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N.Y. Utility: Retail Market Reset Order Ignored Administrative Burden on Utilities From En Masse Return Of Customers To Default Service, Seeks Rehearing

March 28, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

National Fuel Gas Distribution Corporation sought rehearing on the New York PSC's order requiring a "full stop" to the retail market, stating that the order ignored administrative burdens which may be placed on utilities from a likely return of mass market customers to default service en masse, and alleging that the order was not properly noticed with respect to its application to non-low-income customers

"Distribution is not saying that the Commission, after consideration of the consumer record, may not be justified in taking the action it did. The Company recognizes that in this instance, the Commission is focused on protecting consumer interests, and Distribution does not dispute that protecting consumer interests is central to the Commission's duties. What Distribution is saying is that, by failing to consider and account for the effects of its unanticipated Order on the LDCs, the Commission has acted in an arbitrary and capricious manner and, the Order, consequently, lacks a rational basis," the utility said.

Regarding the (now temporarily stayed by a Court) order that ESCOs could generally only serve natural gas customers if guaranteeing savings versus the utility, Distribution said that, "[g]iven that it is Distribution’s experience that the mass market customers of ESCOs have generally paid more than the utility’s commodity rate, and have done so for quite some time despite retail choice, it is likely that the mandatory price guarantee will force many natural gas ESCOs to exit the marketplace or, at the very least, have difficulty honoring the price 'guarantee.'"

Distribution raised a number of impacts on utilities resulting from an en masse return of customers to utility supply, including on natural gas capacity.

"[I]n a number of orders, the LDCs were required to perform balancing services for ESCOs and to release pipeline and storage capacity to them. Although Distribution can adjust capacity on a monthly basis, there is an administrative burden associated with processing these capacity impacts and the accompanying gas procurement implications that flow from an en masse customer return to utility service that should have been raised and evaluated in advance of the Order. Additionally, a degree of uncertainty has been introduced into the Company’s overall planning for the 2016-17 winter; Distribution really does not know how many customers it will be serving by then or if it will have sufficient firm injection rights to fill the returned storage. Additionally, because for both ESCOs and the Company the objective is to fill storage by the end of October/early November, had the Order been properly noticed, the parties could have taken into consideration the potentially significant effect on gas supply planning and administration of the ESCO customers returning to utility service," Distribution said

"[M]any of the changes that will flow from the Order could require unanticipated modifications to the Company’s back office systems. These modifications can be challenging even under ideal circumstances, when an appropriate process has allowed for a full vetting of issues and scope and a thorough redesign of the systems. In the instant case, where there has been little or no opportunity for a thorough analysis of these changes, the modifications typically become significantly more difficult and costly," Distribution said

"With the exception of price protection for low income customers, the Commission should suspend the effectiveness of the Order and issue the proposed mass market price guarantee for comment as a proposed rule in accordance with SAPA Article 2," Distribution said

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