SCMC Says National Fuel Gas Distribution Imbalance Changes Are "Unreasonable"

The Small Customer Marketer Coalition has opposed several tariff revisions filed by National Fuel Gas Distribution Corp. in New York to modify its treatment of imbalances for Supplier Transportation, Balancing and Aggregation (STBA) service.

As only noted in Matters (9/28/10), a major modification contained in the revised tariffs relates to the manner by which Distribution will address and treat burner tip imbalances associated with the differential between deliveries and actual use by ESCO customers.

Distribution currently employs a rollover mechanism under which the month-end imbalance of an ESCO pool is rolled over into the next month and used to either increase or decrease the level of natural gas that the ESCO will supply during the following period. Distribution has proposed to apply a month-end cash-out by which the imbalance volume associated with an ESCO customer pool is reduced to zero.

SCMC said that the tariff language, "raises a number of concerns," because while the default mechanism will be cash-out, Distribution will retain the discretion to use a rollover mechanism instead, as operating conditions permit or require. The exact conditions under which either imbalance mechanism would apply are not specified in the tariff.

SCMC said that the tariff creates an, "unacceptable level of ambiguity and uncertainty."

"It is unreasonable to expect ESCOs to operate in such an ambiguous environment especially with respect to an important operational parameter as represented by the treatment of burner tip imbalances."

SCMC sought further clarification of the treatment of imbalances, including the enumeration of specific conditions under which either cash-out or rollovers would apply.

SCMC also called the tiered cash-out structure "unreasonable." Under this mechanism, a deficiency of 5%-15% short would be charged 110% of index, while a deficiency of greater than 20% short would be charged the higher rate of 140% of index.

SCMC noted that the tariff requires Distribution to determine the daily delivery requirements for each ESCO's pool.

"[T]he ESCO is not the progenitor of the magnitude of any burner tip imbalance as the ESCO is simply responding to the direction of the utility with respect to the amount of natural gas that must be delivered on a daily basis. It is highly inequitable to hold the ESCO responsible for the magnitude of any burner tip imbalances when it is the Company rather than the ESCO which is the cause of the imbalance differential," SCMC said.

All cash-outs should be at 100% of index under such circumstances, SCMC said.

For the same reason, SCMC opposed tiered imbalance charges for imbalances during an unauthorized period.