have positive and negative effects on customers. While a less frequent price change may temporarily insulate customers from increasing prices, the reverse is also true. When market prices decline, as they generally did from 2009 to 2012, a less frequent price change means that it will take longer for customers on default service to see lower electric rates.
PPL's proposed default service plan remains subject to PUC review and approval.