JOINT PETITION FOR SETTLEMENT

Transcription

1 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PETITION OF PENNSYLVANIA : POWER COMPANY FOR : DOCKET NO. P APPROVAL OF ITS DEFAULT SERVICE PROGRAMS. JOINT PETITION FOR SETTLEMENT Volume I of I11 July 23,2010

2 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PETITION OF PENNSYLVANIA POWER COMPANY FOR APPROVAL : DOCKET NO. P OF ITS DEFAULT SERVICE PROGRAMS JOINT PETITION FOR SETTLEMENT JOINT PETITION FOR SETTLEMENT TABLE OF CONTENTS Volume I of I11 Statement A Statement in Support of Joint Petition for Settlement of Pennsylvania Power Company Statement B Statement C Statement in Support of Joint Petition for Settlement of the Office of Consumer Advocate Statement in Support of Joint Petition for Settlement of the Office of Small Business Advocate Statement D Statement in Support of Joint Petition for Settlement of the Office of Trial Staff Statement E Statement F Statement in Support of Joint Petition for Settlement of Dominion Retail, Inc. Statement in Support of Joint Petition for Settlement of Direct Energy Services, LLC Statement G Statement in Support of Joint Petition for Settlement of Constellation New Energy, Inc. & Constellation Energy Commodities Group, Inc. Statement H Statement I Statement in Support of Joint Petition for Settlement of Exelon Generation Company and Exelon Energy Company Statement in Support of Joint Petition for Settlement of FirstEnergy Solutions Corp.

3 Volume I1 of I11 Exhibit A- 1 Exhibit A-2 Exhibit A-3 Exhibit A-4 Exhibit B Exhibit C Exhibit D Exhibit E Metropolitan Edison Company / Pennsylvania Electric Company / Pennsylvania Power Company Default Service Program Fixed Auction Process and Rules Residential and Commercial Customers Metropolitan Edison Company / Pennsylvania Electric Company / Pennsylvania Power Company Default Service Program Hourly Auction Process and Rules Industrial Customers Metropolitan Edison Company / Pennsylvania Electric Company / Pennsylvania Power Company Solicitation Protocol - Fixed Auction Metropolitan Edison Company / Pennsylvania Electric Company / Pennsylvania Power Company Solicitation Protocol - Hourly Auction Pennsylvania Power Company Default Service Supplier Master Agreement Residential Class Full Requirements Pennsylvania Power Company Default Service Program Procurement Schedule Pennsylvania Power Company Default Service Program Procurement Matrix Block Energy Pennsylvania Power Company Residential Class Fixed Block Request for Proposals Process and Rules Volume I11 of I11 Exhibit F Exhibit G Exhibit H Pennsylvania Power Company Default Service Supplier Master Agreement Residential Class Block Energy Pennsylvania Power Company Default Service Supplier Master Agreement Commercial Class Pennsylvania Power Company Default Service Supplier Master Agreement Hourly Pricing Service

4 Exhibit I Exhibit J Exhibit K Exhibit L Solar Photovoltaic Alternative Energy Credits Request for Proposals Process and Rules Proposed Pennsylvania Power Company Tariff Customer Data 2009 American Transmission System, Incorporated Coincident Peak Data By Customer Class

5 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PETITION OF PENNSYLVANIA POWER : COMPANY FOR APPROVAL OF ITS : DOCKET NO. P DEFAULT SERVICE PROGRAMS JOINT PETITION FOR SETTLEMENT July 23,2010

6 TABLE OF CONTENTS I. BACKGROUND TERMS AND CONDITIONS OF SETTLEMENT... 4 Procurement and Implementation Plan... 4 Alternative Energy Portfolio Standards Act... 9 Contingency Plans Third Party Evaluators Postponement of Procurements Rate Design and Cost Recovery Retail Market Issues Transition from MIS0 to PJM Other Provisions Affiliate Relations Request for Waivers THE SETTLEMENT IS IN THE PUBLIC INTEREST IV. ADDITIONAL TERMS AND CONDITIONS EXHIBITS AND STATEMENTS IN SUPPORT Exhibit A- 1 Exhibit A-2 Exhibit A-3 Exhibit A-4 Exhibit B Metropolitan Edison CompanyPennsylvania Electric CompanyPennsylvania Power Company Default Service Program Fixed Auction Process and Rules Residential and Commercial Customers Metropolitan Edison Company/Pennsylvania Electric CompanyPennsylvania Power Company Default Service Program Hourly Auction Process and Rules Industrial Customers Metropolitan Edison CompanyPennsylvania Electric CompanyPennsylvania Power Company Solicitation Protocol - Fixed Auction Metropolitan Edison CompanyPennsylvania Electric CompanyIPennsylvania Power Company Solicitation Protocol - Hourly Auction Pennsylvania Power Company Default Service Supplier Master Agreement Residential Class Full Requirements 1

