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ESCOs Allege That ConEd Passing On Costs of Forecasting Errors to ESCOs (Millions in Imbalances Sought from Suppliers)
Several ESCOs have alleged that Consolidated Edison is seeking to pass-on the costs of inaccurate natural gas forecasts to ESCOs through imbalance payments, as ESCOs asked the New York PSC to immediately order a dispute resolution process to avoid ConEd from suspending any ESCOs from operating on its system while the dispute is pending.
ESCOs currently seeking relief from the PSC include Chief Energy Gas LLC, L&L Energy LLC, Marathon Power LLC and Supreme Energy Inc.
The ESCOs alleged that ConEd required the ESCOs, "to under deliver natural gas based on grossly negligent forecasting."
"Thereafter, Con Ed refused to engage in any substantive dialogue with any of the members of [the petitioning ESCOs], notwithstanding the collective protest against Con Ed's proposed settlement of the disputed imbalance charges on April 18, 2014."
"If Con Ed were to proceed with the April 18 settlement, Con Ed would be causing irreparable and significant financial harm to [ESCOs] and, ultimately, the consuming public."
The ESCOs noted that under ConEd's GTOP, "Con Ed unilaterally determines the amount of gas each ESCO is required to purchase and have delivered to the city gate; any deviation higher or lower than the proscribed Daily Delivered Quantities 'DDQs') results in penalties of 0.36 cents for every under delivered therm and 0.10 cents for every surplus therm."
The petitioning ESCOs said that they purchased exactly the amount required by Con Ed for January through March 2014. On or about April 1, 2014, the ESCOs began to receive their respective actual usages from Con Ed for January 2014.
"Those usage reports, dated March 25, 2014, revealed an ugly truth: Con Ed's DDQs were significantly flawed," the ESCOs alleged.
"In January alone, Con Ed's mandated deliveries were deficient by approximately a factor of six (i.e., Con Ed required 100 therms to be delivered for a particular account on each day but in actuality that account used 600 therms each day). As [ESCOs] investigated this massive shortfall, they each uncovered the same cause: Con Ed disregarded historical usage of accounts, advanced weather factoring programs and long term weather forecasts in determining the DDQs. In some instances, Con Ed forecast zero consumption for certain accounts where those very same accounts had high pool requirements and actual usage in the prior month (December 2013)," the ESCOs alleged.
"Con Ed's April invoice to the [ESCOs] reflected the resulting imbalance and sought to impose significant charges (in excess of $2 million for just four ESCOs in one month alone) on the [ESCOs]. Con Ed's price per undersupplied therm was $2.77! Moreover, Con Ed's invoice indicated that these imbalance charges would be settled against April's receivables. In effect, Con Ed is seeking to pass on the cost of its mistake onto the ESCOs and, therefore, onto the ESCOs' customers. The ESCOs bear no responsibility and neither should the ESCOs' customers," the ESCOs said.
The ESCOs sought PSC action, "to prevent Con Ed from settling any imbalance charges prior to any dispute resolution process can be pursued to address Con Ed's underlying gross negligence. If Con Ed were permitted to settle the disputed charges on or before April 18, 2014, the ESCOs would incur financial hardship and irreparable harm in the form of public outrage and the ensuing loss of customers and goodwill that the [ESCOs] have worked tirelessly to build up over the last several years. This loss would be beyond repair," the ESCOs said.
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April 18, 2014
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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