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We’re Hiring! Brakey Energy Seeks an Associate Energy Analyst
Due to continued company growth and industry demand, Brakey Energy is creating a position for a full-time Associate Energy Analyst. A job description and additional information about the position can be found here. Feel free to pass along to anyone in your network who may be interested in joining our team. For anyone who may have interest or questions, please contact Matt Brakey.
FE Customers Can Now Participate in the Transmission Pilot Program and Default to the SSO
Customers that are participating in FirstEnergy’s (FE) Nonmarket-Based Services (NMB) Rider Opt-Out Pilot Program (i.e., the “transmission pilot”) can now take generation service under the utility’s default Standard Service Offer (SSO) without terminating their participation in the transmission pilot. The effort to permit customers to remain enrolled in the transmission pilot while defaulting to the SSO was spearheaded by a Brakey Energy client and the Industrial Energy Users of Ohio.
In a conference call with interested parties on Tuesday, November 15, staff of the Public Utilities Commission of Ohio (PUCO) provided clarification on a recent PUCO decision that authorized FE to implement a manual billing process to allow SSO customers to continue receiving benefits of the transmission pilot. FE initially interpreted the PUCO’s decision to mean that it could assign the responsibility of transmission pilot billing for SSO customers to Certified Retail Electric Service (CRES) providers. During Tuesday’s call, however, it was established that FE will be solely responsible for manually calculating transmission charges for pilot customers that default to the SSO. FE will issue a single bill for these customers, with NMB rider charges removed and manually calculated transmission pilot charges added. FE will also add a surcharge to the bills to recover costs associated with the manually billing process. This change will be effective with usage beginning this month (which will be billed in December).
Customers that were previously enrolled in the transmission pilot and then removed from the pilot by FE when they defaulted to the SSO can request to be returned to the pilot and receive manual pilot billing from FE. However, FE will not re-bill these customers for pilot-based transmission charges for the months that they have already paid the NMB rider.
FE will continue to manually bill transmission pilot costs for as long as a pilot customer remains on the SSO. Once a customer leaves the SSO to return to retail generation service, FE will cease billing for transmission and those charges will be added to the customer’s monthly CRES bill.
If you are a transmission pilot customer that is considering defaulting to the SSO, or a customer that was forced to terminate participation when you defaulted to the SSO, and have questions about how you can benefit from this opportunity, please contact Matt Brakey.
Take Steps This Winter to Mitigate Your 2024 Transmission Costs
Select electric customers can decrease transmission costs by implementing measures to reduce demand during certain days of the year. In particular, eligible customers in American Electric Power (AEP), FE, and AES Ohio service territories can participate in pilot programs that permit customers to pay for transmission based on an alternative framework. Under the pilot programs, a customer is charged for transmission based on how the customer uses power during the one-hour intervals of the year when demand on each zonal electric grid peaks (referred to as “Transmission Coincident Peaks” or “Transmission CPs”). This is in comparison to the default method in which the customer pays for transmission based on its monthly billed demand.
For a customer enrolled in one of the transmission pilot programs, transmission charges for the 2024 calendar year will be calculated based on the customer’s demand during the Transmission CPs set during the 12 months ending October 31, 2023. Historically, Transmission CPs in FE and AES Ohio service territories have occurred exclusively during the summer months. However, in the last 15 years, Transmission CPs in AEP’s Ohio service territory have occurred nearly as often in the winter months as in the summer months. Of the AEP Transmission CP events that occurred in the winter, 100% occurred during the hour ending 8:00 AM Eastern Standard Time (EST).
We recommend that AEP customers currently enrolled in AEP’s transmission pilot program (or those intending to enroll in 2024) take steps this winter to curtail load in response to potential Transmission CPs. The most critical hour to target will be from 7:00 AM to 8:00 AM EST.
To assist customers in their efforts to reduce demand during Transmission CPs, Brakey Energy has devised an alert notification system. Customers that participate in the system can opt to reduce electric usage during alerted times. This is a service available only to Brakey Energy clients. If you are a participating client and would like to change your registration preferences, including adding or deleting which employees receive the alerts, please email Catherine Nickoson.