7 Exhibit C Exhibit D Exhibit E Exhibit F Exhibit G Exhibit H Exhibit I Exhibit J Exhibit K Exhibit L Statement A Statement B Statement C Statement D Statement E Pennsylvania Power Company Default Service Program Procurement Schedule Pennsylvania Power Company Default Service Program Procurement Matrix Block Energy Pennsylvania Power Company Residential Class Fixed Block Request for Proposals Process and Rules Pennsylvania Power Company Default Service Supplier Master Agreement Residential Class Block Energy Pennsylvania Power Company Default Service Supplier Master Agreement Commercial Class Pennsylvania Power Company Default Service Supplier Master Agreement Hourly Pricing Service Solar Photovoltaic Alternative Energy Credits Request for Proposals Process and Rules Proposed Pennsylvania Power Company Tariff Customer Data 2009 American Transmission System, Incorporated Coincident Peak Data By Customer Class Statement in Support of Joint Petition for Settlement of Pennsylvania Power Company Statement in Support of Joint Petition for Settlement of the Office of Consumer Advocate Statement in Support of Joint Petition for Settlement of the Office of Small Business Advocate Statement in Support of Joint Petition for Settlement of the Ofice of Trial Staff Statement in Support of Joint Petition for Settlement of Dominion Retail, Inc.

8 Statement F Statement G Statement H Statement I Statement in Support of Joint Petition for Settlement of Direct Energy Services, LLC Statement in Support of Joint Petition for Settlement of Constellation New Energy, Inc. and Constellation Energy Commodities Group, Inc. Statement in Support of Joint Petition for Settlement of Exelon Generation Company and Exelon Energy Company Statement in Support of Joint Petition for Settlement of FirstEnergy Solutions corp.

9 BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PETITION OF PENNSYLVANIA POWER : COMPANY FOR APPROVAL OF ITS : DOCKET NO. P DEFAULT SERVICE PROGRAMS JOINT PETITION FOR SETTLEMENT TO THE HONORABLE MARK A. HOYER AND THE HONORABLE MARY D. LONG, ADMINISTRATIVE LAW JUDGES: Pennsylvania Power Company ("Penn Power" or the "Company"); the Office of Consumer Advocate (the "OCA"); the Oflice of Small Business Advocate ("OSBA"); the Office of Trial Staff ("OTS"); Dominion Retail, Inc. ("Dominion Retail"); Direct Energy Services, LLC ("Direct Energy"); Constellation New Energy, Inc. and Constellation Energy Commodities Group, Inc. ("Constellation"); Exelon Generation Company and Exelon Energy Company ("Exelon"); and FirstEnergy Solutions Cop. ("FES") (collectively, the "Joint Petitioners"), by their respective counsel, submit this Joint Petition For Settlement ("Settlement") of all issues in the above-captioned proceeding and request that the Administrative Law Judges approve the Settlement without modification.' In support of this Settlement, the Joint Petitioners state as follows: I. BACKGROUND 1. On February 8,2010, the Company filed the above-captioned petition (the "DSP Petition") requesting that the Pennsylvania Public Utility Commission (the "Commission") approve its proposed default service program (the "Program") for the period June 1,201 1 through May 3 1,2013 (the "Delivery Period''), in accordance with the Electricity Generation ' The Penn Power Users Group ("PPUG) does not oppose the Settlement.

10 Customer Choice and Competition Act, 66 Pa. C.S et seq. (the "Competition Act"), as modified by Act 129 of 2008 ("Act 129"). 2. On February 8,2010, the Company also filed the supporting data required by 52 Pa. Code as well as the prepared direct testimony and accompanying exhibits of: Richard A. D'Angelo (Penn Power Statement No. 1); Kevin M. Siedt (Penn Power Statement No. 2); Richard L. Schreader (Penn Power Statement No. 3); Dean W. Stathis (Penn Power Statement No. 4); Dr. Chantale LaCasse (Penn Power Statement No. 5); Brian A. Farley (Penn Power Statement No. 6); and Laura W. Gifford (Penn Power Statement No. 7). 3. Starting with the first billing cycle in March, 2010, the Company notified its customers of the filing of the DSP Petition by including a bill print message on the customers' bills. In addition, the Company issued a media release describing the filing to major newspapers, radio and television stations within its service area. The Company also published a notice describing the Program and informing customers about where to obtain copies of the filing and the procedure for submitting comments or complaints with the Commission. The notices referred interested persons to the Company's web site, where a copy of the entire filing was available for review. In addition, the Company served its DSP Petition on the OCA, the OSBA, the OTS, and all electric generation suppliers ("EGSs") registered with PJM Interconnection, L.L.C. ("PJM) and active in the Company's service territory. 4. On February 23,2010, the Commission issued a notice scheduling a Prehearing Conference for March 26,2010, before Administrative Law Judges Mark A. Hoyer and Mary D. Long (the "ALJs").

11 5. The OTS entered its appearance in this proceeding and the OCA and the OSBA Office filed notices of intervention. The OCA and the OSBA also filed Answers to the Company's Petition. Petitions to Intervene in this proceeding were filed by PPUG, Dominion, Direct Energy, Constellation, Exelon, and FES. 6. A Prehearing Conference was held on March 26,2010, at which a schedule was established for the submission of testimony and the conduct of hearings. Specifically, and consistent with Commission practice, a schedule was adopted whereby all case-in-chief, rebuttal and surrebuttal testimony would be submitted in writing in advance of hearings. Evidentiary hearings were scheduled for June 15-16,2010, at which all testimony and exhibits would be placed in the record and all witnesses presented for cross-examination, if any, thereon. The ALJs thereafter issued a Prehearing Order establishing this schedule. 7. On May 3,2010, Constellation, Dominion Retail, Exelon, OTS, OSBA and OCA submitted a total of six written statements and accompanying exhibits constituting their direct testimony in this case. On May 21,2010, the Company, Constellation, FES, OSBA and OCA submitted a total of ten statements and accompanying exhibits constituting their rebuttal testimony in this case. On June 11,2010, Constellation, OSBA and OCA submitted a total of three surrebuttal statements. 8. After the submission of written testimony, the parties engaged in discussions to try to achieve a settlement of some or all of the issues in this case. As a result of those negotiations, the Joint Petitioners were able to reach the Settlement set forth herein. 9. On June 1 1,201 0, the parties advised the ALJs that a settlement of dl issues had been achieved. On June 15,201 0, the ALJs conducted a telephonic hearing in which the

