NYSEG Proposes Merging Gas Supply Areas, Using System-Wide WACOC for Releases to ESCOs

NYSEG has proposed consolidating its remaining two Gas Supply Areas (GSAs) into a single GSA, and adopting a system-wide weighted average cost of capacity (WACOC) for the release of capacity to ESCOs, in a report on a NYSEG and Rochester Gas & Electric gas supply collaborative filed with the New York PSC (09-G-0716).

Specifically, NYSEG proposes to merge GSA 1/3 and GSA 2 into a single, system-wide GSA effective September 1, 2013, which coincides with the gas year for gas supply charge reconciliation purposes. The GSA consolidation will apply to the Gas Supply Charge (GSC), Merchant Function Charge (MFC), Transition Surcharge (TS), and Reliability Surcharge.

Transportation Balancing Charges will be consolidated over a phase-in period beginning September 1, 2013 and concluding April 1, 2014. Beginning September 1, 2013, the Transportation Balancing Charges will be the then current Transportation Balancing Charge plus 50% of the difference between the combined Transportation Balancing Charge less the then current Transportation Balancing Charge. Beginning April 1, 2014, Transportation Balancing Charges will be fully consolidated consistent with the system-wide GSC, MFC, Transition Charge and Reliability Surcharges.

The consolidation will result in a slight increase (less than 3%, depending on class) in the gas supply charge for customers in GSA 2, and a marginal reduction in the supply charge for customers in GSA 1/3.

The utilities said that consolidating into a single GSA benefits customers because it adds diversity of supply into the monthly gas supply charge. "NYSEG buys gas in many different markets/pooling areas. The difference in basis between these areas is constantly shifting. As noted by the Companies, consolidating to one GSA (and one GSC) will reduce the impact of these price swings for all customers, thereby mitigating price volatility, which is consistent with Commission Policy as stated in the April 28, 1998 Statement of Policy Regarding Gas Purchasing Practices in Case 97-G-0600," the utilities said.

Consistent with the proposal to consolidate into a single GSA, NYSEG has proposed adopting a system-wide WACOC for the release of capacity to ESCOs. NYSEG currently releases capacity on a pool specific basis at eight different release prices (including miscellaneous surcharges) across its system under the mandatory release program

The WACOC release is to be accomplished over a phase-in period beginning April 1, 2013 and concluding April 1, 2014.

Specifically, NYSEG proposes that:

a) The ESCO will be assigned primary firm capacity upstream of NYSEG's city gates sufficient to meet the ESCOs' peak day Maximum Daily Quantity (MDQ), based on 66 Heating Degree Days.

b) NYSEG shall release capacity, on a pre-arranged basis, each month to accommodate incremental changes in the load served by each ESCO.

c) NYSEG will calculate a WACOC effective each April 1 for the subsequent twelve month period based on NYSEG's upstream portfolio of capacity assets

d) If in any month the actual WACOC should differ from the calculated WACOC by more than five percent (5%), NYSEG will reset the capacity release rate. As a result of the 5% trigger, NYSEG will not reconcile the WACOC charge to ESCOs.

e) NYSEG will file a WACOC statement with the Commission annually (on thirty days notice), effective April 1 of each year.

ESCOs had proposed a WACOC calculation that reflects the location and geographic areas served by each particular group of capacity assets (i.e., a segregated market area based WACOC approach), rather than developing a blended identical WACOC calculation applicable to the entire service territory and all customers. However, the utilities said that the blended WACOC price is more akin to how NYSEG operates its system rather than treating the system as eight or more individual segments.

To address ESCO concerns on the timing of moving to a system-wide WACOC and the potential impact to their customers, NYSEG proposes a phase-in period.

Beginning April 1, 2013, the release price will be the then current release prices plus 50% of the WACOC less the then current capacity release price by pool area (Phase-1 WACOC Adjustment). Beginning April 1, 2014, the release price will be at the WACOC for all pool areas unless the associated adjustment would exceed 125% of the Phase-1 WACOC Adjustment as set forth in the filing to the Commission establishing the April 1, 2013 release price. In the event the associated adjustment would exceed 125% of the Phase 1 WACOC Adjustment, the April 1, 2014 adjustment will be capped at the 125% amount and beginning November 1, 2014, the release price will be at the WACOC for all pool areas.

Additionally, NYSEG has made two specific proposals associated with ESCOs serving customers in the Binghamton area, and one specific proposal associated with ESCOs serving customers in the Plattsburgh area.

First, NYSEG proposes to release a pro-rata share of the Columbia Gulf capacity to ESCOs serving customers in the Binghamton area. This eliminates stranding capacity that delivers into Columbia Transmission at Leach. NYSEG also proposes to change its current practice of releasing Columbia Transmission capacity pro-rata according to contractual receipt entitlements and instead release capacity at Leach receipt only (as long as migration levels allow). This change avoids obligating ESCOs to take release of capacity at multiple points (e.g., Highland and Broad Run).

Second, NYSEG proposes to release DTI capacity to ESCOs serving aggregation customers in Plattsburgh (NCPL). For nominations purposes, ESCOs will utilize the released DTI capacity. ESCOs will have the option of participating in the daily aggregated volume (DAV) or the Dominion DPO/CSC program.

In other proposals arising from the collaborative, NYSEG and RG&E seek to amend their tariffs to clarify the companies' right to collect from ESCOs incremental upstream pipeline costs beyond the 10% balancing threshold. "This will mitigate the impact of cost overruns on firm sales customers," the companies said.

The proposed tariff language will obligate the companies to make a demonstration of any incremental incurred costs itemized on the offending shipper's invoice.

NYSEG has also agreed to separately identify balancing charges on NYSEG interruptible sales service customer pricing offers.

Additionally, NYSEG and RG&E have agreed to implement pool-by-pool auto-balancing for daily metered cashout calculations.

Appendix V of the 2010 Rate Plan requires that cost recovery be a condition of any potential resolution of this issue. The companies are in the process of designing and developing a new ESCO EBB and settlement software application (SmarTRAC replacement software). The implementation of this software enables NYSEG and RG&E to agree to this suggestion with the resources allocated to the effort.

Upon completion and implementation of the new software, NYSEG and RG&E will net imbalances (the difference between nominations and actual usage) of all ESCOs within any given pooling area. Multiplier Tiers (as established in the GTOP manuals) will only be applied to aggregate imbalance volumes (on a pro-rata basis) of those pools outside the tiers on a stand-alone basis.

For reliability reasons, auto-balancing will not apply during periods of LDC or pipeline issued operational flow orders (OFOs). In addition, all daily metered pool imbalances will be cashed out to zero at the daily index (established in the GTOP manuals) and no imbalances will be aggregated to a month-end cashout.

Due to lack of trading activity, the companies propose to eliminate month-end imbalance trading in the process of developing and implementing the new ESCO EBB and settlement software application.

Lastly, the utilities have agreed to provide an update regarding changes to the companies' capacity portfolio during the semi-annual Gas Marketers Operating Group (GMOG) meetings