Each electric utility in this state filing an
application for a standard service offer (SSO) in the form of an electric
security plan (ESP), a market-rate offer (MRO), or both, complies with the
requirements set forth in this rule.
(A) An application for an ESP or MRO is
incomplete without a complete set of direct testimony of the electric utility
personnel or other expert witnesses written in question and answer format
supporting all schedules and significant issues identified by the electric
utility.
(B) An SSO application that contains a
proposal for an MRO, or an SSO application containing a proposal for a
competitive bidding process (CBP), will comply with the applicable requirements
set forth in this paragraph.
(1) The following
electric utility components are to be demonstrated in a separate section of the
SSO application proposing an MRO:
(a) It is the responsibility of the electric utility to show that
it, or its transmission affiliate, belongs to at least one regional
transmission organization (RTO) that has been approved by the federal energy
regulatory commission in compliance with section 4928.12 of the Revised
Code.
(b) The electric utility shall establish one of the following:
its RTO retains an independent market-monitor function and has the ability to
identify any potential for a market participant or the electric utility to
exercise market power in any energy, capacity, and/or ancillary service markets
by virtue of access to the RTO and the market participant's data and
personnel and has the ability to effectively mitigate the conduct of the market
participants so as to prevent or preclude the exercise of such market power by
any market participant or the electric utility; or the electric utility shall
demonstrate that an equivalent function exists which can monitor, identify, and
mitigate conduct associated with the exercise of such market
power.
(2) Prior to establishing
an MRO under division (A) of section 4928.142 of the Revised Code, an electric
utility shall file a plan for a CBP with the commission. An electric utility
that files an MRO or an application containing a CBP plan provides
justification of its proposed CBP plan, considering alternative possible
methods of procurement. Each CBP plan will include the following
components:
(a) A complete description of the CBP plan and testimony
explaining and supporting each aspect of the CBP plan. The description includes
a discussion of any relationship between the wholesale procurement process and
the retail rate design that may be proposed in the CBP plan. The description
includes a discussion of alternative methods of procurement that were
considered and the rationale for selection of the CBP plan being presented. The
description also includes an explanation of every proposed non-avoidable
charge, if any, and why the charge is proposed to be
non-avoidable.
(b) Projected generation, transmission, and distribution rate
impacts by customer class and rate schedules for the duration of the CBP plan.
The electric utility shall clearly indicate how projected bid clearing prices
used for this purpose were derived.
(c) Detailed descriptions of how the CBP plan ensures an open,
fair, and transparent competitive solicitation that is consistent with and
advances the policy of this state as delineated in divisions (A) to (N) of
section 4928.02 of the Revised Code.
(d) Detailed descriptions of the customer load(s) to be served by
the winning bidder(s), and any known factors that may affect such customer
loads. The descriptions include, but not be limited to, load subdivisions
defined for bidding purposes, load and rate class descriptions, customer load
profiles that include historical hourly load data for each load and rate class
for at least the two most recent years, applicable tariffs, historical shopping
data, and plans for meeting targets pertaining to load reductions, energy
efficiency, renewable energy, advanced energy, and advanced energy
technologies. Any fixed load proposed to be served by winning bidder(s) will be
described.
(e) Detailed descriptions of the generation and related services
that are to be provided by the winning bidder(s). The descriptions include, at
a minimum, capacity, energy, transmission, ancillary and resource adequacy
services, and the term during which generation and related services are to be
provided. The descriptions clearly indicate which services are to be provided
by the winning bidder(s) and which services are to be provided by the electric
utility.
(f) Draft copies of all forms, contracts, or agreements that must
be executed during or upon completion of the CBP.
(g) A clear description of the proposed methodology by which all
bids would be evaluated, in sufficient detail so that bidders and other
observers can ascertain the evaluated result of any bids or potential
bids.
(h) The CBP plan includes a discussion of alternative retail rate
options that were considered in the development of the CBP plan. A clear
description of the rate structure ultimately chosen by the electric utility,
the electric utility's rationale for selection of the chosen rate
structure, and the methodology by which the electric utility proposes to
convert the winning bid(s) to retail rates of the electric utility will be
included in the CBP plan.
(i) The CBP plan provides for funding of a consultant that may be
selected by the commission to assess and report to the commission on the design
of the solicitation, the oversight of the bidding process, the clarity of the
product definition, the fairness, openness, and transparency of the
solicitation and bidding process, the market factors that could affect the
solicitation, and other relevant criteria as directed by the commission.
Recovery of the cost of such consultant(s) may be included by the electric
utility in its CBP plan.
(j) The CBP plan includes a discussion of generation service
procurement options that were considered in development of the CBP plan,
including but not limited to, portfolio approaches, staggered procurement,
forward procurement, electric utility participation in day-ahead and/or
real-time balancing markets, and spot market purchases and sales. The CBP plan
also includes the rationale for selection of any or all of the procurement
options.