12 statements of testimony and exhibits were admitted. The remainder of the scheduled hearings were cancelled. 11. TERMS AND CONDITIONS OF SETTLEMENT 10. The Settlement consists of the following terms and conditions: A. Procurement and Implementation Plans (1) Procurement Groups 11. Penn Power's default service customers shall be divided into three classes for purposes of default service procurement: the residential class, the commercial class, and the industrial class. 12. The residential class shall include all customers served under Rate Schedules RS (including the Optional Controlled Service Rider), RH (including the Water Heating Option), WH-Residential, and GS customers served under the Special Provision for Volunteer Fire Companies, Non-Profit Senior Citizen Centers, Non-Profit Rescue Squads and Non-Profit Ambulance Services. 13. The commercial class shall include customers served under Rate Schedules GS (excluding GS Special Rule GSDS), GS Optional Controlled Service Rider, PNP, GM (including the Optional Controlled Service Rider), PLS, SV, SVD, SM, OH (with and without cooling capabilities), and WH Non-Residential. 14. The industrial class consists of customers served under Rate Schedules GP, GT, and GS-Special Rule GSDS.

13 (2) Residential Class Procurement 15. For service rendered to residential default service customers during the June 1, May 31,2013 period, the Company will procure 75% of the supply required through full requirements contracts obtained through descending clock auctions ("DCAs"). The DCAs will be integrated into the DCAs previously approved by the Commission for Penn Power's affiliates, Metropolitan Edison Company ("Met-Ed") and Pennsylvania Electric Company ("Penelec"), in Joint Petition of Metropolitan Edison Company and Pennsylvania Electric Company for Approval Of Their Default Service Programs, Docket Nos. P and P (Order entered November 6,2009) ("Met-EdIPenelec Settlement"). Winning suppliers will bid on "tranches" corresponding to a percentage of the actual residential default service customer load and be responsible for fulfilling all the associated requirements of a load serving entity ("LSE") under their agreements with PJM, including energy, capacity, transmission service other than Network Integration Transmission Service ('NITS"), ancillary services, and PJM administrative expenses, as well as providing all necessary alternative energy credits (except solar) for compliance with Pennsylvania's Alternative Energy Portfolio Standards ("AEPS") Act. 73 P.S et seq. Winning suppliers will schedule the delivery of these products to the Penn Power zone, as designated by PJM (the "Penn Power Zone"). 16. The rules and protocols for the DCA are attached as Exhibits A-1 and A-3, respectively, and the supply agreement which suppliers will be required to execute to supply Penn Power residential default service customers is attached as Exhibit B. The schedule of supply procurements is set forth in Exhibit C. The first DCA in which supply will be procured for Penn Power will be conducted in January, 201 1, as shown in Exhibit C.

14 17. For the remaining 25% of the supply required to serve residential default service customers, the Company will conduct request(s) for proposals ("RFPs") for block energy products and will balance energy and load by purchases and sales conducted through PJM's realtime energy markets (i.e., purchasing hourly spot market energy when load exceeds the purchased block energy amounts and selling purchased block energy amounts when load is less than such amounts). The Company will also be responsible for 25% of the Reliability Pricing Model ("RPM) capacity needed to serve residential default service customers, the ancillary services related to the 25% of the residential default service load served by the Company, and all necessary alternative energy credits (as described below) for compliance with Pennsylvania's AEPS Act requirements associated with the 25% portion of the residential default service load served by the Company. 18. Block energy products will be purchased in twelve-month strips of on- and offpeak blocks twice each year, as set forth in Exhibit D, with suppliers required to deliver the purchased energy to the Penn Power Zone. The estimated amount of block energy product to be procured is shown in Exhibit D and will be established prior to each RFP based upon a 25 MW block size and the Company's most recent quarterly corporate forecasts for on-peak and off-peak residential supply requirements for the Delivery Period, less prior block energy procurements. The Company will establish a target of 80% of on-peak and off-peak residential monthly MWhs acquired in the manner described in Paragraph 17 to be served through block energy products (i.e., 20% of all residential supply requirements including load served through full requirements contracts) with the remainder to be procured through the PJM real-time energy market at realtime spot market prices.

