FirstEnergy's Pennsylvania Default Service Program

Supplier Master Agreement

SMA 00001 (revised 10/10/2014)
Published On: 10/08/2012

Question: In the Bidding Rules Section 3.1 and the SMA Appendix E, a seasonal billing factor is referenced. The summer season is defined as June - September.  Is the June - September correct for contracts for DSP-III auctions?

Answer: Yes, the summer season is defined as June-September for the seasonal billing factor.

SMA 00002 (revised 09/21/2016)
Published On: 10/12/2012

Question: If we already have a signed Supplier Master Agreement with any of the Companies from a prior Default Service auction, will we need to submit a new signed Supplier Master Agreement for subsequent Default Service auctions?

Answer: An executed Supplier Master Agreement (SMA) from a prior Default Service Program  (e.g., DSP-I) cannot be used for a subsequent DSP (e.g., DSP-II, DSP-III, DSP-IV). Only SMAs that have been approved for a particular DSP can be used for that DSP. See also FAQ SMA 00012.

SMA 00004
Published On: 10/16/2012

Question: Are volumes paid based on PJM de-rated volumes or Retail meter volumes?

Answer: The payments to Default Service Suppliers are based on the PJM de-rated volumes.

SMA 00007 (revised 10/05/2016)
Published On: 11/15/2012

Question: Can you post redline documents of the Supplier Master Agreements (SMAs) and Bidding Rules, so the documents can be compared between the current Default Service Program (DSP) and from the prior DSP?

Answer: Please click below to see the redline changes in the SMA document for the June 2017 to May 2021 DSP relative to the document from the June 2015 to May 2017 DSP:

Please click below to see the redline changes in the SMA documents for the June 2013 to May 2015 DSP relative to the documents from the January 2011 to May 2013 DSP:

Also, see FAQs SMA 00005 and SMA 00006 for more on differences in the SMAs between the two DSPs. The Bidding Rules were rewritten and are not directly comparable between the two DSPs.

SMA 00008 (revised 11/04/2015)
Published On: 11/19/2012

Question: (1) In the event that a bidder is awarded tranches to serve full requirements Default Service under multiple EDC auctions (e.g., for Met-Ed, Penelec, Penn Power, and West Penn Power) would each of the Electric Distribution Companies (EDCs) execute the same Supplier Master Agreement (SMA) or would they each sign separate SMAs with the Default Service (DS) Supplier?

(2) In the event that multiple EDCs would execute the same SMA, would such EDCs be jointly and severally liable for Company obligations thereunder and would there be a common agent for them or would each be able to issue conflicting instructions to the DS Supplier?

(3) Should references to Company in the SMA be read as references to a single EDC or to all of the EDCs with respect to which Company has been awarded full requirements/hourly service pricing load?

(4) If there is an Event of Default under the SMA with respect to one EDC, is the DS Supplier entitled to terminate the SMA or other SMAs with respect to the other non-defaulting EDCs?

(5) Conversely, if there is an Event of Default with respect to a DS Supplier relating to load supply to a particular EDC, would the other EDCs have the right to terminate the SMA or other SMAs with respect to the DS Supplier even if the DS Supplier has not defaulted in its obligations to such other EDCs?

(6) How does the second sentence of Section 11.2 in the SMA which states that nothing in the Agreement shall restrict the rights of either party to file a complaint with FERC under relevant provisions of the Federal Power Act work with the Mobile-Sierra provisions in the third paragraph of Section 11.2?

Answer: (1) A winning bidder (Default Service Supplier) will execute a separate SMA document with each EDC for which the winning bidder has been awarded tranches. 

(2) Each SMA document executed by the winning bidder will be executed by only one EDC (not multiple EDCs).

(3) References to Company in the SMA are references to a single Company (i.e., to a single EDC).

(4) No.  Each SMA is between a supplier and a single EDC.

(5) No.  Each SMA is between a supplier and a single EDC.

