New York Utility Seeks To Price Electric Supply Service To Non-shopping Customers On A "Subscription" Basis, Under Pilot

Pilot Would Include Bill Guarantee For Customers

October 22, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Niagara Mohawk (National Grid or "the Company") has filed at the New York PSC for changes to its Clifton Park Demand Reduction REV Demonstration Project, including a proposal to use a subscription model for part of the electric supply charges applicable to a subset of non-shopping customers who receive electric supply from the utility

Niagara Mohawk proposes to implement and evaluate three different rate design groupings for Clifton Park customers served by Company energy supply. As of July 2017, the Company had completed installation of approximately 13,300 electric AMI meters at Clifton Park

Under the proposed modified Clifton Park Demonstration, customers served by Company supply would be placed into one of three groups:

(1) Group 1 customers served under a Subscription Delivery and Subscription Supply rate;

(2) Group 2 customers served under a Subscription Delivery and the Company’s SC-7 Hourly Supply rate; and

(3) Group 3 customers served under the Company’s SC-7 rate for both Delivery and Supply.

The Subscription Delivery rate for customers in Groups 1 and 2 would be the same; however, their Supply rates would differ. The Hourly Supply rate for customers in Groups 2 and 3 would be the same; but, their Delivery rates would differ. The specific supply rates are described further below.

Customers who purchase their supply from an energy service company (ESCO) would continue to receive supply from their ESCO; however, they would be divided into two groups for delivery service: one served under the Subscription Delivery rate; and the other served under the SC-7 Delivery rate.

Subscription Supply Rate - Group 1

Under the proposal, the Subscription Supply rates applicable to Group 1 customers are comprised of a monthly On-peak Energy Charge, Off-peak Energy Charge, and a Subscription Capacity Charge as described below.

(1) On-peak Energy Charge – The On-peak Energy Charge will be determined as the product of: (i) the customer’s total energy usage during the on-peak period of the billing period, and (ii) the On-peak Energy Rate ($/kWh) in effect during the billing period. The On-peak period is defined as the hours of 10am - 9pm weekdays, excluding holidays, year around.

The On-peak Energy Rate ($/kWh) will be determined on a monthly basis as the forecasted on-peak locational based marginal price (LBMP) applicable to the on-peak period, derived from available monthly forward trading market prices prior to the forecast month, plus the forecasted cost of NYISO charges under all applicable OATT schedules, plus the forecasted NTAC. This rate will be multiplied by applicable loss factors and any applicable taxes.

(2) Off-peak Energy Charge - The Off-peak Energy Charge will be determined as the product of: (i) the customer’s total energy usage during the off-peak period of the billing period, and (ii) the Off-peak Energy Rate ($/kWh) in effect during the billing period. The Off-peak period are all hours not defined as on-peak. The Off-peak Energy Rate ($/kWh) will be determined using the same methodology as the On-peak Energy Rate described above but using off-peak LBMP and the off-peak period.

(3) Subscription Capacity Charge – The Subscription Capacity Charge will be determined as the product of the customer’s Subscription Demand, as described in the Subscription Delivery section above, and the Subscription Capacity Rate ($/kW) in effect during the billing period.

The Subscription Capacity Rate ($/kW) will be determined as the product of: (i) the twelve month forecasted capacity price ($/kW-mo) based on available market prices, (ii) the sum of one plus the forecasted annual Unforced Capacity Requirement of the NYISO, (iii) the sum of one plus the forecasted annual Demand Curve Requirement of the NYISO, and (iv) the sum of one plus the Average Unaccounted For Energy Factor as specified in Rule 39, plus any applicable taxes.

Peak Time Credits - Group 1

Group 1 customers who take supply service from the Company will pay the Subscription Supply rates for their energy supply and capacity and have the opportunity to recoup a portion of their capacity payments through Peak Time Credits based on their demand response during Company called events ('Peak Time Events') and during the hour of the New York Control Area ('NYCA') system peak ('NYISO Peak Hour').

The Company will offer two types of credits that will provide Group 1 customers the opportunity to offset their Subscription Capacity Charges. The offerings are Peak Time Event Credits and NYISO Peak Hour Credits.

