Electric rates should drop slightly for residential and small commercial accounts, with larger declines on tap for bigger customers.
The reductions were announced by the Delaware Public Service Commission, which also released The Liberty Consulting Group’s Final Report assessing the conduct and results of Delmarva Power’s electric Standard Offer Service (SOS) reverse auction process for 2016-17.
The rates come through a bidding process that discloses actions of other bidders in an attempt to drive down prices. Electric prices are now at record lows, the PSC reported.
A decline in consumption, due to factors ranging from the shutdown of industrial plants to conservation efforts has increased electricity supplies, even with the shutdown of coal-fired power plants.
Natural gas prices have also remained low as production from Pennsylvania comes on line.
Of the 11 companies interested in this year’s program, eight were eligible to bid. Of the eight bidders, five won a portion of Delmarva Power’s SOS needs. The winning suppliers were BTG Pactual, DTE, Exelon, NextEra, and TransCanada.
Delmarva held two separate auctions, one in December 2015 and one in February 2016, in which they received and ranked bids for four different customer classes.
Delmarva Power acquired approximately 456 megawatts of peak load energy for full-requirement SOS service, 18MW less than last year. Contracts from this year’s Residential and Small Commercial (RSCI) bids will replace those procured in the 2012-13 auctions.
The average winning bid for this class was approximately 22.6 percent lower than last year. For the Medium (MGS), Large (LGS), and Primary (GS-P) general service customers, Delmarva Power sought 12-month contracts. Average winning bids for these classes were approximately 25.6 percent to 29.5 percent lower than last year.
This means, based on the bid prices alone, there will be roughly a 2.6 percent reduction in the average monthly bill for residential customers and approximately a 3.9 percent reduction in the average monthly bill for small commercial and industrial customers.
Medium General Service customers will see a decrease of about 18.1 percent, Large General Service customers will see a decrease of approximately 20.3 percent, and General Service customers will see a decrease of nearly 28 percent to their average monthly bill (not including various other costs subject to change to on the bill).
The difference in rates between the residential, small commercial and other rates is due to the three-year timespan of those rates.
Delmarva buys electricity over longer periods for smaller customers to balance out the volatility of rates. Larger users see shorter time spans in power purchases.
Customers pay a charge for the delivery of the electricity, as well as the charge for the electricity itself. The cost of electricity itself is passed through to the customer with the utility not earning a profit.
Delivery charges, also the source of the utility’s profits, have been rising, due to an aging grid and work to improve reliability.
Rate increases in delivery charges have been more frequent since utilities no longer have the cushion from higher consumption that holds down delivery costs.
Of late, rate cases have been halted, due to the proposed merger of Delmarva’s parent, Pepco with Exelon.
The technical report can be found at http://www.depsc.delaware.gov/sos.shtml.