(6) The right to file a complaint addressed in the second sentence of Section 11.2 of the SMA is separate from standards that may be applied to such a complaint, which are addressed in part in the provision referencing the Mobile-Sierra doctrine. The Companies recommend that all bidders consult with counsel regarding the legal meaning of any provisions of the SMAs.

SMA 00011 (revised 01/18/2017)
Published On: 01/22/2013

Question: Can you supply the PNODE ID of the settlement point for Penn Power and West Penn Power?

Answer: Penn Power PNode ID is 115944307 PENN POWER AGGREGATE.  West Penn Power PNode ID is 8394954 APS ZONE.

Effective June 1, 2015, PJM will require all Zone aggregated LMP settlement points to be replaced with its respective residual aggregated LMP.

For the PA utilities, the following Residual LMPs will apply for settlements:


Company Pnode ID Description
Met-Ed 116472947 METED_RESID_AGG
Penelec 116472951 PENELEC_RESID_AGG
Penn Power 126769999 PENNPOWER_RESID_AGG
West Penn Power 116472931 APS_RESID_AGG

SMA 00012 (revised 11/06/2014)
Published On: 02/11/2013

Question: The winning bidders for the Residential/Commercial (Fixed Price) product in a particular auction have signed the SMA agreements. If they become winning bidders in a subsequent auction, would they have to sign a new SMA or an amendment to an existing SMA? Also, would an additional Guaranty be needed?

Answer: A Default Service supplier and the Company will sign the applicable base Supplier Master Agreement and Appendix E the first time the supplier is awarded Default Service load for that Company for the current Default Service Program (DSP).  For subsequent Default Service awards with that Company in the same DSP, only Exhibit 1 will need to be executed.  In the event there are changes required to the SMA itself in subsequent procurements, a separate full SMA document (including the applicable appendix) can be executed.  If the Bidder wins additional tranches in a subsequent auction, they can simply amend the existing guaranty by adding the date of the new Supplier Master Agreements to the guaranty.

SMA 00013 (revised 09/21/2016)
Published On: 08/21/2013

Question: For the both the pre-bid LOC and performance LOC, the requirements is for the bank to be rated A by S&P and A2 by Moodys. Can a Bank that meets those credit requirements be used even if they do not have a US Branch (Foreign Bank)?

Answer: As long as the issuing bank meets the minimum credit rating requirements, there is no requirement that the bank have a US branch.

SMA 00014 (revised 11/03/2016)
Published On: 08/21/2013

Question: Please advise on the process to provide comments in order to update SMA Appendix F (FORM OF SUPPLIER LETTER OF CREDIT).

Answer: The Companies generally do not modify forms of agreements during an ongoing bidding process, so as to maintain consistency in the rules and application forms across all potential bidders.  Consequently, changes to Appendix F or any other part of the Supplier Master Agreement (SMA) generally are not permitted.

Further, the rules, agreements, and standard forms and supporting documents are reviewed and modified during a public legal proceeding that is intended to provide the opportunity for changes before regulatory approval of those documents is complete.  

SMA 00015
Published On: 08/21/2013

Question: If a bidder's guarantor is formed under the laws of Canada, is an enforceability opinion with respect to the guarantee required to be provided by an outside law firm? Given the trading relationship and substantial overlap in US and Canadian law, can we instead provide an opinion from in-house counsel licensed to practice law in Canada?

Answer: The Companies' bid rules and applications do not specifiy that the opinion letter come from either in-house or external firm counsel.  It is up to the bidder to determine which is most appropriate, to the extent that the selected counsel is fully qualified under the laws of the foreign jurisdiction to provide such an opinion. 

SMA 00017 (revised 10/10/2014)
Published On: 12/02/2013

Question: Our guarantor is based outside of the US. If we become a Default Service Supplier, will we be required to submit a legal opinion & sworn certificates from our guarantor? The process for us to obtain these documents can take in excess of ten business days. If we win tranches in the January auction, when will these documents be due?