AEP SSO Auction Results
AEP’s Ohio customers that take generation service under the utility’s SSO will likely see dramatic increases in electric costs beginning June 1, 2023. Ohio’s investor-owned electric distribution utilities (EDUs) use a series of Competitive Bidding Process auctions to secure SSO load (i.e., energy, capacity, ancillary services, etc.) for each June 1 through May 31 delivery year (DY).
AEP’s first SSO auction for the 2023-2024 DY was held on November 1, 2022. The auction secured 45% of SSO load for the DY and cleared at a price of 11.998¢ per kilowatt hour (kWh). This is approximately 93% higher than the average clearing price from the SSO auctions that secured load for the current DY. The auction fell short of AEP’s goal to secure 50% of its SSO load for the DY. AEP will need to secure the remaining 55% of its SSO load for the 2023-2024 DY in its March 7, 2023 auction.
Brakey Energy will continue to monitor the SSO auctions for Ohio’s EDUs and will report outcomes in future newsletters. If you have any questions about the SSO auction process or about SSO rates for any of Ohio’s EDUs, please contact Jennifer Lemley.
Residential Corner
The highly competitive generation offers we highlighted in the past for residential customers have long disappeared. We have been recommending since October 2021 that customers with expiring contracts default to the SSO until Spring 2023. We will provide a new and urgent contracting recommendation then. The SSO rate varies by electric distribution utility but is materially below current market conditions. To the extent you are in an expiring contract, make sure you provide notice to your supplier that you would like to default back to the SSO as to avoid being swept up in an extremely expensive holdover provision.
AEP Energy is currently offering a 36-month fixed price natural gas contract for $6.79 per hundred cubic feet with no early termination fees. While slightly higher than the Direct Energy offer we highlighted on August 26, 2022 that quickly disappeared, we think this offer represents a compelling value. This is especially true because customers can cancel at any time and enter into a lower priced agreement if it becomes available. Please note that the price listed will vary based on service territory.
Natural Gas Market Update
The NYMEX price for November settled at $5.186 per Million British Thermal Units (MMBtu) on October 27, 2022. This price is down 24.5% from October’s price of $6.868 per MMBtu. This settlement price is used to calculate November gas supply costs for customers that contract for a NYMEX-based index gas product.
The graph below shows the year-over-year monthly NYMEX settlement prices for 2018, 2019, 2020, 2021, and 2022 to-date. Prices shown are in dollars per MMBtu of natural gas.
Figure 1: NYMEX Monthly Natural Gas Settlement Prices
Figure 2 below shows the historical November 29, 2020 through November 29, 2022 Around the Clock (ATC) forward NYMEX natural gas prices in dollars per MMBtu for the first quarter of 2023 (labeled “Custom Strip” in the graph below) and calendar years 2023, 2024, 2025, 2026, 2027. Following a drop earlier this month, prices have increased in the last several days in response to colder temperatures and the planned reopening of the Freepoint Liquified Natural Gas terminal in mid-December.
Figure 2: ATC First Quarter 2023 and Calendar Year NYMEX Natural Gas Prices
*Pricing courtesy of Direct Energy Business.
Electricity Market Update
Figure 3 below shows the historical November 29, 2020 through November 29, 2022 ATC forward power prices in dollars per Megawatt hour (MWh) for the first quarter of 2023 (labeled “Custom Strip” in the graph below) and calendar years 2023, 2024, 2025, 2026, 2027 for the AD Hub. Forward power prices for first quarter of 2023 and calendar year 2023 are continuing to trade at extreme premiums relative to outlier years. Power prices plateaued around $85 per MWh earlier this month but have increase in the last several days in response to rising gas costs.
Figure 3: ATC First Quarter 2023 and Calendar Year Power Prices for the AD Hub
*Pricing courtesy of Direct Energy Business.
Calendar of Events
27TH ANNUAL OHIO ENERGY SAVINGS & MANAGEMENT CONFERENCE
Tuesday, February 28, 2023 - Wednesday, March 1, 2023
The Columbus Renaissance Hotel
50 North Third Street
Columbus, Ohio 43215
This is Ohio’s premier conference on energy rates, regulations, and efficiency. Make plans to attend this conference and receive priceless insights into energy prices, trends, savings opportunities, and the forces that influence the price and quality of energy in Ohio.
A complete agenda with a list of presentation topics, speakers, and times will be available on the event website by December 7, 2022.
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