15 19. The Joint Petitioners acknowledge and agree that the amount of block energy procured to meet the 80% target will be based upon the Company's most recent forecasts of monthly on-peak and off-peak MWhs and that the actual amount of block energy that may be required to be sold and the actual amount of spot energy that may be required to be purchased to satisfy the 20% residential supply requirement may vary significantly from the amounts projected in the Company' forecasts and used as the basis for block energy procurements. 20. In January 2011, the Company will also solicit a 25 MW around the clock block energy product for residential customers with a tern of 48 months for delivery beginning June 2011, which shall be included in the amount of energy to be served by block energy products for purposes of calculating the 80% target The block energy product RFP rules for the Company are attached as Exhibit E, and the supply agreement which block energy suppliers will be required to execute is attached as Exhibit F. (3) Commercial Class Procurement 22. For service rendered to commercial default service customers during the June l, May 3 l,20 13 period, the Company will procure 100% of the supply through DCAs for full requirements service. The DCAs will be integrated into the DCAs previously approved by the Commission for the commercial classes of Penn Power's affiliates, Met-Ed and Penelec, in the Met-ENenelec Settlement. Winning suppliers will bid on "tranches" corresponding to a percentage of the actual commercial default service customer load and be responsible for fulfilling all the associated requirements of an LSE under their agreements with PJM, including energy, capacity, transmission (other than NITS), ancillary services, and PJM administrative

16 expenses, as well as providing all necessary alternative energy credits (except solar) for compliance with the AEPS Act. Winning suppliers will schedule the delivery of these products to the Penn Power Zone. The rules and protocols for the DCAs are attached as Exhibit A-1, and the supply agreement which suppliers will be required to execute to supply Penn Power commercial default service customers is attached as Exhibit G. The schedule of supply procurements is set forth in Exhibit C. The first DCA in which supply will be procured for Penn Power will be conducted in January 2011, as shown in Exhibit C. 23. The full requirements contracts for the commercial class will include a fixed price for 90% of the supply to be established through the applicable DCA and a variable price for the remaining 10% of the supply. The variable price will be the hourly real-time zone price for the Penn Power Zone, plus an adder to cover the estimated price of capacity, AEPS compliance, ancillary services, and any other products necessary for delivery of real-time supply. The schedule of these procurements is also set forth in Exhibit C. A copy of the supply agreement which suppliers of the commercial class will be required to execute is attached as Exhibit G. The seasonal weighting factor in the supply agreement will be updated prior to the planned solicitations for the June 1,2012 through May 31,2013 supply delivery period. (4) Industrial Class Procurement 24. The Company will offer industrial default service customers an Hourly Pricing Service ("HPS") priced to the PJM real-time hourly market and procured through three DCAs conducted in the same manner and on the same day, but in a separate DCA, from the DCAs used to obtain 100% of the supply for the commercial class and 75% of the supply for the residential class. The rules and protocol for this DCA are attached as Exhibits A-2 and A-4, respectively.

17 Suppliers will bid for the right to serve a portion of the HPS load as a PJM LSE. Customers on HPS will pay, and winning suppliers will receive: 1) the Penn Power Zone real-time hourly locational marginal price, and 2) the auction clearing price for provision of all other products required to serve the associated load, including capacity, AEPS credits, and ancillary services. The schedule for these procurements is also set forth in Exhibit C, and a copy of the supply agreement which HPS suppliers will be required to execute is attached as Exhibit H. B. Alternative Energy Portfolio Standards Act 25. For a default service supply contract entered into between a winning full requirements supplier and the Company, the winning supplier will be required to supply alternative energy credits to satisfy all Tier I (except solar photovoltaic) and Tier I1 AEPS requirements associated with the load the winning supplier serves under such contract, including the increasing annual percentage requirements during the term of the contract set forth in the AEPS Act (as amended as of the effective date of the contract) and at 66 Pa. C.S All other AEPS requirements for a winning supplier shall be those in effect at the time such contract is executed for that load. 26. For the remaining 25% of the residential customer load not served by full requirements contracts, the Company will procure non-solar Tier I and Tier I1 alternative energy credits required by entering into contracts in the applicable AEPS reporting year for alternative energy credits at market prices. As with the block energy procurement, the Joint Petitioners acknowledge and agree that the Company may procure an amount of alternative energy credits for the 25% of the residential customer load target based upon the Company's most recent forecasts of monthly on-peak and off-peak MWhs. The Company in its judgment may wait until

18 the reporting years' actual requirements are known and procure the credits, or a combination of these strategies may be used. Excess alternative energy credits procured may be banked for fbture use in accordance with the AEPS Act or sold at market prices. 27. The Company will conduct a separate solar RFP designed to meet the solar photovoltaic requirements for the duration of the Program, including the solar photovoltaic requirements associated with any customer load served by an EGS. The solar RFP, which will be managed by the Brattle Group (the same manager of the solar AEPS RFPs conducted pursuant to the Met-EdIPenelec Settlement), will solicit bids to obtain 2,200 solar photovoltaic alternative energy credits ("SPAECs") over a nine-year period, divided into separate tranches of 100 SPAECs. Copies of the proposed RFP rules and the agreement which each SPAEC supplier will be required to execute are attached as Exhibit I. The DSP Petition generally adopted the RFP rules and SPAEC agreement from the Met-EdIPenelec Settlement. This Settlement reflects the following changes from the DSP Petition: (a) The delivery period for SPAECs under Section of the agreement is extended fiom 30 to 45 days; (b) The number of tranches permitted in "all or nothing" bids (i.e., where all of the tranches offered must be accepted at the bid price) is reduced fiom 15 tranches to 4 tranches; (c) Section 3.6 of the SPAEC agreement is revised to remove the deleted text and add the bolded text shown below: Each SPAEC delivered by SPAEC Supplier hereunder shall be capable as of the Delivery Date to be used by the Company for

