The MRO, which was filed with the Public Utilities Commission of Ohio (PUCO), would establish a competitive bidding process (CBP) to secure electric generation supply and pricing beginning June 1, 2011. The proposed process is similar to the CBP conducted earlier this year to secure generation supply for FirstEnergy’s Ohio utility customers through May 31, 2011.
Anthony Alexander, president and CEO of FirstEnergy, said: “This CBP has several key enhancements – including multiple bidding sessions and staggered contract lengths – to further reduce potential price volatility, reduce supplier risk and encourage bidder participation. The process is designed to deliver the most competitively priced power for our Ohio customers through a vibrant auction process.”
The CBP would be managed by CRA International, a consulting firm with expertise in energy markets and procurement. Qualifying suppliers would bid to supply a percentage of the companies’ retail electric generation requirement in multiple rounds of bidding – combining all classes of customers in a “slice-of-system” approach.
The process would use a descending clock auction format, with the price per kilowatt-hour ticking down each round until the number of bids equals the total supply requirement. The final round of bidding would represent the lowest price at which customers’ generation supply needs would be met. The resulting price would be used to establish the service offer for customers who choose not to shop with an alternative generation supplier.
The proposed CBP calls for two initial bid solicitations next year – one in June and one in October – with varying supply periods of 12, 24 and 36 months. The end dates establish a framework for the companies to conduct subsequent CBPs each year for one-third of customers’ generation supply needs, with customer prices ultimately reflecting an average of results over a three-year period.
In addition to the service offer, the MRO filing includes three voluntary time-differentiated pricing options for customers – real-time pricing, time-of-day pricing and critical peak pricing. These options provide participating customers the ability to manage their energy usage and costs.
The filing also outlines a request for proposal process to secure commitments for load reductions from large commercial and industrial customers, which would help meet the companies’ load-reduction requirements.
The CBP is being conducted under Ohio’s energy law, which outlines a process for establishing electric generation supply and pricing for retail electricity customers who do not select alternative generation suppliers, either individually or through governmental aggregation programs.
