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ESCO Issues Addressed In KeySpan LDCs Joint Proposal, Merchant Function Charges Calculation Revised; New Consolidated Billing Charges

September 9, 2016

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

A joint proposal in the rate case of KeySpan New York and KeySpan Long Island (National Grid) addresses several ESCO issues.

The JP, which remains subject to New York PSC approval, would cover the rate plan years January 1, 2017 through December 31, 2019.

Balancing Charges and Penalties

The KeySpan LDCs will modify the provisions of their tariffs governing the under delivery of volumes by ESCOs to provide that under deliveries in excess of two percent of the required delivery volume will incur a penalty charge of $25 per Dekatherm (Dth) when no operational flow order (OFO) is in effect and $50 per Dth when an OFO is in effect. These charges will be identified as penalties in the LDCs' tariffs and Gas Transportation Operations (GTOP) manuals.

In addition, to the extent that ESCOs and/or transportation customers are subject to daily balancing and daily imbalances are cashed out at a daily gas purchase price, any surcharges to such daily price applied to the sale of gas as a result of an under-delivery, and any discounts to such daily price applied to the purchase of gas as a result of an over-delivery, will be identified as penalties in the LDCs' tariffs and GTOP manuals.

Allocation of the Proceeds of Asset Management Agreements Related to Storage Service

The KeySpan LDCs will modify the manner in which revenues/credits arising from asset management agreements (AMAs) associated with the LDCs' upstream contract storage services are allocated such that ESCOs will receive an allocation of the customer portion of those revenues/credits. The amount of revenues/credits provided to ESCOs will be equivalent to the ESCO customers’ proportionate responsibility for the costs of the upstream storage services provided by the LDCs that are the subject of the AMAs that result in the revenues/credits.

Use of Firm Storage Released to ESCOs for Non-Firm Customers

Subject to the requirements of federal law and regulation, ESCOs may use contract storage released to them under the LDCs’ retail choice programs to serve their non-firm customers in KEDNY or KEDLI’s service territory when such storage is not needed to serve their firm customers in KEDNY or KEDLI’s service territory.

ESCO Collaborative

A collaborative to address ESCO issues that were raised in these proceedings but not resolved in the Joint Proposal will commence in the fall of 2016. The collaborative will discuss the development of a process improvement plan for the LDCs to address ESCO complaints. The collaborative will also address the following issues that are termed "Equal Access Issues":

(a) issues associated with the release of upstream pipeline capacity to ESCOs when their customer loads change;

(b) issues associated with the release to ESCOs of additional upstream storage and associated firm transportation capacity;

(c) for the portion of upstream storage and associated firm transportation capacity that cannot be released by the LDCs, the possibility of providing a financial credit to ESCOs to offset any financial advantage provided to the LDCs' sales customers as a result of the LDCs' sole access to non-releasable capacity

(d) the allocation of supplies between KEDNY and KEDLI

(e) the updating of demand charges recovered through KEDNY’s SC 4-A and 4-B rates and KEDLI’s SC 15 and 16 rates

A written report of the results of the collaborative, including any recommendations, will be filed with the New York PSC no later than June 1, 2017 to allow for the possibility of implementation of such recommendations by November 2017. If the collaborative report does not reflect the agreement of all parties, then the report will identify the positions of the parties and any dispute will be submitted to the Commission for resolution.

Any issues considered in the collaborative will be resolved in a manner that is revenue neutral to the LDCs. If the collaborative (or any separate party or parties in the event unanimous agreement is not reached) recommends an initiative that is not revenue neutral to the LDCs, then the report will identify projected costs and recommend an appropriate means of recovery of such costs.

After the collaborative report is submitted, the LDCs will address any additional Equal Access Issues during the remaining term of the KEDNY and KEDLI rate plans, as necessary, at their annual post-winter operations meetings. Such meetings will be held no later than May 31 of each year to permit the possibility of implementation of any operating changes before the start of the subsequent winter. To the extent that Equal Access Issues are raised at the post-winter operations meeting that cannot be resolved immediately, the ESCO collaborative will remain open during the term of the KEDNY and KEDLI rate plans to effectuate such resolution in a manner consistent with the procedures outlined above. The ESCO collaborative will also remain open during the term of the KEDNY and KEDLI rate plans to resolve any retail-choice related issues that may arise as a result of a separate IT/TC collaborative