1. Peak Time Event Credits – The Company may call up to ten Peak Time Events per year during the period of June 24 through September 15. Each event may be up to several hours in duration as determined by the Company. The Company will notify Group 1 customers of the day and duration of each Peak Time Event on a day ahead basis. The Company will determine when events will be called which will likely be during forecasted periods of high demand and/or high market prices for supply.

Peak Time Event Credits will be determined for each customer for each event if the customer’s maximum demand during the Peak Time Event is less than the customer’s Subscription Demand in that billing period. The Peak Time Event Credit will be determined as the product of: (i) the difference between the customer’s maximum demand (kW) during the Peak Time Event and the customer’s Subscription Demand during the billing period, and (ii) the Peak Time Event Credit Rate ($/kW).

The Peak Time Event Credit Rate ($/kW) will be determined as 50% of the annual Subscription Capacity Rate ($/kW-yr) divided by 10 events per year. The 50% represents that half of the customer’s capacity costs that may be potentially returned to the customer through Peak Time Event Credits. The sum of the Peak Time Event Credits for all events during a billing period will be provided to the customer as a credit on a subsequent bill.

2. NYISO Peak Hour Credit – The NYISO Peak Hour Credit will be available each year following the end of the NYISO summer capability period. Customers will be eligible for the NYISO Peak Hour Credit when their maximum demand during the hour the NYCA peak demand occurs is less than their Subscription Demand. The NYISO Peak Hour Credit will be determined as the product of: (i) the difference between the customer’s maximum demand (kW) during the hour of the NYCA peak and the customer’s Subscription Demand during the billing period, and (ii) the NYISO Peak Hour Credit Rate ($/kW-mo).

The NYISO Peak Hour Credit Rate ($/kW-mo) will be determined as the annual Subscription Capacity Rate ($/kW-yr) in effect during the NYISO Peak Hour, multiplied by 50%, and divided by 3 months over which the customer will receive the credit. The 50% in the formula represents that half of the customer’s capacity costs may be potentially returned to the customer through the NYISO Peak Hour Credit.

Groups 2 and 3 Pricing

Customers in Groups 2 and 3 will have the same structure for energy supply and capacity, which will be the rate design the Commission approves for mass market customers who opt into the SC-7 Standby tariff. The Hourly Supply Rate will include an hourly energy supply charge and a capacity charge based on the customer’s individual capacity tag. For the hourly energy supply charge, the customer’s hourly energy usage (kWh) will be multiplied by the NYISO hourly day ahead LBMP ($/kWh) plus applicable NYISO ancillary costs, losses and taxes. The customer will be charged the sum of these hourly supply charges during the billing period.

For Groups 2 and 3, the capacity charge applicable will be calculated as the product of: (i) the customer’s unique capacity tag, as determine by the Company, and assigned for the duration of each NYISO capability year, and (ii) the forecasted NYISO capacity spot market price established in each monthly billing period. The method for establishing capacity tags will be consistent with the method the Company uses to establish capacity tags for its current demand class customers and is based on the customer’s peak demand during the hour of the previous year’s NYCA peak hour.

For the purposes of the Clifton Park Demonstration, the supply rates for Groups 2 and 3 will follow the designs the Commission approves for the Company’s SC-7 Standby rates.

Supply Reconciliations

Group 1 and Group 2 customers will be excluded from the New Hedge Adjustment, the Mass Market Adjustment ('MMA'), the Supply Service Adjustment ('SSA') for non-hourly supply customers, and the Supply Reconciliation Balance. The Company proposes that Group 1 and Group 2 customers be included in the SSA for hourly supply customers and the Balance of the ESRM (ESRM) for hourly price customers. This will result in the Group 1 and Group 2 customers receiving the same ESRM ($/kWh) rate as hourly supply customers. Group 2 customers will also receive the capacity reconciliation that is currently applicable to hourly supply customers.