19 purposes of compliance with the Act. The Company will make a determination within 30 days of delivery of each SPAEC if, as of the Delivery Date, the SPAEC is unable to be used by the Company for compliance with the Act &.., because of the SPAEC Supplier's failure, whether by act or omission to act, under, or with respect to, this Agreement. Any SPAEC the Company determines it is unable to use shall be immediately returned to the SPAEC Supplier, and the SPAEC Supplier shall deliver to the Company an equivalent SPAEC (of the same vintage as would have been the case for the non-compliant SPAEC), which is capable to be used by the Company for purposes of compliance with the Act. SPAEC Supplier shall be responsible to reimburse the Company for any costs or penalties incurred by the Company with respect to any SPAEC delivered hereunder, which the Company is unable to use for compliance with the Act as of the Delivery Date. (d) Section 9.2 of the SPAEC agreement is revised to remove the deleted text and add the bolded text shown below : The Company's obligations under this Agreement are contingent on, and limited by, the Company's ability to recover all costs incurred by it under this Agreement from its retail customers in full and on a current basis. If any statutes, rules, regulations, permits or authorizations are enacted, amended, granted or revoked which have the effect of changing the recovery of costs, the Company may terminate this Agreement upon a 45 days written notice. Prior to the effectiveness of such termination, the Parties to this Agreement shall use good faith and reasonable commercial efforts as promptly as practicable to consider an alternative to termination that would provide for full and current cost recovery by the Company. 28. As described in the SPAEC RFP rules, the Independent Evaluator will prepare a report to the Commission with the SPAEC RFP results, and the Commission will have three business days to approve or reject the SPAEC RFP results. The Company will aggressively promote the SPAEC RFP and will make a good faith effort to attract at least three bidders. The

20 participation of fewer than three bidders, however, will not preclude the Company fkom requesting the Commission's approval of the bids received. 29. The report of the Independent Evaluator submitted to the Commission will include a state of the market (i.e., benchmarking) report on the SPAEC market and the number of potential bidders. At least five business days prior to the date bids close, the benchmarking report will be provided to the OCA and OSBA on a confidential basis. The OCA and OSBA will have three business days to review the report and provide comments to the Independent Evaluator on a confidential basis. The Independent Evaluator will append any comments provided by the OCA and OSBA to the report that the Independent Evaluator provides to the Commission. C. Contingency Plans (1) Full Requirements 30. The Joint Petitioners agree that, in the event that the default service load for any class is not fully bid, the Company will rebid the unfilled tranches in the next scheduled DCA, provided that a minimum of 30 calendar days exists prior to the start of the delivery period for that class. If such a window does not exist to allow for rebidding the tranches, the Company will purchase the necessary physical supply for the remaining tranches for that class through PJM administered markets. Energy will be purchased in the PJM real-time market at real-time market prices. Should this happen for the industrial class, the Company will become the LSE for those industrial tranches. The Company will not enter into hedging transactions to attempt to mitigate the associated price or volume risks to serve these tranches. This same two-stage

21 contingency procedure will be used for all insufficient bidding contingencies that may occur for any of the proposed procurement dates. 31. The Joint Petitioners agree that, in the event a winning bidder defaults prior to the start of or during the delivery period, the Company will offer the unfilled tranches to the other qualified suppliers. If this is unsuccessful and a minimum of 30 calendar days exists prior to the start of the delivery period, the tranches will be bid out in a separate solicitation. If insufficient time exists to conduct an additional solicitation, or if the supplemental solicitation is unsuccessful, the Company will supply the tranches using PJM-administered real-time markets. 32. The Company will recover any contingency costs (including real-time energy costs), net of any forfeited supplier collateral, as part of default service charges. (2) Block Energy 33. In the event that a twelve month term block procurement is unsuccessful, it will be re-bid approximately one month later, provided that a minimum of 30 calendar days exists prior to the start of the delivery period. If such a window does not exist to allow for rebidding the twelve month block product, the Company will purchase the necessary physical supply for the remaining prompt month load for that class through the PJM real-time market and then rebid the remaining eleven months as soon as reasonably possible. If the eleven month product procurement is unsuccessful, the process will be repeated until such time as the remaining months are filled. 34. The Joint Petitioners agree that, in the event that the 48 month term block procurement is unsuccessful, it will be re-bid during the next scheduled block procurement. If the re-bid of the 48 month term block procurement is also unsuccessful, the Company will, 13

