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New York Utilities See "No Value" in Offering Fixed Price Default Service
The joint New York utilities, "see no value in requiring utilities to also offer," a fixed price default service option, the utilities said in a New York PSC proceeding on this winter's pricing.
Filing the comments jointly were Consolidated Edison, Orange and Rockland, Central Hudson Gas & Electric, National Grid, New York State Electric & Gas, and Rochester Gas and Electric.
"In 1998 and 1999, the Joint Utilities offered fixed rate options for gas customers. Customer enrollment, participation, and satisfaction differed by utility, but many customers were dissatisfied by the experience. As noted previously, customers already have fixed price options available from energy services companies, and the Joint Utilities do not believe utilities should be required to offer a fixed rate option. Mandatory utility fixed rate options would raise a host of issues. For example, the Joint Utilities note that there are no means for a utility to completely and perfectly hedge a customer’s position, because future customer usage is unpredictable and hedge products require commitments for specific volumes. As a result, it is likely that actual costs of gas for fixed rate customers will be different from what is collected from those customers, and the Commission will have to consider how such discrepancies are resolved. And if the Commission requires utilities to offer a fixed rate option, the Joint Utilities believe that there is no basis for deviating from the current and long-standing principle that utilities be permitted to fully recover and reconcile all their prudently-incurred supply costs, including costs incurred in offering the fixed rate options, including the associated hedging costs."
However, to the extent the PSC requires the offering of utility fixed-price options, the utilities said that, "the Commission should require a fixed term of service in order to prevent gaming and minimize the subsidies between customers."
"In order to best protect customers from the risk of sustained hedging losses, the maximum term of service should be no more than a year," the utilities said.
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June 24, 2014
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Reporting by Karen Abbott • kabbott@energychoicematters.com
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