No default selection in a select item on commerce checkout pages using hook_form_alter
The documentation says:


  If #required is TRUE and there is no #default_value, an empty option is added to the select control to force the user to make an active choice.


So take the default value out and make sure that the form code includes '#required' =&gt; TRUE,

I also read somewhere that you must use drupal_get_form() to build the output for a form otherwise the additional form processing functions will not run.  I did not use hook_form_alter() to modify shipping services but instead used hook_commerce_shipping_service_info() in a custom module to give me more flexibility.