(k) The electric utility shall show, as a part of its CBP plan,
any relationship between the CBP plan and the electric utility's plans to
comply with alternative energy portfolio requirements of section 4928.64 of the
Revised Code, and energy efficiency requirements and peak demand reduction
requirements of section 4928.66 of the Revised Code. The initial filing of a
CBP plan includes a detailed account of how the plan is consistent with and
advances the policy of this state as delineated in divisions (A) to (N) of
section 4928.02 of the Revised Code. Following the initial filing, subsequent
filings include a discussion of how the state policy continues to be advanced
by the plan.
(l) An explanation of known and anticipated obstacles that may
create difficulties or barriers for the adoption of the proposed bidding
process.
(3) The electric utility
shall provide a description of its corporate separation plan, adopted pursuant
to section 4928.17 of the Revised Code, including but not limited to, the
current status of the corporate separation plan, a detailed list of all waivers
previously issued by the commission to the electric utility regarding its
corporate separation plan, and a timeline of any anticipated revisions or
amendments to its current corporate separation plan on file with the commission
pursuant to Chapter 4901:1-37 of the Administrative Code.
(4) A description of how
the electric utility proposes to address governmental aggregation programs and
implementation of divisions (I), (J), and (K) of section 4928.20 of the Revised
Code.
(C) An SSO application that contains a
proposal for an ESP will include the criteria set forth in this
paragraph.
(1) A complete
description of the ESP and testimony explaining and supporting each aspect of
the ESP.
(2) Pro forma financial
projections of the effect of the ESP's implementation upon the electric
utility for the duration of the ESP, together with testimony and work papers
sufficient to provide an understanding of the assumptions made and
methodologies used in deriving the pro forma projections.
(3) Projected rate
impacts by customer class/rate schedules for the duration of the ESP, including
post-ESP impacts of deferrals, if any.
(4) The electric utility
provides a description of its corporate separation plan, adopted pursuant to
section 4928.17 of the Revised Code, including, but not limited to, the current
status of the corporate separation plan, a detailed list of all waivers
previously issued by the commission to the electric utility regarding its
corporate separation plan, and a timeline of any anticipated revisions or
amendments to its current corporate separation plan on file with the commission
pursuant to Chapter 4901:1-37 of the Administrative Code.
(5) Each electric utility
provides a statement as to whether its operational support plan has been
implemented and whether there are any outstanding problems with the
implementation.
(6) A description of how
the electric utility proposes to address governmental aggregation programs and
implementation of divisions (I), (J), and (K) of section 4928.20 of the Revised
Code.
(7) A description of the
effect on large-scale governmental aggregation of any unavoidable charge
proposed to be established in the ESP.
(8) The ESP application
includes a detailed account of how the ESP is consistent with and advances the
policy of this state as delineated in section 4928.02 of the Revised
Code.
(9) Specific
information
Division (B)(2) of section 4928.143 of the
Revised Code authorizes the provision or inclusion in an ESP of a number of
features or mechanisms. To the extent that an electric utility includes any of
these features in its ESP, it files the corresponding information in its
application.
(a) Division (B)(2)(a) of section 4928.143 of the Revised Code
authorizes an electric utility to include provisions for the automatic recovery
of fuel, purchased power, and certain other specified costs. An application
including such provisions includes, at a minimum, the information described as
follows:
(i) The type of cost the
electric utility is seeking recovery for under division (B)(2) of section
4928.143 of the Revised Code including a summary and detailed description of
such cost. The description includes the plant(s) that the cost pertains to as
well as a narrative pertaining to the electric utility's procurement
policies and procedures regarding such cost.
(ii) The electric utility
includes in the application any benefits available to the electric utility as a
result of or in connection with such costs including but not limited to profits
from emission allowance sales and profits from resold coal
contracts.
(iii) The specific means
by which these costs will be recovered by the electric utility. In this
specification, the electric utility must clearly distinguish whether these
costs are to be recovered from all distribution customers or only from the
customers taking service under the ESP.
(iv) A complete set of
work papers supporting the cost must be filed with the application. Work papers
include, but are not limited to, all pertinent documents prepared by the
electric utility for the application and a narrative and other support of
assumptions made in completing the work papers.
(b) Divisions (B)(2)(b) and (B)(2)(c) of section 4928.143 of the
Revised Code, authorize an electric utility to include unavoidable surcharges
for construction, generation, or environmental expenditures for electric
generation facilities owned or operated by the electric utility. Any plan which
seeks to impose surcharge under these provisions shall include the following
paragraphs, as appropriate:
(i) A description of the
projected costs of the proposed facility and confirmation that the need for the
proposed facility was reviewed and determined by the commission through an
integrated resource planning process filed pursuant to rule 4901:5-5-05 of the
Administrative Code.