Answer: Yes, per Section 6.4 (ii) of the SMA, these documents would be required. These documents, along with the Guaranty and execution of the Supplier Master Agreement, are due within three (3) business days following the Commission’s approval of the auction results.

SMA 00018 (revised 10/10/2014)
Published On: 12/11/2013

Question: The Supplier Master Agreement references the Open Access Transmission Tariff (OATT) for defining "Ancillary Services". The OATT defines the term as: “Those services that are necessary to support the transmission of capacity and energy from resources to loads, while maintaining reliable operation of the Transmission Provider’s Transmission System in accordance with Good Utility Practice.” And “The Transmission Provider is required to provide … the following Ancillary Services (i) Scheduling, System Control and Dispatch, and (ii) Reactive Supply and Voltage Control from Generation or Other Sources.” For the purposes of Default Service supply, is "Ancillary Services" intended to mean ALL load-related charges or some subset of settlement charges related to ancillary services? (I.e.: Reactive Services, Black start, etc.) Are the administrative charges like “Market Monitoring Unit (MMU) Funding,” “FERC Annual Recovery,” and “Organization of PJM States, Inc. (OPSI) Funding” included?

Answer: Yes, per the definition of Default Service Supply in the Supplier Master Agreement (SMA), suppliers are responsible for all load-related charges except as listed in Appendix D in the SMA.

SMA 00020 (revised 09/21/2016)
Published On: 10/23/2014

Question: Can you confirm the seasonal billing factors for DSP-III (June 2015 - May 2017) for summer and non-summer months are both one (1)? Also, in Appendix C of the posted Supplier Master Agreement (SMA) the following is stated: "When specified, numerical multipliers associated with summer months (June-September) and non-summer months (November-May)". I think the non-summer months should be October-May.

Answer: Yes, for DSP-III the seasonal billing factor for both the summer months and the non-summer months will be one (1) for June 2015 through May 2017.  There is a typo on page 6 of Appendix C, DS Supply Specifications, in the SMA:  "(November-May)" should be "(October-May)".  The seasonal billing factor periods are defined correctly on page 10 in the SMA in Article I, Definitions.

SMA 00021
Published On: 02/17/2015

Question: Per the SMA, the Company needs to be notified of any changes to the Supplier's financial stance. Would it be sufficient if we add the Company to the e-mail distribution list for shareholder notifications?

Answer: Adding the Company to the distribution list for shareholder notifications is not an appropriate means to notice the Company of change to financial condition or credit rating per Section 6.1 of the Supplier Master Agreement ("SMA").  Exhibit 2 to the SMA provides the required form of notice and recipients for any required notification under the SMA.

SMA 00022
Published On: 09/10/2015

Question: Section 1.9 Additional Certifications in Part 1 of the Application states, "if you become a winning bidder, you will execute the SMA within three (3) Business Days". Does this imply that the Authorized Representative has to have the ability to sign the SMA? Or that the Applicant (not necessarily the Authorized Rep.) must execute the SMA within the time period specified?

Answer: The SMA does not need to be signed by the Authorized Representative.  The SMA needs to be executed by the Applicant, which may or may not be the Authorized Representative. 

SMA 00023 (revised 12/03/2015)
Published On: 11/16/2015

Question: Section 6.2 of the Supplier Master Agreement (SMA) states: "The DS Supplier may submit and maintain a security deposit in accordance with Section 6.4 of this Agreement in lieu of submitting to or being qualified under a creditworthiness evaluation." However, towards the end of Section 6.2 it also states: "DS Supplier shall provide the Company and its agent’s unrestricted access to audited financial statements; provided that if audited financial statements are not available, the Company, in its sole discretion, may specify other types of financial statements that will be accepted." Does the first statement mean that providing a security deposit would exempt a DS supplier from the audited financial requirements? The entity that we will be using to participate in the auction does not have audited financials, but we can provide un-audited information.

