ConEd Recommends No Credit to Full Service Customers for Prior Transportation Under-deliveries

The New York PSC should not require Consolidated Edison to provide a credit to full service natural gas customers to make them whole for the costs borne due to historic under-deliveries from transportation customers, which resulted from an anomaly in the lost and unaccounted for gas mechanism, ConEd said in comments to the PSC.

ConEd was solely addressing any potential cost recovery and credit for the prior under-deliveries. The PSC has already established that an adjustment to the load following charge shall be made to correct the issue going forward, without modifying the factor of adjustment (see 9/19)

In contrast, requiring ConEd to provide a refund to full service customers for the historic under-deliveries by transportation customers, "will provide de minimis monthly savings to full service customers whose gas costs were higher than would have been the case absent the anomaly and will also provide a credit to many current full service customers that bore little or no higher costs during the historic period," ConEd said.

Under a Staff proposal, the estimated monthly reduction on a typical bill for a full service residential heating customer, assuming a three-year amortization period, would be $1.58, or approximately 0.3 percent, ConEd said.

Furthermore, ConEd noted that there has been significant "customer churn" between the full service and transportation classes and, for that reason, "the calculation of the exact amount of the [historic] disparity that flowed between the classes is unclear because of migration."

"Since the under-deliveries by transportation customers during the historic period do not involve any over- or under-recovery of costs by the Company ... and considering the potential mismatch between the intended beneficiaries and the actual beneficiaries of the proposed credit in light of the extended period for which a credit would be calculated and applied; and further considering that the estimated monthly savings for a typical customer would be de minimis, the Company submits there is no compelling reason to address this past miscalculation through a credit to current full service customers," ConEd said.

Accordingly, the Company requested that the Commission find that no credit to full service customers is warranted to address past under-deliveries by transportation customers.

However, if the PSC orders such a credit to full service customers, ConEd said that the amount should be $1.6 million, and that it should be funded though an equivalent surcharge on transportation customers.

ConEd agreed that the estimated value of gas under-delivered for transportation customers during the historic period is $13.44 million. ConEd initially agrees with Staff in discounting this total to $9.7 million because, over the relevant period, the percentage of firm service customers taking full service declined from 83% to 56%.

However, ConEd said that, "it is reasonable to assume that customer churn will continue during the prospective period."

"Accordingly, it is reasonable to conclude that the number of current full service customers that were also full service customers during the historic period will continue to decline throughout the prospective period," ConEd continued, stating that the calculation of any amount to be credited should assume continuing customer churn throughout the prospective period.

Assuming continuing customer churn at the average annual rate during the historic period (i.e., approximately 5.4% annually), the Remaining Full Service Firm percentage should be reduced from 56% to 40%, ConEd said.

Using this percentage, the aggregate credit to full service customers would be $1.6 million, ConEd said.

"If the Commission decides to proceed with a prospective adjustment for the under-deliveries for transportation customers during the historic period, the Company submits that fairness and equity, as well as Commission precedent, dictate that the Company recover from current transportation customers through a surcharge an amount equal to the credit to be provided to current full service customers," ConEd said.

Finally, ConEd said that if any adjustment for the historic period is ordered, it should be charged and credited over a three-year period, to minimize the potential competitive effect of the credit.

"This approach will minimize bill impacts on transportation customers and avoid the reconciliation of the past under-collections from skewing price signals to customers or inadvertently affecting migration," ConEd said.