22 within 60 days, re-bid a third time using a 24 month term block product. In the event the 24 month term block product remains unfilled, the Company will procure 12 month term block products and follow the contingency plan specified in the preceding paragraph. 35. In the event a winning bidder defaults prior to the start of a delivery period, the Company will re-bid the product to be supplied by that bidder if there are at least 30 calendar days prior to the delivery period. If such a window does not exist prior to the start of the delivery period, then the Company will supply the prompt month load from the PJM real-time market and then rebid the remaining months of the delivery term as soon as reasonably possible. If a supplier defaults within the delivery period, the Company will use the real-time market for procuring supply for any intra-month and prompt month period deliveries and rebid the remaining months of the delivery term as soon as reasonably possible The Company will recover any block energy contingency costs (including real- time energy costs), net of any forfeited supplier collateral, as part of default service charges. (3) AEPS Requirements 37. The Joint Petitioners agree that in the event any tranches for SPAECs remain unfilled after an RFP or any winning supplier defaults before or during a delivery period, the Company will purchase alternative energy credits at market prices to ensure AEPS compliance (including solar photovoltaic AEPS compliance for EGSs serving customers). The cost, including any penalties, will be deducted from payments made to defaulting suppliers andlor fiom collateral posted by the defaulting supplier. If recovery from suppliers is not possible, any costs (exclusive of penalties) incurred by the Company will be recovered as part of default service charges. The Joint Petitioners agree that in the event the Company cannot procure the

23 required AEPS credits, the Company will secure any SPAEC compliance requirements for unfilled tranches at market prices until an alternative contingency plan is approved by the Commission. The Company will consult with the Independent Evaluator, Commission staff, OCA, OTS and OSBA to determine the appropriate alternative contingency plan for the remaining requirement. D. Third Party Evaluators 38. The Joint Petitioners agree to the appointment of National Economic Research Associates ("NERA") as the independent third-party evaluator and auction manager for all DCAs. 39. The Joint Petitioners agree to the appointment of The Brattle Group as the independent third-party evaluator and RFP manager for the SPAEC procurement. 40. The Joint Petitioners agree to the appointment of Neil McAndrews and Associates as the independent third-party evaluator and RFP manager for the block energy procurements for the residential class. E. Postponement of Procurements 41. The procurement schedule will be as described in the preceding sections and as set forth on Exhibit C, except that the Company, with the Commission's approval, may postpone or modify the timing of a scheduled DCA solicitation provided that such postponement or modification shall occur only when market conditions are impacted by extraordinary events, such as, but not limited to, the advent of war, acts of terrorism or acts of God. The RFPs for the

24 block energy products for the residential class will be held within the month shown on the schedule at a date to be determined in advance by the Company and the third party administrator. F. Rate Design and Cost Recovery (1) Residential Class 42. For the residential class, the Company will continue to use its Price To Compare Default Service Rate Rider (LLPTCDefault)'), but the entire residential class will be charged a single default service rate and existing residential rate differentials will be eliminated (consistent with the Settlement and Commission Order in Petition of Pennsylvania Power Company for Approval of Interim Default Service Supply Plan, Docket No. P ) ("Penn Power Interim Settlement"). The residential class PTChfault rate will consist of a single kwh- based charge, which will change quarterly to reflect (a) changes in the underlying weighted average cost of default service supply to the residential class, (b) taxes, and (c) a quarterly reconciliation rate component ("E factor") pursuant to the Price to Compare Default Service Reconciliation provision of the Price to Compare Default Service Rate Rider. The Company will provide the price of each block energy product procured through the RFP process described in Section II.A.(2), supra, as part of the underlying data for the quarterly changes. This rate will be adjusted to reflect a credit from the sale of excess energy purchased through block procurements, and the inclusion of capacity charges, ancillary service charges, AEPS charges, spot market purchase, and other costs billed by PJM to Penn Power in the delivery of the 25% of the residential customer class supply secured through block and spot procurement method described in Section II.A.(2), supra.

25 43. As required by Act 129, residential customers may also elect Penn Power's new "time-of-day" ("TOD) option, which will be limited to the first 5,000 customers who choose this service. Once a customer affirmatively elects this service, a new meter will be installed to measure time-of-day usage. The customer will be responsible for the incremental cost of this meter installation, in accordance with the rules that apply during the "grace period" under the Company's Smart Meter Technology Procurement and Installation Plan (Docket No. M ). The costs of a bill insert explaining the TOD service will be included as part of administrative costs and allocated to residential customers. In addition, during the term of the Program, Penn Power agrees to study and report on or provide the following eleven items in its next DSP plan: (a) The number of participating customers; (b) The total reduction in peak demand; (c) The kw shifted from on-peak to off-peak for participating customers; (d) The reduction in energy usage, if any; (e) The impact on capacity costs, if any; (f) Program costs; (g) A copy of Penn Power's most recent load study; (h) Hourly peak load data for the period June l, through May 3 1,201 2; (i) A copy of Penn Power's customers' actual consumption for the period June 1, through May 3 1,201 2; (j) Supporting documents including the historic locational marginal prices used in its analysis; and

26 (k) The hourly usage profile for each customer class. (2) Commercial Class 44. The Company will continue to use its use PTCDefault rate, but the entire commercial class will be charged a single default service rate and, consistent with the Penn Power Interim Settlement, existing commercial rate differentials will be eliminated. The commercial class PTC Default rate will consist of a single kwh-based charge that will change quarterly to reflect changes in the underlying weighted average cost of default service supply. The rate will also account for a quarterly reconciliation adjustment pursuant to the Price to Compare Default Service Reconciliation component included in the Price to Compare Default Service Rate Rider. In addition, the Company will estimate the projected cost of spot market purchases that represent a component of the calculation of the weighted cost of energy to be included in the commercial PTC Current Cost Component and will reconcile this estimate quarterly. (3) Industrial Class 45. The Company will continue to use its Hourly Pricing Default Service Rider, with revisions to reflect the Company's move from the transmission system operated by the Midwest Independent System Operator, Inc. ("MISO) to PJM as follows: (a) The Hourly Pricing Service Default Service charge will include an Hourly Pricing Cap-AEPS-Other Charge, stated on a cents per kwh basis, to recover the costs paid by the Company to suppliers for capacity, AEPS compliance and any other associated costs of providing hourly priced service incurred by the supplier, which will be adjusted by distribution loss multipliers set forth in the rider.