(ii) A proposed process,
subject to modification and approval by the commission, for the competitive
bidding of the construction of the facility unless the commission has
previously approved a process for competitive bidding, which would be
applicable to that specific facility.
(iii) An application
which provides for the recovery of a reasonable allowance for construction work
in progress, should include a detailed description of the actual costs as of a
date certain for which the applicant seeks recovery, a detailed description of
the impact upon rates of the proposed surcharge, and a demonstration that such
a construction work in progress allowance is consistent with the applicable
limitations of division (A) of section 4909.15 of the Revised
Code.
(iv) An application which provides for recovery of a
surcharge for an electric generation facility should include: a detailed
description of the actual costs as of a date certain, for which the applicant
seeks recovery, detailed description of the impaction upon rates of the
proposed surcharge, the proposed terms for the capacity, energy, and associated
rates for the life of the facility.
(c) Division (B)(2)(d) of section 4928.143 of the Revised Code
authorizes an electric utility to include terms, conditions, or charges related
to retail shopping by customers. Any application which includes such terms,
conditions or charges, shall include, at a minimum, the following
information:
(i) A listing of all
components of the ESP which would have the effect of preventing, limiting,
inhibiting, or promoting customer shopping for retail electric generation
service. Such components would include, but are not limited to, terms and
conditions relating to shopping or to returning to the standard service offer
and any unavoidable charges. For each such component, an explanation of the
component and a descriptive rationale and, to the extent possible, a
quantitative justification shall be provided.
(ii) A description and
quantification or estimation of any charges, other than those associated with
generation expansion or environmental investment under divisions (B)(2)(b) and
(B)(2)(c) of section 4928.143 of the Revised Code, which will be deferred for
future recovery, together with the carrying costs, amortization periods, and
avoidability of such charges.
(iii) A listing,
description, and quantitative justification of any unavoidable charges for
standby, back-up, or supplemental power.
(d) Division (B)(2)(e) of section 4928.143 of the Revised Code
authorizes an electric utility to include provisions for automatic increases or
decreases in any component of the standard service offer price. Pursuant to
this authority, if the ESP proposes automatic increases or decreases to be
implemented during the life of the plan for any component of the standard
service offer, other than those covered by division (B)(2)(a) of section
4928.143 of the Revised Code, the electric utility must provide in its
application a description of the component, whether the component is bypassable
or nonbypassable, the proposed means for changing the component, and the
proposed means for verifying the reasonableness of the change.
(e) Division (B)(2)(f) of section 4928.143 of the Revised Code
authorizes an electric utility to include provisions for the securitization of
authorized phase-in recovery of the standard service offer price. If a phase-in
deferred asset is proposed to be securitized, the electric utility shall
provide, at the time of an application for securitization, a description of the
securitization instrument and an accounting of that securitization, including
the deferred cash flow due to the phase-in, carrying charges, and the
incremental cost of the securitization. The electric utility will also describe
any efforts to minimize the incremental cost of the securitization. The
electric utility provides all documentation associated with securitization,
including but not limited to, a summary sheet of terms and conditionsand a
comparison of costs associated with securitization to demonstrate that
securitization is the least cost strategy.
(f) Division (B)(2)(g) of section 4928.143 of the Revised Code
authorizes an electric utility to include provisions relating to transmission
and other specified related services. Moreover, division (A)(2) of section
4928.05 of the Revised Code states that, notwithstanding Chapters 4905. and
4909. of the Revised Code, commission authority under this chapter includes the
authority to provide for the recovery, through a reconcilable rider on an
electric distribution utility's distribution rates, of all transmission
and transmission-related costs (net of transmission related revenues),
including ancillary and net congestion costs, imposed on or charged to the
utility by the federal energy regulatory commission or a regional transmission
organization, independent system operator, or similar organization approved by
the federal energy regulatory commission.
Any utility which seeks to create or modify
its transmission cost recovery rider in its ESP shall file the rider in
accordance with the requirements delineated in Chapter 4901:1-36 of the
Administrative Code.
(g) Division (B)(2)(h) of section 4928.143 of the Revised Code
authorizes an electric utility to include provisions for alternative regulation
mechanisms or programs, including infrastructure and modernization incentives,
relating to distribution service as part of an ESP. While a number of
mechanisms may be combined within a plan, for each specific mechanism or
program, the electric utility provides a detailed description, with supporting
data and information, to allow appropriate evaluation of each proposal,
including a cost-benefit analysis, how the proposal addresses any cost savings
to the electric utility and customers, avoids duplicative cost recovery, and
aligns electric utility and consumer interests. In general, and to the extent
applicable, the electric utility also includes, for each separate mechanism or
program, quantification of the estimated impact on rates over the term of any
proposed modernization plan. Any application for an infrastructure
modernization plan shall include the following specific
components:
(i) A description of the
infrastructure modernization plan, including but not limited to, the electric
utility's existing infrastructure, its existing asset management system
and related capabilities, the type of technology and reason chosen, the portion
of service territory affected, the percentage of customers directly impacted
(non-rate impact), and the implementation schedule by geographic location
and/or type of activity. A description of any communication infrastructure
included in the infrastructure modernization plan and any metering,
distribution automation, or other applications that may be supported by this
communication infrastructure also shall be included.