Answer: Per Section 6.2, the Default Service Supplier may submit and maintain a security deposit in accordance with Section 6.4 of the Supplier Master Agreement in lieu of submitting to or being qualified under a creditworthiness evaluation.  Also, per Section 6.2, DS Suppliers shall provide unrestricted access to audited financial statements; provided that if audited financial statements are not available, the Company may specify other types of financial statements that will be accepted.

SMA 00024
Published On: 07/05/2016

Question: For West Penn Power, the Default Service Supplier is responsible for PJM Charge 1104 (NITS Offset). Is the same NITS Offset Charge applied for both retail suppliers (1104.12) and wholesale suppliers (1104.14)?

Answer: Yes, that is correct.

SMA 00026
Published On: 12/01/2016

Question: For Penn Power and West Penn Power, what energy forward price do you use for margin purposes? In these locations, there are no broker quotes.

Answer: Per Appendix B of the Supplier Master Agreement, the energy forward price is based on PJM Western Hub.

SMA 00027
Published On: 12/07/2017

Question: Following up on FAQ PJM 00022, is balancing congestion the responsibility of the supplier? Also, is it known when the SMA will be updated to reflect this charge?

Answer:

Section 2.5 (PJM Agreement Modifications) of the Supplier Master Agreement (SMA) addresses this issue.  The load serving entity, or in this case, the Default Service supplier, is responsible for all balancing congestion line items.  The PA FirstEnergy operating companies plan to formally amend their SMA to reflect this change as part of their filings for the next Default Service plan.

SMA 00028
Published On: 01/17/2018

Question: GEN 00044 states that "Default Service Suppliers independently participate in the PJM ARR/FTR auctions and are awarded ARRs and FTRs from the PJM auction into their individual PJM account. The FE-PA Utilities do not have access to the awarded ARR paths or nominated FTR paths for any Default Service Supplier." However, Section 2.3 of the SMA indicates that "The Company shall transfer or assign to the DS Supplier the Company’s rights to Auction Revenue Rights (ARRs) to which the Company is entitled as an LSE pursuant to the PJM Agreements, including the rights to ARRs, provided that such rights are related to the service being provided to meet the DS Supplier Responsibility Share and such rights are for the Delivery Period." These two statements seem to contradict one another, can you please confirm whether the companies assign ARRs directly to tranche providers? If so, how are ARRs allocated?

Answer: Section 2.3 of the SMA relates to the load that has yet to be assigned to a Default Service (DS) Supplier at the time of the PJM Annual Auction Revenue Rights (ARR) Allocation process.  There may be times when not all the load is assigned to DS Suppliers in time to participate in the PJM Annual Auction Revenue Rights (ARR) Allocation process.  In this case, the FE Companies will be responsible for this load and will obtain the ARRs.  Once suppliers are secured for the unassigned load, the ARRs obtained are allocated to the DS Suppliers by PJM pursuant to the PJM Agreements.

SMA 00029
Published On: 01/29/2018

Question: Where the Supplier Master Agreement (SMA) discusses termination due to default, it states that "The Non-Defaulting Party shall calculate, in a commercially reasonable manner, a Settlement Amount with respect to the obligations under this Agreement. The DS Supplier may, in its sole discretion, select the notional quantity in the following subsection 5.4(a)(i) by checking the box below. If the DS Supplier does not select subsection 5.4(a)(i) by checking the box, it will be deemed to be excluded from this Agreement.” Is there additional information available on how the "commercially reasonable manner" would be determined? Is there a calculation available for the price component?

Answer: No, there is no additional information on “commercially reasonable manner” for calculating a settlement amount.  Any such calculation would be prepared and reviewed after the default and the applicable variables would be applied.  Such settlement calculations are the exception and the pricing component calculation also would be developed after the default event.

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