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ConEd Details Reduction In Administrative Supply Costs

Seeks New Charge To Collect Disaggregated Supply Costs Previously Reflected In Bids

Proposes Change In Gas Balancing

February 1, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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As part of its newly filed electric rate case, Consolidated Edison (ConEd, or Company) detailed its reduction in administrative costs related to its supply function, and sought a new charge to recover supply costs previously reflected in bidders' rates, associated with the utility's transition to an in-house procurement platform

Concerning electric supply costs, ConEd said that, "In 2018, the Company piloted third-party RFP auction platform administered in-house at a significantly reduced cost over its prior vendor. The new platform requires the Company to incur new costs for customization, licensing, maintenance, and incremental internal labor costs, but still has resulted in much lower total auction platform and administrative costs than the previous external vendor’s end-to-end product costs."

"Under the prior vendor, annual auction fees collected from Con Edison suppliers ranged between approximately $1.1 million dollars and $2.2 million dollars. These fees were reflected in a supplier’s offer price, which means they were passed on to customers. In contrast, the new vendor’s fees are less than $120,000 per year," ConEd said

As a result, ConEd said that, "The Company is proposing to revise the tariff to recover the vendor fees that are today indirectly recovered from customers through the supply charge. As we have explained, under the previous vendor all costs, including customization, licensing, maintenance, and external labor, were estimated and provided to suppliers as an auction fee which would be incorporated into their bids and passed on to customers as a supply cost. By switching vendors, adopting a new platform, and administering the new platform in-house, the Company has reduced these administrative costs from between $1 million and $2.2 million to less than $120,000. However, the Company’s new approach results in these administrative costs becoming disaggregated from the supply costs and assumed by Energy Management without a mechanism for recovery. The Company is proposing tariff revisions to avoid this possibility and to allow the Company to recover as a supply cost the disaggregated administrative costs related to using an on-line auction platform."

ConEd also proffered utility-owned renewable generation as a proposal to reduce supply costs to customers

"As the Company has explained in comments to the Commission regarding new initiatives to help meet the State’s Renewable Portfolio Standards (“RPS”) goals, Con Edison supports utility ownership of renewable facilities over any power purchase agreement (“PPA”) arrangements. Utility ownership will result in lower supply costs to our customers than PPAs would. In addition utility ownership will capture the continuing benefits of the renewable facilities for our customers over the life of the facilities instead of ending at the expiration of the PPAs," ConEd said

ConEd is also proposing a change to the balancing provisions applicable to uninterruptible gas service

Specifically, the Company is proposing to add a maximum delivery charge for 'over-deliveries' above 110% of the Daily Transportation Quantity to the Monthly Balancing Program for interruptible marketers. Currently, there is a minimum delivery charge for a Daily Transportation Quantity that is less than the minimum delivery quantity ('under-deliveries') but no charge for 'over-deliveries'.

Currently marketers elect either a 70%, 80%, or 90% minimum delivery quantity.

"An over-delivery of 110% would result in swings of 20-40% depending on the customer class. Since both under- and over- deliveries to our gas system adversely impact operations (e.g., pressure), we believe the same charge to under-deliveries above 10-30% should be applied to over-deliveries above 10%. With increased demand on our system, the Company has less room to handle 19 these types of daily swings," a witness for ConEd said

ConEd also stated that it is not proposing a change in the billing and payment processing (BPP) charge

As exclusively first reported by EnergyChoiceMatters.com, ConEd is also seeking authorization to own energy storage (see story here)

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