Merchant Function Charge

KEDNY’s MFC will be modified as follows:

(a) the methodology for calculating commodity-related uncollectible account expense will be aligned with the methodology adopted by the Commission for Niagara Mohawk Power Corporation d/b/a National Grid (NMPC) in Case 08-G-0609, such that the commodity-related uncollectible account expense component of the MFC will be calculated each month by multiplying the uncollectible rate of 1.0571 percent by the Monthly Cost of Gas as set forth in the Gas Adjustment Charge (GAC);

(b) the methodology for calculating commodity-related working capital expense will be aligned with the methodology adopted by the Commission for NMPC in Case 08-G-0609, such that the working capital component of the MFC will be calculated each month by multiplying the lead/lag rate of 8.79 percent by the pre-tax weighted average cost of capital and further multiplying that product by the per therm Monthly Cost of Gas as set forth in the GAC Statement;

(c) the return requirement on gas in storage inventory, which utilizes the authorized pre-tax weighted average cost of capital in each Rate Year, will be modified to account for the change in the treatment of storage under KEDNY’s retail access program;

(d) the MFC calculation will be modified to add TC and IT sales customers’ therms into the MFC calculation; and

(e) the MFC annual expense targets will be established and recorded on the same basis as the GAC – September 1 through August 31. KEDNY will reconcile the period from January 1 through August 31, 2017 to account for the time between the current reconciliation and the new Rate Year One reconciliation period.

KEDLI’s MFC will be modified as follows:

(a) the methodology for calculating commodity-related uncollectible account expense will be aligned with the methodology adopted by the Commission for NMPC in Case 08-G-0609, such that the commodity-related uncollectible account expense component of the MFC will be calculated each month by multiplying the uncollectible rate of 1.0593 percent by the Monthly Cost of Gas as set forth in the GAC;

(b) the methodology for calculating commodity-related working capital expense will be aligned with the methodology adopted by the Commission for NMPC in Case 08-G-0609, such that the working capital component of the MFC will be calculated each month by multiplying the lead/lag rate of 7.76 percent by the pre-tax weighted average cost of capital and further multiplying that product by the per therm Monthly Cost of Gas as set forth in the GAC Statement;

(c) the return requirement on gas in storage inventory, which utilizes the authorized pre-tax weighted average cost of capital in each Rate Year, will be modified to account for the change in the treatment of storage under KEDLI’s retail access program;

(d) the MFC calculation will be modified to add TC, IT, and SC 9-NGV sales customers’ therms into the MFC calculation; and

(e) the MFC annual expense targets will be established and recorded on the same basis as the GAC – September 1 through August 31. KEDLI will reconcile the period from January 1 through August 31, 2017 to account for the time between the current reconciliation and the new Rate Year One reconciliation period.

Consolidated Billing Charge

KEDNY’s Consolidated Billing Charge will be increased from $0.76 per bill to $0.98 in Rate Year One, to $1.20 in Rate Year Two, and to $1.42 in Rate Year Three.

KEDLI’s Consolidated Billing Charge will be increased from $0.65 per bill to $1.02 in Rate Year One, to $1.39 in Rate Year Two, and to $1.76 in Rate Year Three.

GAC Reconciliation

KEDLI will modify its monthly cost of gas calculation to implement a common per therm gas fixed cost and common per therm fixed cost credit. KEDLI will determine the per dekatherm fixed gas cost for each service class grouping by allocating the fixed gas costs of the gas assets to the service class groupings proportionate to each service class groupings’ estimated use of peak day, winter season, and annual gas. Fixed cost credits will be allocated in the same manner as fixed gas costs

Cost Of Gas Imbalance Adjustments

KEDNY and KEDLI will be permitted to modify its monthly cost of gas imbalance adjustments to (i) expand the period that monthly imbalance surcharges or refunds take effect to include October 1 through July 31 and (ii) eliminate the $0.05 per therm cap. KEDNY will also be permitted to include adjustments each March 1st to its currently effective annual cost of gas imbalance factor to include any residual gas cost imbalance, including simple interest, associated with the recovery of the prior year’s annual cost of gas imbalance factor.

REV Demonstration Projects

The LDCs will implement three Reforming the Energy Vision demonstration projects during the term of the KEDNY and KEDLI Rate Plans. The three projects involve: (i) flood zone protection packages; (ii) micro combined heat and power – home energy management solutions; and (iii) commercial demand response.

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