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Retail Supplier Defaults At ISO, Customers Returned To Default Service

Regulator Opens Investigation Of Supplier, Issues Subpoena

August 9, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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Update, 8/9, 10:40 a.m.

Columbia Utilities provided the following statement concerning the matter:

"Columbia Utilities Power, LLC ('Columbia Utilities Power'), a New York-only ESCO serving customers throughout New York State, was informed by the NYISO on Friday, July 8, that it needed to post additional collateral, to be held on deposit, by 4:00 p.m. ET on Tuesday, July 12. This request for additional deposit was largely driven by billing issues experienced by Columbia Utilities Power which were out of our control. Columbia Utilities Power was then informed by the NYISO on July 12 that it was deemed in default of its financial obligations at the NYISO.

"Columbia Utilities Power’s customers across New York State have been returned to utility default service. We worked diligently with the New York Department of Public Service, the NYISO, and the electric utilities to ensure this transition occurred with as little disruption or complications for customers as possible. Customers had no lapse in the safe and reliable delivery of electricity to their homes and businesses.

"This situation does not impact Columbia Utilities, LLC gas customers in New York. These customers, including those who also purchased their electricity from Columbia Utilities Power, will continue to receive their natural gas supply from Columbia Utilities, LLC."

--- Statement from Columbia Utilities


The New York Independent System Operator, Inc. recently terminated Columbia Utilities Power, LLC from participation in the ISO-Administered Markets and returned Columbia Utilities Power's customers to default service

Included in the drop to default service were about 25,000 customers in the Hudson Valley Community Power municipal aggregation (CCA)

In a July notice, NYISO said that Columbia Utilities Power's termination was due to failure to comply with the NYISO’s creditworthiness requirements.

Prior to the default at NYISO, certain municipalities in the Hudson Valley Community Power program had filed a suit against Columbia Utilities Power in New York State court, alleging breach of contract among other claims, related to Columbia Utilities Power's previously reported stated intent to return the aggregation customers to default service

In March 2022, Columbia had informed CCA administrator Joule Assets that Columbia considered alleged severe billing problems at Central Hudson Gas & Electric (CHG&E) to constitute a Force Majeure event under the CCA contract

In a March letter to Joule, Columbia had stated, "As you know, the New York State Department of Public Utilities [sic] has also received customer complaints about the issues, and has now begun investigating the situation. These ongoing CHG&E deficiencies constitute a Force Majeure event under Section 18.7 of the Community Choice Aggregation Agreement ('Agreement'). As outlined in my previous letter, Columbia has used all available commercially reasonable efforts to work with CHG&E and deal with the impacts of the deficiencies, but CHG&E has been unable to rectify these technical deficiencies despite multiple attempts."

In such March letter, Columbia had noted that it had not suspended performance under the contract, a right granted under Force Majeure, but Columbia said that it reserved all rights, including suspension, under a Force Majeure. As previously reported, Columbia later filed notice at the New York PSC to return the CCA customers to default service

A county court in New York granted a temporary restraining order (TRO) against any drop, by Columbia Utilities Power, of the CCA customers to default service

In a court filing, Columbia Utilities Power said that, "Since the TRO was entered, Columbia has been doing everything in its power to abide by the terms of the TRO. Specifically, Columbia has not taken any steps to transfer any customers to Central Hudson (including the sending of any notices), to discontinue supply to the CCA customers, nor has it transferred or sold any hedges related to the financial hedgers, arrangements, or energy supply or renewable energy credit contracts or the proceeds thereof, that support or relate to the obligations of Columbia to the CCA customers."

In a court filing, Columbia Utilities Power said that, "On Friday, July 8, 2022, New York Independent System Operator, Inc. ('NYISO'), which manages New York’s electric grid and its competitive wholesale electric marketplace, informed Columbia that that it needed to post additional collateral almost double the current collateral amount by 4:00 p.m. ET on Tuesday, July 12, 2022. This demand from NYISO far exceeded any prior collateral requirement demanded of Columbia by NYISO. Upon receiving this notification, Columbia reviewed its financial position and attempted to meet the NYISO’s requirements. Unfortunately, Columbia does not have sufficient available financial capital to post the required collateral. Upon failure to make the required posting by 4 p.m. on July 12, 2022, Columbia was informed by the NYISO that it was deemed in default of its financial obligations. Columbia subsequently informed NYISO that it is unable to cure this default."

