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New York PSC Approves Changes To Default Service Reconciliation Mechanism

April 25, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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The New York PSC has approved at Niagara Mohawk (National Grid, or Company) changes to its reconciliations mechanism for electricity hourly-priced (HP) default service, which will also impact the reconciliations seen by non-hourly default service customers

In brief, the PSC directed NiMo to create and calculate a new Supply Service Adjustment (SSA) for only HP customers and reconcile capacity costs using $/kW rate on the ICAP tag. As a result, reconciliations for HP and non-HP customers will now be separate.

More specifically, on September 17, 2018, Niagara Mohawk Power Corporation d/b/a National Grid (National Grid or the Company) had submitted an Electric Supply Whitepaper which evaluates alternative methods for calculating its Electric Supply Reconciliation Mechanism (ESRM) for hourly-priced customers (Whitepaper). In the Whitepaper, NiMo had recommended creating separate Supply Service Adjustments (SSA) for hourly priced (HP) and non-HP customers. The Company provided draft tariff revisions to effectuate the recommendation.

The PSC approved the proposed changes and directed NiMo to file tariffs consistent with the draft tariff modifications submitted with the Whitepaper.

Currently HP and non-HP customers pay the same SSA component of the ESRM. Further, the ESRM is assessed on a per kWh basis for both customer groups.

Under NiMo's recommendation ("Option #1"), NiMo had recommended two modifications to the current process. First, the Company recommended using a separate SSA rate to reconcile actual supply costs and revenues for HP customers and non-HP customers. Second, the Company recommended reconciling capacity costs separately for HP customers on a per kW basis. The Company recommended displaying the capacity reconciliation as a separate line item on HP customer bills, which is similar to how it displays the ESRM on a separate line from the electric supply cost rates on customer bills. According to NiMo, listing the charge separately provides greater transparency and will not distort the capacity market price signal for HP customers and energy services companies, that desire to compare rates.

The Whitepaper had listed several improvements related to implementing Option #1. First, the ESRM for HP customers would be less volatile, as the reconciliation would only account for the ancillary rate and load bidding costs. Second, capacity costs would be reconciled on a per kW rate using the HP customers specific capacity tag, which NiMo had said provides a more equitable allocation than the present per kWh allocation.

NiMo had said that the impact to non-HP customers is small.

In adopting Option #1, the PSC noted that, "National Grid’s present ESRM comprises several components that reconcile commodity costs and revenues. Having separate reconciliations for HP and non-HP customers is beneficial for several reasons."

"First, and primarily, the Company knows HP customers actual usage, by definition, by hour. In contrast, the Company does not know non-HP customers’ actual usage with that level of granularity. As a consequence, the Company develops load profiles from service class data to estimate hour by hour electricity usage in the absence of interval metering. Reconciling both together, in a single ESRM rate is less accurate than splitting the ESRM into two groups," the PSC noted

"Second, Option #1 improves the reconciliation of capacity costs. Presently National Grid recovers these costs from customers on a per kWh basis, which can create misallocations based on load factor. Option #1 provides that capacity costs be recovered through the customers’ ICAP tags, which more closely reflects the customers’ contribution to cost, and is, therefore, superior to Option #2," the PSC said

"Accordingly, the Commission directs National Grid to file tariff amendments consistent with those provided in the attachment to the ESRM Whitepaper on not less than three days’ notice to become effective May 1, 2019," the PSC said

"The tariff amendments directed in this Order will improve the accuracy of the ESRM. The impact on non-HP customers will be de minimis. For full service HP customers, the changes will provide a benefit by decreasing volatility in the electric supply portion of their bills. National Grid shall inform each of its full-service HP customers of the ESRM changes," the PSC said

The PSC directed that NiMo, "should continue to look for ways to improve the ESRM."

"As suggested in the Whitepaper, there may be several other improvements that the Company can make at a process level, that would not require Commission action. The Company during its natural course of business, should implement these prudent changes," the PSC said

Case 17-E-0238

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