The Company has determined that Group 1 customers should not be included in the MMA, which currently trues up residential customers’ fixed monthly energy rate to actual spot market energy rates, because Group 1 customers will have On-peak and Off-peak energy rates that differ from the energy rates applicable to other residential customers and would have to be tracked separately. Similarly, Group 1 customers should not be included in the SSA for non-hourly supply customers because the SSA includes a reconciliation of capacity for residential customers that is not applicable to Group 1 customers who will be receiving the Subscription Capacity Rate, NiMo said. The SSA for hourly supply customers is more appropriate for Group 1 customers because it does not reconcile capacity, NiMo said

The Company proposes to separately calculate the reconciliations of Group 1 customers’ time of use energy rates and capacity rates for informational purposes only. "The programming complexity and expense to separately reconcile these costs to the Group 1 customers is not warranted due to the limited term of the proposed project and the limited number of Group 1 customers. Group 1 reconciliations of energy and capacity will automatically be recovered through the SSA for non-hourly supply customers and is not expected to have a significant bill impact on other residential customers," NiMo said

Group 3 customers will be subject to the supply reconciliations of the SC-7 class.

Bill Guarantee

All customers enrolled in the proposed rates will receive a one-year bill guarantee at the end of their first twelve months on the proposed rates, under NiMo's proposal

The bill guarantee will provide a credit to the customer for the difference in the event the customer’s charges over the first twelve months on the proposed rate are greater than what they would have been billed on standard SC-1 charges on a total bill basis (excluding the New Hedge Adjustment component of the ESRM as specified in Rule 46.3.1 of the Tariff).

"In addition, consistent with the Company’s proposed approach in the AMI Report, low-income customers will receive an extended bill guarantee on a graduated basis. During the second year of the revised Clifton Park Demonstration, the Company will compare the low-income customer’s annual charges with the amount the customer would have otherwise paid under the Company’s standard volumetric rate for the same twelve-month period. If the comparison shows the low-income customer paid more than five percent above what he or she would have otherwise paid under the Company’s current basic volumetric supply rate for the entire twelve months, the Company will credit the customer that amount over the 105 percent of the bill the customer would have otherwise received. In the third year of the Clifton Park Demonstration, the Company would extend the bill guarantee for low-income customers to a limit of 110 percent above the bill a customer would have otherwise paid under the Company’s standard volumetric supply rate for the entire twelve-month period," NiMo said

Opt-Out Enrollment

The Company proposes to test the proposed rate structures on an opt-out basis.

In this case, customers will have the choice to opt out of the rate structure they are assigned. Those who exercise that option will default to the Service Classification No. 1 ('SC-1') standard rates under the Tariff. However, to avoid the potential for gaming capacity and network costs, customers who elect to opt out will be ineligible to re-enroll in the innovative rate program for a period of one year from the effective date of opt-out.

In addition, customers who made an active choice to enroll in the Company’s voluntary TOU ('VTOU') program under Service Classification No. 1 or the Service Classification No. 1-C, Residential and Farm Service – Optional Large TOU Rate ('SC-1C') will continue to be enrolled in the rates they chose (i.e., they will not be automatically enrolled in the Clifton Park innovative pricing demonstration). However, such customers may choose to change their pricing program and opt-in to the demonstration. Such customers who opt-in to the demonstration, and subsequently opt out at a later time, will be placed on SC-1 and will need to re-enroll in either the VTOU or SC-1C if they so choose.

Other Provisions

Based on an approval by the Commission’s February 2020 session, the Company intends to commence serving customers under the innovative pricing structures described above in October or November 2020. The Company intends to balance the groups such that changes in load and savings between the groups can be attributed to the effects of the different rates, rather than sample selection. To achieve this balance, the Company will attempt to account for customer characteristics across the groups, including low-income, net metering, EVs, and ESCO customers. The Company will, to the extent practicable, balance the treatment group customers by load profiles, energy consumption strata, or customer persona profiles. This approach will enhance learnings, as it will improve the Company’s ability to isolate the effects of time-varying pricing on both supply and delivery.

NiMo's latest Clifton Park proposal replaces its earlier proposal (see details here) of 1) a time-of-use ('TOU') and critical peak pricing ('CPP') supply rate as initially proposed in the Company’s Advanced Metering Infrastructure ('AMI') Report (the 'AMI Rate'); and 2) a 'Beneficial Electrification Rate' that combines the TOU / CPP supply component from the AMI Report with a two-demand delivery charge, or such other rate as approved by the Commission in response to the Company’s Beneficial Electrification Proposal.

Case 19-E-0111

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