"Since Columbia is unable to post the collateral NYISO is insisting on, Columbia has no ability to stop this transfer from occurring," Columbia had said in the court filing

In a subsequent filing, Columbia further said, "Contrary to Plaintiffs’ suggestions in its July 22 letter, NYISO’s actions were sudden and unexpected. As is now well-documented and the subject of public investigation, starting in September 2021, Central Hudson Gas and Electric Corp. ('Central Hudson') experienced severe and widespread billing issues, and Central Hudson’s attempts to fix those issues led to significant disruption for customers and energy service companies alike. In Columbia’s case, Central Hudson concluded that it significantly underreported usage details to NYISO by approximately $4 million over a nine-month period, causing NYISO to automatically deduct that amount from Columbia’s banking account over the course of about one month beginning in June 2022. That includes a $2 million adjustment about which NYISO notified Columbia on July 8, 2022 and automatically deducted from Columbia’s banking account on July 12, 2022, leading to an overdraft."

In such subsequent filing, Columbia further said, "Central Hudson’s significant adjustments also caused NYISO to suddenly and significantly increase the amount of collateral that it required Columbia to post with NYISO, which led to the default described in Columbia’s July 15 letter to the Court. As Columbia previously explained, on Friday, July 8, 2022 -- the same day that NYISO notified Columbia that it would automatically deduct nearly $2 million from Columbia’s account -- NYISO stated that it performed a 'true-up' and determined that Columbia would need to post more than $3.5 million in collateral by Tuesday, July 12, 2022, two business days later. NYISO had never before required Columbia to post anywhere near that amount of collateral; in fact, at the time it sent its notice, NYISO had not required Columbia to post collateral at all for 'true ups.'"

"In response, Columbia immediately questioned the accuracy of NYISO’s calculations. It also notified NYISO about the temporary restraining order in place in this matter and explained that it could not meet the collateral demand by the deadline provided. NYISO, however, provided Columbia only two more days to post the collateral pursuant to automatic operation of NYISO’s Market Administration and Control Area Services Tariff and Open Access Transmission Tariff. On the heels of NYISO’s multi-million-dollar debits, Columbia had no viable option to meet NYISO’s collateral demand by its July 14 deadline. As a result, and as Columbia notified Plaintiffs and the Court, Columbia could not cure the default, and on July 18, 2022, NYISO terminated Columbia from the market, leading to NYISO’s unilateral transfer of all of Columbia’s customers (not just those part of the Joule aggregation). Columbia therefore had no ability to comply with the temporary restraining order," Columbia said in such subsequent filing

Prior to Columbia Utilities Power's subsequent filing, plaintiff municipalities, in response to the default at NYISO, had alleged in a filing that, "Our concern is heightened by the statements made by Defendants’ counsel to this Court, alleging that Defendants had not been paid by Central Hudson and were therefore losing funds every day. However, following the June hearing before this Court, Central Hudson informed us that Columbia had in fact been paid the full amounts due."

The New York State Department of Public Service said in a court filing that, "[T]he New York State Department of Public Service joins and supports Plaintiffs’ request for expedited discovery to determine the reason Columbia defaulted on its obligations to NYISO, as well as on the contracts Columbia entered into with the Municipalities, both of which appear related to the finances of the company and its underlying energy supply contracts – not to any billing problems with Central Hudson Gas & Electric Corporation as alleged in Columbia’s most recent letter. Given that Columbia’s contract provided residents with a fixed energy price that is currently lower than the market price for wholesale electricity, those residents are being irreparably harmed by Columbia’s default. For this reason, it is imperative for Plaintiffs and the Department to get the bottom of the reason behind the defaults as soon as possible."

The DPS further informed the court that, "[G]iven this abrupt change in circumstances, the New York State Department of Public Service has initiated an independent administrative investigation into the actions of Columbia and its officers, agents and employees pursuant to Public Service Law § 25 and related statutes. On July 21, 2022, the Secretary to the Public Service Commission issued a subpoena duces tecum to Columbia’s Chief Executive Officer, Robert Palmese, requesting multiple financial documents to further the investigation. However, given the Court’s jurisdiction over Joule in this case, the Department believes that expedited discovery here may allow Plaintiffs and the Department to obtain the requested information faster."

Index No. EF2022-1113 (Ulster County. Sup. Ct.)

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