New York Utility Seeks To Increase Billing Charge Applicable To ESCOs By 30%

New York Utilities Detail Unbundled Supply-Related Administration Costs In New Rate Case

May 22, 2019

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With an increased focus by retail suppliers on alleged subsidization of default service rates by distribution customers, due to supply-related administrative costs being embedded in distribution rates, newly filed rate cases by New York State Electric & Gas Corporation (NYSEG) and Rochester Gas and Electric Corporation (RG&E) (collectively, the Companies) provide an opportunity to review such costs, including costs that have already been unbundled and allocated to the merchant Function Charge

The utilities also filed updated amounts for the Bill Issuance and Payment Processing (BIPP) charge, which represent an increase versus the current amounts (see below)

The electric MFC consists of six components: 1) Commodity Uncollectibles; 2) Administrative Component; 3) Credit and Collection/ Call Center ('CCCC') Component; 4) Working Capital for Purchased Power; 5) working Capital for Commodity Hedge Margin Accounts; and 6) Prior Year True Up Component

Generally, Credit and Collection / Call Center component and the Commodity Uncollectibles, Administrative Component reflect the unbundling of the following costs based on an allocation in an embedded cost of service study (ECOS):

Credit and Collection and Call Center
  Call Center (906B)
  Credit and Collections (906A)



Administrative Component

  Electric / Gas Supply
  A&G (920‐935)
  Customer Service Expenses (907 ‐ 916)
  Depreciation
  Taxes other than income
  Income Taxes & Adjustments

The amounts unbundled for each, for each company for each commodity, are included in the companies' rate filing package, in the Exhibits to the testimony of the Revenue Allocation And Rate Design Panel, Exhibit RARD‐12 (click here)

Furthermore the Administrative Component also includes a Return on Rate base, reflecting net plant and a rate base adjustment (which varies by commodity, but generally excludes working capital on hedging and purchased power or gas storage inventory)

The Companies provided totals for each of the items above to set the required revenue under the MFCs at each company, for each commodity, to be updated upon a final order to reflect the latest information for certain components (noted below)

The Companies propose continuing to use the same process reflected in Appendix W of the 2016 Joint Proposal for resetting and reconciling the MFC. Consistent with current practices as provided for in the 2016 Joint Proposal, the final MFC rates will be included in the Companies’ compliance filings submitted after an order is issued in the rate cases. The final MFC rates will include a more recent update for: 1) Uncollectibles; 2) Working Capital for purchased power; 3) Working Capital for gas underground storage inventory; and 4) Working Capital for commodity hedge margins.

The Companies are not proposing any changes to the currently effective process for calculating the Uncollectibles Component of the electric MFC calculation. The fixed uncollectible percentage will continue to be updated annually based on 12 months of historic data. The percentage will be applied to monthly commodity costs and, accordingly, the Uncollectible Component of the rate will be updated monthly. The Uncollectible revenues are not reconciled

The electric MFC Administrative Component includes Energy Supply Department expenses, allocations of A&G, common plant, and other miscellaneous overheads and common allocations. These amounts come straight from the ECOS study. The Administrative Component of the MFC will continue to be based on the ECOS study results and will remain the same until the next rate case. The forecasted units will be updated annually when the rate is reset. The Administrative Component will be reconciled to the amounts from the ECOS studies based on the variance between actual and forecasted sales.

The Companies are not proposing any changes to the currently effective process for updating and reconciling the Working Capital Components of the electric MFC calculation. The Working Capital on purchase power and the commodity hedge margin account will be reset annually based on a recent 12-month historical period. This component will be reconciled to actual expenses for the same time period. It should be noted that the Working Capital associated with the commodity hedge margin account is only charged to small non-time of use customers because the Companies only hedge commodity for the non-demand, non-time of use customer population.

Regarding the electric MFC Prior Year True Up component, the variances for the reconcilable components are tracked monthly and the net of the variances are collected from or refunded to supply customers once the rates are reset annually. Under collections and over collections are rolled into the next year’s MFC rate through the Prior Year True Up component.

The same methodology used to calculate the electric MFC was used to develop the gas MFC. The gas MFC contains the same components mentioned above for electric. The Working Capital component for the gas MFC includes Working Capital on storage inventory and also Working Capital on the commodity hedge margin account. There is no inclusion of Working Capital on purchased gas in the MFC rate. Additionally, the Working Capital on the commodity hedge margin account for gas is applicable to all sales customers.

For the gas MFC, the Companies are not proposing any changes to the currently effective process for updating and reconciling the Working Capital Component of the gas MFC calculation. The Working Capital on storage inventory and the commodity hedge margin account will be reset annually based on a recent 12-month historical period. This component will be reconciled to actual expenses for the same time period.

The Companies do not propose any change to the electric and gas MFC or purchase of receivables (POR) rate calculations. The Companies propose to use the same methodologies as those approved in the 2015 Rate Proceeding as reflected in Appendix W to the 2016 Joint Proposal.

Bill Issuance and Payment Processing Charges

The Companies also filed amounts for the Bill Issuance and Payment Processing (BIPP) charge.

The proposed new NYSEG BIPP rate per bill is $0.90. The current NYSEG BIPP rate per bill is $0.81

The proposed new RGE BIPP rate per bill is $0.93. The current RGE BIPP rate per bill is $0.72

The current methodology was used to calculate the BIPP charge. The Companies computed the unbundled rate applicable to BIPP on a system-wide basis rather than differentiating it by service class or by service type. Both NYSEG and RG&E added the electric and gas BIPP revenues at the required rate of return, and this total was used as the numerator. The denominator reflects an annual number of invoices for all electric, gas, and combination customers as of 2018.

The Companies will continue the approach currently in place to charge the BIPP to combination electric and gas customers, electric-only customers, and gas-only customers

A combination electric and gas customer will receive one BIPP charge applied to the bill. An electric-only or gas-only customer will also receive one BIPP charge applied to each bill. The BIPP charge for a combination customer will be the same as that for an electric-only customer and a gas-only customer.

If an ESCO is providing both the electric and gas service, it will be billed an amount equivalent to the BIPP charge for each consolidated bill. If the ESCO is only providing a consolidated bill for either gas or electric service, it will also be billed an amount equivalent to the BIPP charge per consolidated bill. If a customer has separate ESCOs for electric and gas, the charge for consolidated billing will be prorated between the ESCOs.

A customer receiving consolidated billing from the Companies will not see a BIPP charge on his or her delivery bill. The customer’s ESCO will, however, bill the customer for BIPP services.

Case 19-E-0378 et al.

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