27 (b) The Transmission Charge in the existing rider will be converted to an Hourly Pricing Network Integration Transmission Service ("NITS") Charge, stated on a cents per-kwh basis, to recover the NITS costs incurred by the Company, pursuant to PJM's Open Access Transmission Tariff, as well as any direct transmission owner charges imposed by PJM that the Company incurs to provide Hourly Pricing Service Default Service. (c) The Market Based Energy Charge ("MBEC") and the Revenue Sufficiency Guarantee Distribution Charge ("RSGD") set forth in the current rider will be replaced with an Hourly Pricing Energy Charge. This charge will recover the locational marginal price ("LMP") determined on a "real time" basis using PJM's load-weighted average LMP for the Penn Power Zone plus any ancillary service charges. Since the LMP is a "real time" price, there will be no need for the extra step, embodied in the existing Penn Power rider, of imposing an MBEC at day-ahead prices and an RSGD to true-up for real- time pricing. (d) The Administrative Charge, defined as DSExpZ under the proposed Hourly Pricing Service Default Service Rider, will recover the administrative costs associated with providing default service, including legal and regulatory expenses related to the default service filing and consultant costs related to the administration of the descending clock auction. (4) Network Integration Transmission Service 46. The Company will provide NITS for non-shopping customers and recover the NITS costs associated with each customer class through the PTCD~~~~~~ rate for that class. The Company will allocate NITS charges among rate schedules based on each rate schedule's 19

28 contribution to the Penn Power system peak (which is the same method utilized by PJM to allocate NITS charges among electric distribution companies and is the method approved by the Commission in the Met-Ed/Penelec Settlement for the allocation of NITS costs). (5) Default Service Support Rider 47. The Company's proposed tariff includes a Default Service Support Rider ("DSSR") applicable to all delivery service customers to recover only (1) uncollectible accounts expense associated with default service and with the purchase of receivables ("POR") identified in Section II(G)(S) and allocated by customer class; (2) MIS0 Transmission Expansion ("MTEP") fees, PJM integration fees, and MIS0 exit fees associated with Penn Power's move from MIS0 to PJM, identified in Section II.H, inpa, and allocated to customer classes in accordance with Section II(H); (3) customer education expense as identified in Section II.G.(3), inpa, and allocated to customer classes in the manner described in Section II.G.(3), inpa; and (4) PJM Regional Transmission Expansion Plan ("RTEP") costs beginning June 1,2013 for Penn Power and allocated to customer classes in accordance with Paragraph II.(H), in~a.~ The DSSR will be non-bypassable and, as such, will be charged to shopping and non-shopping customers on an equal basis. For the residential and commercial customer classes, the DSSR will be billed utilizing a kwh-based rate design. For the industrial customer class, the DSSR will be billed utilizing a demand-based rate design. The Company's affiliates, Metropolitan Edison Company and Pennsylvania Electric Company, will recover RTEP costs in a manner consistent with this Settlement.

29 (6) Solar Photovoltaic Requirements Charge Rider 48. To recover the costs of SPAECs, the Company will use a Solar Photovoltaic Requirements Charge Rider ("SPVRC Rider"). The SPVRC Rider will become effective January 1,2011 and will apply to all delivery service customers. The SPVRC Rider rate will be set on a cents per kwh basis and apply to all rate schedules. Because the amount of SPAECs that have to be purchased is expressed on the basis of a percentage of metered kwh sales, the cost per kwh will be the same for secondary, primary, and transmission voltage service customers. The rate will be established annually to recover the annual cost of the SPAECs purchased through the solar RFP, the cost of any SPAECs purchased in the spot market to match the amount needed, and administrative costs. From this amount, the proceeds the Company receives from SPAECs sold into the spot market will be deducted. 49. Industrial customers that self-generate SPAECs on-site and deposit enough SPAECs to cover the Company's SPAEC requirements for 100% of such industrial customers' load into the Company's accounts maintained in PJM's Generation Attribute Tracking System will be excluded from the calculation of the charges that otherwise would be assessed to them under the Company's SPVRC Riders. Customers that elect to self-perform and fail to meet their obligations will be rebilled at the cost of acquiring the SPAECs in the market to fill the requirement. (7) Recovery of Administrative Costs 50. The Company' default service plan administrative costs (i.e., primarily the costs of conducting procurement auctions andlor RFPs and the regulatory costs associated with these proceedings) that cannot be directly assigned or are not recovered through the SPVRC