(ii) A description of the
benefits of the infrastructure modernization plan (in total and by activity or
type), including but not limited to the following as they may apply to the
plan: quantitative and qualitative impacts of all reliability improvements, the
number of circuits impacted, the number of customers impacted, the timing of
impacts, whether the impact is on the frequency or duration of outages, whether
the infrastructure modernization plan addresses primary outage causes, what
problems are addressed by the infrastructure modernization plan, the resulting
dollar savings and additional costs, the activities affected and related
accounts, the timing of savings, other customer benefits, and societal
benefits. Through metrics and milestones, the infrastructure modernization plan
will include a description of how the performance and outcomes of the plan will
be measured.
(iii) A detailed
description of the costs of the infrastructure modernization plan, including a
breakdown of capital costs and operating and maintenance expenses net of any
related savings, the revenue requirement, including recovery of stranded
investment related to replacement of un-depreciated plant with new technology,
the impact on customer bills, service disruptions associated with plan
implementation, and description of (and dollar value of) equipment being made
obsolescent by the plan and reason for early plant retirement. The
infrastructure modernization plan will also include a description of efforts
made to mitigate such stranded investment.
(iv) A detailed
description of any proposed cost recovery mechanism, including the components
of any regulatory asset created by the infrastructure modernization plan, the
reporting structure and schedule, and the proposed process for approval of cost
recovery and increase in rates.
(v) A detailed
explanation of how the infrastructure modernization plan aligns customer and
electric utility reliability and power quality expectations by customer
class.
(h) Division (B)(2)(i) of section 4928.143 of the Revised Code
authorizes an electric utility to include provisions for economic development,
job retention, and energy efficiency programs. Pursuant to this paragraph, the
electric utility provides a complete description of the proposal, together with
cost-benefit analysis or other quantitative justification, and quantification
of the program's projected impact on rates.
(10) Additional required
information
Divisions (E) and (F) of section 4928.143 of
the Revised Code provide for tests of the ESP with respect to significantly
excessive earnings. Division (E) of section 4928.143 of the Revised Code is
applicable only if an ESP has a term exceeding three years, and would require
an earnings determination to be made in the fourth year. Division (F) of
section 4928.143 of the Revised Code applies to any ESP and examines earnings
after each year. In each case, the burden of proof for demonstrating that the
return on equity is not significantly excessive is borne by the electric
utility.
(a) For the annual review pursuant to division (F) of section
4928.143 of the Revised Code, the electric utility provides testimony and
analysis demonstrating the return on equity that was earned during the year and
the returns on equity earned during the same period by publicly traded
companies that face comparable business and financial risks as the electric
utility. In addition, the electric utility provides capital budget requirements
for future committed investments in Ohio for each annual period remaining in
the ESP.
(b) For demonstration under division (E) of section 4928.143 of
the Revised Code, the electric utility provides, in addition to the
requirements under division (F) of section 4928.143 of the Revised Code,
calculations of its projected return on equity for each remaining year of the
ESP. The electric utility supports these calculations by providing projected
balance sheet and income statement information for the remainder of the ESP,
together with testimony and work papers detailing the methodologies,
adjustments, and assumptions used in making these projections.
(D) Applications for an SSO may include an ESP and/or MRO;
however, an ESP may not be proposed once the electric utility has implemented
an MRO approved by the commission.
(E) The SSO application shall include a section demonstrating
that its current corporate separation plan is in compliance with section
4928.17 of the Revised Code, Chapter 4901:1-37 of the Administrative Code, and
consistent with the policy of the state as delineated in divisions (A) to (N)
of section 4928.02 of the Revised Code. When any waivers of the corporate
separation plan have been granted and are to be continued, the applicant
justifies the continued need for those waivers.
(F) A complete set of work papers will be filed with the
application. Work papers include, but are not limited to, all pertinent
documents prepared by the electric utility for the application and a narrative
or other support of assumptions made in the work papers. Work papers should be
marked, organized, and indexed according to schedules to which they relate.
Data contained in the work papers should be footnoted so as to identify the
source document used.
(G) All schedules, tariff sheets, and work papers prepared by, or
at the direction of, the electric utility for the application and included in
the application should be available in spreadsheet, word processing, or an
electronic non-image-based format, with formulas intact, compatible with
personal computers. The electronic form does not have to be filed with the
application but should be made available within two business days to staff and
any intervening party that requests it.
