New York PSC Allows ConEd, O&R To Include Certain CNG, LNG Costs In Gas Supply Charges, And Rates Applicable To ESCOs

August 13, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC has approved, with modification, natural gas tariff revisions from Consolidated Edison Company of New York, Inc. (Con Edison) and Orange and Rockland Utilities, Inc. (O&R) (together, the Companies) to expand the recovery of certain costs associated with trucked and stored compressed natural gas (CNG) and liquefied natural gas (LNG) through the Companies’ respective gas supply recovery mechanisms, the Gas Cost Factor (GCF) for Con Edison and Gas Supply Charge (GSC) for O&R, and to recover such costs from ESCOs as well.

With respect to ESCOs, Con Edison proposed to recover CNG and LNG project costs through the Daily Delivery Service (DDS) demand price under Tier 3 – Peaking Service. Con Edison also proposed modifications to the security requirements for the DDS service for gas marketers participating in the Purchase of Receivables Program. Con Edison proposed clarifying revisions to the GCF and DDS tariff leaves relating to costs associated with CNG and LNG supplies. Con Edison proposed to modify the commodity price under Tier 3 to include the variable costs associated with trucked and stored CNG and LNG, and the definition of Fixed Gas Costs in the GCF to include CNG and LNG project development costs.

To align with Con Edison’s tariff filing, O&R proposed to modify General Information Section No. 12.1 – Gas Supply Charge and No. 12.2(I) – Balancing Charge (applicable to Service Classification Nos. 1, 2 and 6) to clarify that fixed costs associated with trucked and stored CNG and LNG are recoverable through the Fixed Gas Cost component of the GSC. O&R proposed to allow the recovery of development costs associated with trucked and stored CNG and LNG projects, including abandoned projects, through the Fixed Gas Cost of the GSC. O&R sought to recover these development costs through the Balancing Charge component of the Monthly Gas Adjustment (MGA). O&R also proposed to clarify that gas commodity costs associated with trucked and stored CNG and LNG are recoverable through the Variable Gas Cost component of the GSC.

During the pendency of the proceeding, the Companies filed revisions to the original amendments which removed language that would have allowed the Companies to recover abandoned costs and interconnection and equipment costs through the GCF and GSC.

The PSC approved the Companies' revised tariff filings, subject to the inclusion of modified language that clearly specifies that only costs associated with used and useful CNG and LNG projects will be eligible for recovery.

The PSC in its order stated, "The Companies propose tariff amendments to allow for the recovery of fixed charges for trucked and stored CNG and LNG projects, as directed by the NPA [Non-Pipeline Solutions Portfolio] Order. Fixed costs include expenses incurred by the supplier to procure, truck, store and deliver CNG and LNG, as well as the cost of the CNG and LNG. The Companies’ respective gas supply recovery mechanisms, the GCF and the GSC, are designed to recover the natural gas supply costs, which include the cost of the gas, as well as costs incurred to procure the gas and deliver it to the Companies’ city gates. Therefore, recovering the fixed costs associated with CNG and LNG projects through each Company’s respective gas supply mechanism is appropriate and consistent with the costs currently recovered through those mechanisms."

"However, further revisions to the Companies’ tariff amendments are needed. In addition to the fixed costs, the Companies propose to recover site development costs through their gas supply recovery mechanisms. While certain site development costs, such as permitting fees and feasibility studies, are appropriate for recovery through the GCF or GSC, there are potential site development costs that should not be recovered through these mechanisms. Specifically, costs associated with abandoned projects should not be eligible for recovery, as these costs would not meet the used and useful requirement of Public Service Law §66(16). Therefore, the Companies are directed to make further revisions to their tariff amendments to specifically state that the costs associated with abandoned CNG and LNG projects will not be recoverable," the PSC said

"In addition, the costs associated with any company-owned interconnection plant, such as piping or safety valves, should not be recovered through the GCF or GSC. These mechanisms are designed to recover the cost of gas supply, not the cost of company-owned infrastructure required to deliver gas to customers; instead, these costs should be recovered through the Companies’ respective delivery rates. For this reason, Con Edison is directed to file further revisions to Con Edison P.S.C. No. 9 – Gas, Leaf Nos. 166.2 and 183.6, to state that recovery of the costs associated with any company-owned interconnection plant will be recovered through the MRA [Monthly Rate Adjustment]. The costs to be recovered include the associated carrying charges of Con Edison’s investment, with a return on investment, depreciation expense and operations and maintenance expenses associated with this infrastructure. Allowing recovery of these costs through the MRA, until such costs can be incorporated into base rates during Con Edison’s next rate filing, will provide Con Edison a timely return on its capital investments for CNG and LNG projects," the PSC said

The PSC noted that, "The proposed changes would allow the Companies to include the costs of CNG and LNG projects in the storage and peaking services that are made available to marketers through the DDS and balancing service programs. Including these costs in the DDS and balancing service programs provides consistency among all Con Edison gas customers by ensuring that transportation customers receiving gas supply from marketers also bear the costs of CNG and LNG projects."

The Companies’ proposed tariff amendments, with the modifications discussed above, were approved to go into effect on September 1, 2019.

Case 19-G-0171 et al.

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