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NY Utility Says Customers "Conscripted" Into Municipal Aggregation May Create Ill-Will, Opposes PSC's Inclusion of Larger C&I Customers on Opt-out Basis

May 24, 2016

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

National Fuel Gas Distribution Corporation sought rehearing of the New York PSC's generic order authorizing municipal aggregation on an opt-put basis statewide, as Distribution said that, "the benefits of a state-wide Opt-out enrollment model have not been demonstrated and are, accordingly, a matter of speculation and conjecture."

"[A]n Opt-in enrollment model is to be preferred because customers would have provided affirmative consent and thus would be far more likely to understand and continuously participate in the CCA program. The very nature of 'Opt-in' would augment consumer protection benefits from local involvement by providing a municipality with further incentive to promote, educate or market the projected benefits of the CCA program to their constituents," Distribution said

"Conversely, customers conscripted into the CCA through Opt-out enrollment will not have any loyalty to the CCA. Moreover, it may even engender ill-will amongst constituents," Distribution said

"The Order’s assertion that 'Opt-in aggregation for residential customers is limited by the same factors that limit retail market participation in general, including lack of the time, interest, or knowledge needed to consider aggregation offers, lack of awareness, and the difficulty of comparing competing offers,' is also unfounded," Distribution said

"As documented in Case 12-M-0476, ESCOs typically charge more for their commodity services than the comparable utility commodity service. This simple fact is the more likely reason why many customers do not participate in retail choice, not the factors cited by the Order or inertia of the utility being the default provider. To assert otherwise is to turn one’s back on the Commission’s recent Reset Order which detailed the high prices and questionable sales tactics of certain ESCOs. Contrary to the PSC’s assertions, it would appear consumers generally understand the market economics of retail choice and deliberately choose not to participate. While CCA programs may well provide consumers with better bargaining power than they would have individually, there is no guarantee CCA programs will produce savings or provide value added services that customers will value as warranting having the Opt-out enrollment model as the default model," Distribution said

Distribution said that while it is not opposed to further pilots utilizing an opt-out model, the PSC has rushed authorization of opt-out aggregation prior to the results of any pilot, as Sustainable Westchester, authorized specifically as a pilot, has only just commenced service.

"At the very least, the Opt-out process for the Sustainable Westchester Pilot program should be completed and thoroughly evaluated before the Commission adopts a state-wide CCA Opt-out enrollment model. To do otherwise – to rush headlong into mandating Opt-out before the Westchester Pilot Program has produced results, or the Reset Order proceeding has afforded a decision on eligible products for mass market customers – is truly 'putting the cart before the horse,'" Distribution said

Distribution also highlighted the success of the Village of Hamburg and Village of Sloan opt-in programs as being ignored by the PSC's justifications for opt-out authorizations.

Distribution slammed the "inherent conflict" presented by aggregation administrator and suppliers running the opt-out process

"While the Order requires that a meaningful Opt-out process must serve as a proxy for affirmative customer consent, there is an inherent conflict if the CCA Program Administrator or the selected ESCO oversees and operates the Opt-out process. These parties have a vested interest in preventing customers from exercising their Opt-out rights to preserve load and resulting economies of scale. An independent third party should operate the Opt-out process, perhaps similar to Third Party Verification ('TPV') utilized for ESCO door-to-door and telephonic customer enrollments. This would provide a more meaningful Opt-out process and an objective measure of how the CCA program complied with the other Commission requirements designed to protect customers and/or the CCA program implementation plan. Therefore, the Commission should either require utilization of TPV or require that municipalities not utilize CCA Program Administrators or the 'Selected ESCO' to oversee and operate the Opt-out process," Distribution said

Distribution also took issues with the PSC's decision to subject a broader range of customers than the traditional definition of mass market to municipal aggregation on an opt-out basis (see prior story: New York Municipal Aggregations Will Be Allowed To Enroll Larger Customers on Opt-Out Basis)

"Distribution also believes that ... the Order erred in its determination of which of the Company’s service classifications falls within the definition of 'Gas Opt-Out Service Classes'. The inclusion of “SC 3 General” is overly broad because this classification includes non-residential customers with consumption up to 5000 mcf annually, well in excess of the 750 Dth mass market breakpoint provided in the Reset Order for mass market customers. These customers are generally more sophisticated in terms of their energy purchasing decisions than non-residential customers that fall within the mass market definition," Distribution said

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