New York ESCO Says Utilities' Proposed Renewable Gas Supply Offering Could Stifle Competition, Raises Potential For "Unfair Marketing" By LDCs

September 25, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Family Energy, Inc. submitted comments to the New York PSC to raise "several concerns" with the Renewable Natural Gas (“RNG”) product offerings that have been proposed by the KeySpan LDCs (KEDNY and KEDLI aka National Grid) in the LDCs' current rate cases

The KeySpan LDCs' proposed offering of renewable natural gas supply to utility-supply customers had been exclusively first reported by EnergyChoiceMatters.com. DPS Staff have filed testimony generally in support of the LDCs' proposed green gas tariff (story here)

Family Energy said in its comments, "Without further clarity and consideration, Family is concerned about the potential for unfair marketing by National Grid with respect to RNG product offerings, and the potential to leverage monopoly resources in the competitive supply market in ways that would stifle competition and interfere with retail suppliers’ customer relationships."

Family Energy said in its comments, that, "The Commission has emphasized the importance of the retail market to 'spur innovation in the creation of value-added products, particularly energy efficiency services that regulated rates may not provide, and to create commodity price competition that would result in efficiencies."

"Since 2013, Family has offered an 'EcoGas' product to its customers whereby Family purchases and retires emissions credits to offset 1.5 tons of CO2 per 1000 therms of gas used by participating customers," Family Energy noted. "Family Energy offers carbon-offset products and is considering expanding its offerings to include an RNG product," Family Energy further noted

"By design, the GGT [the LDCs' green gas tariff] program seems to require interested customers to switch back to the Utility’s gas commodity service to be eligible for the tariff offering. But National Grid does not address how the RNG program will align with or interfere with pre-existing contracts, such as EcoGas, or the process by which a customer that signs up for the mandatory one or two-year commitment period may be able to switch to a competitive program offering at a later point in time during the contract period. It does not discuss termination procedures, termination fees, nor address plans for handling customer education or potential market confusion," Family Energy said

"For example, Family is concerned that existing EcoGas customers, or potential customers of a future Family RNG program, will experience significant market confusion that is already prevalent in the ESCO marketplace. What steps will be taken to make sure ESCO customers don’t think GGT service is an ESCO product? What steps will be taken to make sure utility customers don’t mistakenly sign up for an ESCO product when trying to enroll in the GGT? Termination procedures for existing ESCO program customers returning to full utility service in order to participate in the GGT also must be addressed," Family Energy said

"The GGT program also does not contemplate alignment with the Commission’s decision to prohibit Assistance Program Participant ('APP') customers from entering into non-default service arrangements, regardless of the value added services that may be provided to them. As articulated by the Commission, 'Low-income customers have very little margin for paying premiums for services, so any fixed-rate product would have to come with a minimal premium and perhaps a guarantee of savings for it to be acceptable.' Case 12-M-0476, Order Adopting a Prohibition on Service to Low-Income Customers by Energy Service Companies (issued Dec. 16, 2016). Allowing National Grid to serve APP customers with value-added products such as an RNG subscription under the GGT, while at the same time denying that opportunity to competitive suppliers, would be categorically unfair and antithetical to a level playing field in the competitive market. It would also be irrational, arbitrary and capricious," Family Energy said

"Family is also concerned that National Grid would have an unfair competitive advantage in deploying the GGT which would suppress market innovation. National Grid seeks recovery of costs assisted with FTEs, information technology, contracting, managing purchases and sales, tracking costs and revenues, managing transaction system entries, complying with reporting requirements, and other labor-related costs. Indirect costs of operating the soup-to-nuts GGT program do not appear to be included in National Grid’s estimated budget, which may include billing, customer care, enrollments (including obtaining verifiable authorization from the customer to enroll), customer complaint handling and cancellation requests, metering, and other overhead, all of which could be leveraged to supply an RNG product at below-market rates and with a substantial marketing and brand advantage. Incentives in the form of Supply Diversification and CO2 Reduction EAMs measure volume of RNG injected into the system and the amount of RNG purchased by GGT customers, both of which would provide an additional market advantage to National Grid that is not currently offered to competitive retail suppliers, such as Family. In fact, the EAM appears to provide financial incentives to National Grid for switching competitive third party suppliers to National Grid’s GGT. See National Grid, Response to IR CNY-95, Request b. The Commission has historically been careful to limit anticompetitive abuses with utility affiliates. The same concerns are implicated here," Family Energy said

Family Energy said that alternatives to utility-supplied RNG must be fully examined.

"In the Direct Testimony of the Future of Heat Panel, National Grid lists two alternatives to the GGT: (1) an RNG marketplace to match suppliers with large consumers, limiting consumption to those large enough to be anchor customers for RNG development projects; and (2) working with energy service companies to support transportation customers. Exhibit__(FOH-1) Schedule 1, Page 2. Because National Grid did not provide any explanation or examination of those alternatives, the Department of Public Service ('DPS') requested a detailed assessment of those options. DPS-365, Request 5. National Grid’s brief response suggests that little time was spent on examining alternatives or working within existing market structures that could support the same objectives. It is grossly inadequate, particularly given the fundamental retail market and customer confusion concerns implicated by the GGT. Real alternatives must be fully developed before further consideration of GGT (including competitively neutral options similar to RECs/ZECs," Family Energy said

"If the goal is to incentivize RNG producers and suppliers, it should be achieved in a competitively neutral manner. When incentivizing renewable electricity and zero-emission nuclear baseload resources, the Commission created the CES and corresponding REC and ZEC procurement mechanisms. National Grid has failed to justify why RNG deserves special treatment to be supplied under a separate, and non-neutral mechanism. Leveling the playing field to allow market participants to procure and supply RNG resources is in alignment with the Commission’s goals of spurring development of innovative, value-added products for residential and commercial customers, particularly when such products require a customer contract and fixed term commitment," Family Energy said

Case 19-M-0309 et al.

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