30 Rider will be allocated to and recovered from the various customer classes in accordance with the percentage that each class' projected default service sales in MWh bears to total projected default service sales in MWh. Administrative costs shall only be recovered from customers taking default service fiom the Company and shall be bypassable for customers taking service fiom an EGS. (8) Electric Sewice Tariff 51. The Joint Petitioners agree that the electric service tariff set forth in Exhibit J to this Joint Petition reflects the rate design and method(s) of cost recovery described herein and that the Company shall be permitted to file that electric service tariff, to become effective as of June 1,2011. G. Retail Market Issues (1) Access to Customer Information and Other Data 52. The Company will post updated lists of shopping and non-shopping customers ("eligibility lists"), as well as the supplier-specific "Sync List," on the secure portion of the Company's EGS support web site. The first eligibility list to be posted to the supplier support web site will include the data shown on Exhibit K and shall be available no later than June 1, 2011, and the Company will use its best efforts to provide the information earlier. After the posting of the first updated customer list, the database will be updated quarterly on a preestablished date. Customers who have restricted access to their information will be able to authorize the release of their information in accordance with 52 Pa. Code (b). The Company will noti@ customers of their right to opt out of the release of customer information prior to the start of the default service period and twice a year thereafter through bill inserts and

31 will notify new customers of their right to opt out of release of customer information in the new application for service process. Customers will be able to do this with respect to multiple accounts at a time, but will be required to list each account number. The Company will provide the OCA and OSBA with an opportunity to review and comment on the opt-out notice prior to its delivery to customers. No later than June 1,2011, the Company will also provide both interval and non-interval consumption information via ED1 867 transactions after receiving written customer authorization fiom the requesting supplier or written certification by the supplier that it has such authorization. 53. The Company will initiate the following ED1 change requests with the Pennsylvania Electronic Data Exchange Working Group for implementation by June 1,2011 :(a) update cross reference ED1 transactions related to the 867 IU; and (b) provide EGSs with a customer's meter read cycle information in the ED1 814 response transaction or in the ED1 867 HU transaction. In addition, the Company will also investigate implementing the ED1 814 ND consistent with the Met-Ed/Penelec Settlement. (2) Billing 54. The Company will offer rate ready and bill ready EDC consolidated billing and dual billing capability to EGSs, as well as budget billing to customers on the purchase of receivables ("POR) program described in Paragraph II.G.(5), infra. EGSs selecting the rate ready option will be initially limited to a flat rate per kwh, and a percentage off of PTC pricing options. Each EGS will not submit more than 200 discrete rates for implementation during each calendar quarter and the Company will have no obligation with respect to rates in excess of that amount.

32 (3) Customer Education 55. The Company will send letters notifying residential and small commercial customers of available EGS offers for electric generation service, with a goal of sending letters twice each calendar year. The letters shall be sent in envelopes bearing the Company's name and established corporate logo, and the letter will be printed on the Company's letterhead. The content will be developed and paid for by participating EGSs, i.e., those EGSs whose offers are included in the customer letter. OCA and OSBA will review and approve the letters, and any participating EGS will review and approve the letters that go to their respective customers (but will not be able to disapprove material from other EGSs). A budget of up to $225,000 is established to cover the actual costs incurred pursuant to this paragraph for all mailings sent during the duration of this DSP Program. The actual costs incurred up to the $225,000 will be recovered through the Default Service Support Rider from residential and small commercial customers on a per customer allocation basis, except that any portion of the costs up to $225,000 that can be directly assigned to a class shall be collected from only that class. All costs above $225,000 will be paid by the participating EGSs. (4) Disclosure of Results 56. The Independent Evaluator will release the auction clearing price for each product procured through the auction process, or the average price for each block product procured for residential customers through an RFP process, within 10 business days of the issuance of a Secretarial Letter issued by the PUC approving such results or the results being deemed approved in accordance with Commission regulations. The Independent Evaluator will release said information through an to all parties that have subscribed to the Company's Default Service Web-site, and the results will be posted to the same web-site that allows 24

33 unrestricted public access. All price information provided under this provision shall be considered public information and available to the public. (5) Purchase of Receivables 57. The Company will file a POR program for EGS commercial and residential customers utilizing EDC consolidated billing as part of its revised supplier tariff to be filed with the Commission within six weeks after the entry of a final order approving the Settlement. The POR program will be available beginning on the earlier of June 1,2011, or upon Commission approval of the supplier tariff, and, at a minimum, will include the following elements which the Joint Petitioners agree not to oppose: The Company will have the ability to terminate service to a customer for the customer's non-payment of supplier charges in the same manner and to the same extent that the Company could terminate service to such a customer for nonpayment of EDC charges. This ability will be subject to the consumer protections included herein. Receivables purchased by the Company must be associated only with basic electricity supply, which is defined to be energy (including renewable energy) and renewable energy or alternative energy credits ("RECs" or "AECs") procured by an EGS, provided that the RECs/AECs are bundled with the associated delivered energy. For residential customers, basic electricity supply does not include early contract cancellation fees, late fees, or security deposits imposed by an EGS. Additional material will be included in the Company's confirmation letters sent to customers switching from default generation service to an EGS which informs customers that their electric distribution service may be terminated beginning June 1,201 1, for failure to pay for EGS basic electricity supply charges incurred after that date. The Company will work with the OCA, the OSBA, and other interested signatory parties to develop the specific language for the confirmation letters. EGSs will not deny service to residential customers whose accounts are included in the POR program for credit-related reasons and will not ask residential customers for deposits separate from any deposit required by the Company pursuant to Commission regulations and Act 201.