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Exclusive: Residential ESCO Customers At NY Utility Paid $3.8 Million More Than Default Service In First Six Months of 2016

October 14, 2016

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

Residential electric customers served by ESCOs at Central Hudson Gas & Electric in aggregate paid $3.8 million more for supply during the first six months of 2016 versus the default service cost, according to data filed by Central Hudson with the PSC

PSC Staff had issued a data request to Central Hudson on September 30 seeking a comparison of ESCO supply costs billed to customers versus what Central Hudson default service rates would have been, in a manner similar to the historical price comparison required for the historic ESCO bill calculators utilities are required to offer. In the data request, Staff directed that the comparison, "account for monthly adjustments to prior periods, one-time charges or short term changes in energy and natural gas prices."

Staff requested the data for electricity and natural gas residential and small C&I service classes.

We briefly note longstanding criticisms of such aggregate data:

• Even with certain prior period adjustments described above, there may be future adjustments and reconciliations not yet charged and accounted for in default supply rates, making comparisons inapt

• Particularly for fixed price products, the value (in the form of protection from any spikes which did or may occur in default supply rates) to ESCO customers may be front (or back) loaded over the term of the contract, and not captured in snapshot comparisons. This issue is somewhat mitigated by the 2.5 year time horizon in Staff's request (we highlight the first 6 months here for brevity), but there remain issues with customers who newly enroll in fixed plans whose value under such plans are being judged before the future value of such plans are known.

• Aggregate comparisons do not reflect individual customer experiences, who enroll with ESCOs at a variety of different times. The experience of ESCO customers who previously saved under a fixed price plan, but who are now "out of the money" versus the current rate due to fluctuations in market prices (even when saving over the life of the contract) may mask the experience of new customers who have enrolled more recently under a different set of (more competitive) prices

• To the extent ESCOs provided value-added services with their commodity, the data compares a plain vanilla default supply product with such value-added services

• To the extent an ESCO offers a guaranteed savings product, with such savings paid only at the end of the contract term, such savings may not be captured for customers currently in-term. Moreover, if such savings are not paid through the utility consolidated bill, they would not be captured here and would provide a skewed comparison

Nevertheless, as similar data is being used to justify changes in the New York PSC's retail market, the data is relevant notwithstanding any criticisms of the data. Moreover, in the absence of ESCOs providing (on a customer-masked basis) individual savings for each of their customers, it's all we have.

Also note that Central Hudson, during the relevant time period, used bimonthly billing for residential customers, so a customer's bill reflected two months of usage.

With that out of the way, under an exclusive analysis performed by EnergyChoiceMatters.com, the data filed by Central Hudson shows that, for the residential classes (SC 1, SC6-TOU), ESCO customers in aggregate paid $3.8 million more than what the cost would have been under Central Hudson default service for the first six months of 2016. Limiting the comparison to just SC1 residential customers, ESCO customers in aggregate paid $3.7 million more than what the cost would have been under Central Hudson default service.

There were about 37,000-39,000 SC1 customers on ESCO service during the first six months of 2016 (varied by month). The aggregate $3.7 million in excess cost works out to about $95 per customer.

For the calendar year 2015, SC1 ESCO residential customers paid in aggregate $8.7 million more than what the cost would have been under Central Hudson default service.

For brevity, we will not excerpt here the experience over the entire period dating back to 2014, the individual monthly comparisons, or the comparison for each individual ESCO, which are available in Central Hudson's data. However, a cursory examination would conclude that the experience is similar for SC1 electric customers under the longer time horizon, and that in no month were SC1 electric ESCO customers consistently seeing aggregate costs below default service, and that customers of no individual ESCO were consistently seeing significant savings versus default service (some ESCOs did have negligible costs in excess of default service: in one case, only $2, only $30-$1,000 in other cases; however, in such cases, the aggregate ESCO billings for such individual ESCO were likewise small, perhaps only few thousands dollars)

For natural gas, residential ESCO customers under SC12 (Aggregated Firm Transportation Rate - Residence) in aggregate paid $1.3 million more than what the cost would have been under Central Hudson default service for the first six months of 2016. There were about 11,000 SC12 customers on ESCO service during the first six months of 2016.

The one period where ESCOs consistently saved Central Hudson residential customers money in aggregate versus default service was in the wake of the polar vortex (March through September 2014), where ESCOs in aggregate saved SC12 gas customers about $500,000. However, on a calendar year basis, SC12 gas ESCO customers in aggregate paid about $500,000 more than default service in 2014.

Indeed, the calendar year 2014 experience for SC12 gas customers shows the problem with snapshot rate comparisons, as ESCO customers started the year paying in aggregate well in excess of default service (January and February), then, presumably as default service rates "caught up" to actual reconciled costs and/or new market prices, ESCO customers saw large savings, particularly in March and April, with the monthly swings shown below

SC 12 Natural Gas Aggregate ESCO Customers
Month           Monthly Savings Vs 
(2014)         CHGE Default Service
1                  ($325,458)
2                  ($237,106)
3                    $93,238 
4                   $223,255 
5                    $91,386 
6                    $36,274 
7                    $21,396 
8                    $15,541 
9                     $5,218 
10                  ($62,430)
11                  ($95,226)
12                 ($257,825)

The Central Hudson data also includes comparisons limited to low-income customers which generally indicate that, with the exception of certain months in the wake of the polar vortex, low-income customers are in aggregate paying in excess of the default service cost

The full data as reported by Central Hudson can be found below:

CHGE Explanatory Letter

Bill Comparisons

Calculation Example

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