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Mass. LDCs Seek OK to Procure Capacity for Capacity-Exempt (Shopping) Customers, Solicit Such Customers for Return to Default Service

September 16, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Citing reliability concerns, the Massachusetts natural gas LDCs have requested authorization to include up to 30 percent of the Winter 2014/15 design day and design winter gas-supply requirements of capacity-exempt transportation customers in the planning and procurement process for Default Service for the period November 1, 2014 through April 30, 2015.

A capacity-exempt customer is a retail customer purchasing natural gas supply from a competitive supplier, but that is exempt from the mandatory assignment of capacity and is therefore excluded from the planning load of the Gas Companies under Department precedent. In contrast, "capacity eligible" transportation customers are assigned a pro-rata portion of the resource portfolio held by their respective gas company on a mandatory basis.

The LDCs said that they must be allowed to procure such additional resources because of their inability to distinguish between capacity-exempt and capacity-eligible customers in running the system, meaning that during peak times, capacity-exempt customers who lose their competitive supplier may be drawing on system gas, to the potential detriment of reliability.

"Without the ability to plan for the entry of additional Default Service customers in advance of the peak season, the reliability of gas service could be jeopardized for all customers," the LDCs said. "The Gas Companies’ distribution systems are not engineered to differentiate between capacity-eligible and capacity-exempt customers from a delivery perspective, and the Gas Companies are without the ability to stop capacity-exempt customers from improperly drawing natural gas off the system in periods of high demand, and may not even have notice of the need to take any responsive action."

The LDCs further said that their, "experience is that competitive suppliers do not general [sic] hold firm transportation capacity rights to serve their customers, which can have significant economic impacts for their customers in a constrained capacity market."

"During the 2013/14 peak season, each Gas Company received numerous inquiries on the options for electing Default Service and/or experienced a rising percentage of capacity-exempt customers taking service as Default Service customers after being returned to the system by their competitive supplier. In most cases, the customer’s return to the system is made without warning or a request for service to the Company. The customer inquiries have continued in relation to the Winter 2014/15 season and the Gas Companies expect this trend to continue and perhaps to increase until such time that capacity constraints are alleviated and price volatility arising in the marketplace due to current natural gas demand and existing supply constraints is mitigated," the LDCs said.

The LDCs specifically sought approval of a plan that requires: (a) authorization for the Gas Companies to procure additional supplies for the upcoming Winter 2014/15 season to meet the needs of Default Service customers who were not already included in the Gas Company planning processes due to capacity-exempt status, up to 30 percent of the design day requirements of capacity-exempt load; and (b) implementation of a standardized process to allow capacity-exempt customers' entry to Default Service over the period November 1, 2014 through April 30, 2015.

If authorized by the Department, the Gas Companies would expeditiously notify all capacity-exempt customers of the opportunity to become a Default Service customer as of November 1, 2014, or on a cycle requested by the customer.

As a condition of becoming a "new customer" for Default Service, capacity-exempt customers electing Default Service would be required to remain on Default Service through April 30, 2015, at which time the customer may remain on Default Service or return to Supplier Service.

Notably, the customers would lose their capacity-exempt status if returning to default service. When and if the customer opts to again elect Supplier Service, the customer will be assigned capacity pursuant to Section 13 of the T&Cs and become part of the "Planning Load" of the respective Gas Company on a going forward basis.

Capacity-exempt customers who do not elect Default Service as part of the proposed solicitation, but request Default Service during the 2014/15 peak season may be allowed to take Default Service at the LDC's sole discretion based on availability, but must agree to remain a Default Service customer through April 30, 2015.

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