In Rate Case Testimony, Direct Energy Seeks Greater Transparency In ConEd MRA Charge

Seeks Capacity Release, Storage, Other Market Changes

Direct Energy Alleges ConEd Made Out Of Cycle Adjustment To Its WACOC

May 24, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Direct Energy Services, LLC filed testimony in a Consolidated Edison rate case before the New York PSC seeking greater transparency in certain ConEd charges and improved communication from ConEd

Direct noted that ConEd applies a Monthly Rate Adjustment ('MRA') to the bills of customers that purchase gas from them.

A witness for Direct Energy said, "There is virtually no explanation of what the charge is intended to recover or how it’s developed. Since ESCOs are trying to beat the incumbent utility rate, we need to understand what we’re competing against. It would be to everyone’s advantage if ESCOs could better understand and forecast the MRA."

Direct Energy sought certain changes to the natural gas market in its testimony. Among such changes is that Direct Energy sought adoption of, on a permanent basis, a program that releases storage to ESCOs

"Physical storage is an important asset for ESCOs. It allows ESCOs to better serve customers and to compete more readily with LDCs. The LDCs have access to physical storage and it’s important that ESCOs have that same access. Last year, Con Ed implemented a pilot program to test a physical storage release program. The pilot was in effect for one year. At the end of the year, Con Ed terminated the program without providing either an adequate review of its benefits or an explanation of why it was terminated. We believe that the program should be re-implemented in the coming year and should be made a permanent part of Con Ed’s tariff," a witness for Direct Energy said

Direct Energy also sought adoption of intraday storage changes

"Currently Con Ed doesn’t allow intraday storage changes. KeySpan, for example, allows ESCOs to back off supply from pipelines and nominate storage intraday or back off storage intraday and nominate pipeline gas. This provides useful flexibility to ESCOs in meeting their energy supply and balancing requirements, and there is no physical reason why Con Ed can’t provide such flexibility as well. Con Ed has that flexibility in its contracts with pipeline suppliers and in the interest of fair competition, they should provide the same flexibility to ESCOs. KeySpan can do it and so should Con Ed," a witness for Direct Energy said

Direct Energy also said that ConEd should implement an automated solution to limit capacity release delivery volumes.

"Con Ed releases pipeline capacity to ESCOs. That capacity has daily limits and ESCOs are not permitted to deliver volumes above their maximum daily quantity ('MDQ'). The problem is that there is no physical stop to prohibit an ESCO from nominating a volume in excess of its MDQ. If an ESCO nominates a volume in excess of its MDQ and that excess amount is accepted by Con Ed, then that ESCO gains a competitive advantage over other ESCOs. Direct Energy will abide by the daily limits but we believe that some other ESCOs are nominating excess volumes on pipelines that deliver cheaper gas. In the interest of maintaining discipline on the pipeline and encouraging fair competition on a level playing field, there should be a physical stop in place so that no ESCO can nominate a quantity in excess of its MDQ. Other utilities like KeySpan have such hard stops in place," a witness for Direct Energy said

Direct Energy also sought improved communication from ConEd to ESCOs

Direct Energy cited data inconsistencies and delays that Direct Energy has encountered on ConEd's system.

"On multiple occasions, the data Direct Energy receives from Con Ed has been either inconsistent or grossly delayed. Direct Energy relies on this data to conduct ordinary business functions such as customer billing, accounting and reconciliation, accounts payable, etc. In some circumstances, Direct Energy has been unable to obtain accurate information necessary to bill certain customers for over seven months. Direct Energy has reached out to Con Ed multiple times to request the data, but these requests often go unanswered due to issues with Con Ed’s systems. Direct Energy has requested weekly update calls (until the problems are rectified), which Con Ed’s Retail Access staff has denied. Accurate and timely data is crucial to Direct Energy’s business and to that of every other ESCO serving customers on Con Ed’s system," a witness for Direct Energy alleged

"The energy industry is a complex system of moving parts. In order for everything to work optimally, the participants need to have open communication. A lack of information or a delay in receiving it could have significant economic consequences. One example is the storage pilot where ESCOs didn’t know until almost the last minute that they were going to be required to empty their storage. If they had known in advance, ESCOs could have planned the end of winter purchases more accurately. A second example is the recent Unaccounted-for Energy ('UFE') issue where the UFE percentages were not being calculated correctly. This issue wasn’t communicated well and by the time it came to light, the deadline for correcting the problem had already passed. Con Ed needs to communicate better and more timely with ESCOs. Additionally, any upcoming changes should be communicated as quickly as possibly (to provide enough notice for ESCOs to implement any system changes that are necessary). As I said, this is a complicated business and communicating what may be coming is very important," a witness for Direct Energy said

Direct Energy described as an example a recent situation in which two pipelines serving Con Ed, Transco and TETCO, filed rate cases at the Federal Energy Regulatory Commission, and Direct Energy's request to ConEd to provide the date when those rate changes would flow through to ESCOs taking capacity release and to full service customers.

A witness for Direct Energy faulted various ConEd communications concerning the matter and for not providing the requested information

Direct Energy alleged that, on March 26, 2019, ConEd issued a bulletin to ESCOs entitled 'Transco and Texas Eastern Pipeline Rate Proceedings'.

Direct Energy alleged, "In this bulletin, Con Ed explained that its WACOC of $0.5606/Dt [sic] in effect from March 1, 2019 to September 30, 2019 already included an unspecified portion of Transco’s rate hike 'in order to spread out the cost impact to customers and prevent a large spike.'"

Based on such bulletin, a witness for Direct Energy alleged, "it appears that Con Ed made an out of cycle adjustment to its WACOC, which is supposed to be set effective November 1 and remain in effect through and until September 30. If Con Ed requested and received a tariff waiver from the Commission to make that adjustment, Direct Energy is not aware of it. If Con Ed did not request and receive a tariff waiver for this adjustment, it would appear to be acting in violation of its tariff."

"[I]t is impossible for Direct Energy and other ESCOs to accurately forecast either the WACOC or the Capacity Release Service Adjustment associated with the released pipeline capacity which ESCOs must take from Con Ed as part of its retail access program. Access to this information is critical to the ability of ESCOs to price their services and to manage their relationships with their customers," a witness for Direct Energy said

Direct Energy recommended that ConEd should be required to inform all ESCOs taking released capacity from ConEd of any change in pipeline rates and/or total capacity purchases from any particular pipeline within one week of their acceptance for filing by FERC. Where rate changes are suspended or made subject to refund, Con Ed should provide that information as well, Direct Energy said. In addition, Con Ed should also be required to provide each such ESCO with a good faith estimate of the impact each such rate change and/or change it [sic] capacity purchases on its WACOC to become effective on November 1 of the next annual WACOC period, Direct Energy said

A witness for Direct Energy also offered two alternatives to the above recommendation. "First, the Commission could require Con Ed to notify ESCOs a certain period in advance before making any change in the cost of released capacity and to provide detailed justification for those changes along with that notice. Alternatively, the Commission could require Con Ed to recover all of its capacity release charges directly from retail access customers, thereby avoiding the distortions that result from Con Ed's current system where these costs are sometimes imposed on ESCOs and sometimes imposed on customers," a witness for Direct Energy said

Case 19-E-0065 et al.

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