Update: New York PSC Adopts Emergency Order Concerning ESCO Imbalances, Cash-Outs At Utility In Light Of Reduced Demand From COVID-19 Pandemic

Earlier: New York Utility Requests Emergency Order Concerning ESCO Imbalances, Cash-Outs In Light Of Reduced Demand From COVID-19 Pandemic

March 31, 2020

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Updated, 4/1:

The New York PSC, in a One Commissioner Order, adopted on an emergency basis the tariff changes proposed by Central Hudson Gas & Electric as described in our original story below, effective April 1, 2020

As further detailed specifically below, under the PSC's order, Central Hudson will temporarily 1) waive daily imbalance penalties for Retail Suppliers delivering outside the prescribed deadband, and 2) adjust the Index pricing applied to Retail Suppliers’ over- and under-deliveries such that the average of the existing Index prices be used for both over- and under-deliveries, effective April 1, 2020 and until such time that the Governor’s Executive Order is lifted.

Case 20-G-0150

Earlier:

Central Hudson Gas & Electric has filed with the New York PSC an Emergency Petition for proposed temporary tariff amendments, to become effective April 1, 2020, "to ensure the safety and reliability of the natural gas distribution system," in light of anticipated reduced demand from the COVID-19 pandemic

In the petition, Central Hudson said, "Due to the operational changes made by businesses throughout Central Hudson’s service territory, Central Hudson believes there is the potential for reduced gas usage by such businesses. Given the current structure and mechanics of Central Hudson’s Retail Access program, Central Hudson anticipates these operational changes may result in Retail Supplier over-deliveries absent any action by Central Hudson. Specifically, if Retail Access Provider customer pools in Central Hudson’s service territory have lower usage than the Daily Contract Quantity ('DCQ') requirements that are fixed volumes set prior to the start of each month, then some or all scheduled gas may be left behind on the upstream interstate pipeline(s). An oversupply situation created by Retail Supplier over-deliveries could put gas network reliability at risk for all customers."

"Additionally, Retail Suppliers are subject to cash-out charges for over- and under-deliveries as compared to their customers’ meter readings. In the current economic environment, these Retail Suppliers may also experience reduced collections from businesses that may currently be closed. Central Hudson seeks to make temporary changes to the cash-out provisions and prices to neutralize any additional financial harm to Retail Suppliers that may result from the structure of Central Hudson’s Retail Access program and associated cash-out rules," Central Hudson said

As a result, Central Hudson proposes to temporarily

1) waive daily imbalance penalties for Retail Suppliers delivering outside the prescribed deadband and

2) adjust the Index pricing applied to Retail Suppliers’ over- and under-deliveries such that the average of the existing Index prices be used for both over- and under-deliveries, until the March 7, 2020 Executive Order 202.8 from the Governor or its successor order, ends.

Central Hudson explained that Retail Suppliers serving customers in Central Hudson’s Retail Access Program must deliver to Central Hudson on each day of the month, the aggregated DCQ forecast for their pool. The DCQ forecast is established individually for each customer based on that customer’s heating and non-heating load. Due to Central Hudson’s current mainframe programming and software utilized to manage the Retail Access program, the Company does not possess the ability to perform a wholesale update to DCQ forecasts based on potential changes to usage characteristics.

Each day, Retail Suppliers must deliver within 2% of their pool’s DCQ forecast to avoid daily imbalance charges. For deliveries less than 98% of the DCQ forecast, Retail Suppliers are assessed an additional charge of $10/Dekatherm ('Dth'). At the end of any given month, those accounts with valid meter readings are cashed-out for the difference between the customer’s actual billed usage for the period and the DCQ forecast for that customer. The resulting over- or under-deliveries are cashed out at the following index prices, plus Central Hudson’s weighted average cost of transportation and fuel losses:

• Over-deliveries: the lower of 'Millennium, East receipts' and 'Tennessee, zone 4-300 leg'

• Under-deliveries: the higher of 'Algonquin, city-gates' and 'Iroquois, zone 2'

More specifically, Central Hudson proposes to temporarily waive the per dekatherm penalty for deliveries less than 98% of the aggregated DCQ forecast for a Retail Supplier’s pool effective April 1, 2020 and continuing until the date that Executive Order 202.8 or its successor order, ends. The waiver of this penalty will provide Retail Suppliers with an opportunity to use their discretion to reduce deliveries based on known operational changes for their pool of customers. Additionally, Central Hudson proposes to temporarily average the resulting over- and under- delivery cash-out prices effective April 1 - starting with cash-outs for accounts with billing periods ending on or after April 1, 2020 - up to the date the Governor’s Executive Order 202.8, or its successor order, is lifted.

"Central Hudson believes setting the over- and under-delivery cash-out rates equal to each other would provide Retail Suppliers with a neutral cash-out alternative should the deliveries required by Central Hudson’s Retail Program result in over-deliveries as compared to their customers’ meter readings," Central Hudson said

"Due to operational changes in many businesses throughout Central Hudson’s service territory resulting from COVID-19, Central Hudson believes there is the potential for reduced gas usage by businesses. Given the current structure and mechanics of Central Hudson’s Retail Access program, Central Hudson anticipates these operational changes may result in Retail Supplier over-deliveries absent any action by Central Hudson. An oversupply situation created by Retail Supplier over-deliveries could risk the safety and reliability of the gas network for all customers. Central Hudson has sufficient capacity assets and capability to manage day-to-day fluctuations in demand based on severe weather changes and sporadic modifications to customer usage, but not wholesale changes generated by a situation similar to the pandemic we are currently experiencing. At the beginning of every month, the utility can adjust the amount requested to be delivered but intra month this capability is problematic," Central Hudson said

"If, despite Central Hudson’s best efforts, an over-supply imbalance occurs, the utility would need to reject gas delivered to it as a means of protecting the safety and reliability of the distribution system from an over pressure situation. By this action, Central Hudson would force the over-supply, over-pressure situation on to the interstate pipelines supplying Central Hudson’s service territory. This in turn could cause problems on the interstate pipeline system as well, the least of which would be activation of over-pressure safety relief devices that would vent natural gas into the atmosphere. By removing financial penalties for under-delivering the DCQ, Central Hudson is allowing each retail supplier to adjust its deliveries based on intra-month customer needs, as the situation changes," Central Hudson said

Case 20-G-0150

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