New York Approves Change to RG&E Cashout Procedure

The New York PSC approved Rochester Gas & Electric's request to modify its tariff to allow the use of an alternative suitable index for cashouts as set forth in its Gas Transportation Operating Procedures (GTOP) Manual.

RG&E's prior tariff provisions required RG&E to use an average of the Niagara index price and the Dominion Transmission Incorporated (DTI) Appalachia South Point to cash out imbalances.

RG&E had used the published Gas Daily Niagara index for the Empire side of the system which is based on reported transactions at the point of interconnection between Tennessee Gas Pipeline (TGP) and TransCanada Pipeline. Natural gas supply into the RG&E distribution system on the Empire Pipeline side of the system is sourced from Chippawa, the point of interconnection between Empire and TransCanada Pipeline, but, historically, there has not been a published index for the Chippawa point, RG&E said.

Beginning in March, the reporting of the Niagara Index in Gas Daily became sporadic and, on certain days, there was no reported price. "Given the changing operational pipeline flows, RG&E expects that the unpredictability of the Niagara Index in Gas Daily may continue," RG&E reported.

The PSC noted that the relevance of the Niagara index is "debatable" at this point in time, which is largely due to the fact that natural gas trading activity at this area has been decreasing over the years, which minimizes the use of this area as a liquid point.

"The trading activity has been impacted by reduced imports of natural gas from Canada due to the surge of more attractively priced natural gas from the Marcellus region, as well as other new production areas in the United States. It is believed that these reduced imports have led to the difficulty of obtaining published data for Niagara on a regular basis. This phenomenon is expected to continue as production is expected to increase in the shale formations in the United States and less reliance on Canadian imports is anticipated," the PSC noted.

In light of this, RG&E proposed to eliminate the language regarding specific indices for balancing and penalties from its tariff, and instead refer participants to the GTOP for cashout imbalance and penalty procedures.

The PSC found that putting the relevant indices and specific calculations for balancing and penalties in the GTOP will allow the RG&E to make changes, if and when necessary, on a more expeditious timetable, while still allowing market participants the opportunity to comment.

"These revisions will provide RG&E the flexibility to address changing market conditions and be able to cashout imbalances pursuant to a process where ESCOs are provided notice," the PSC said.

"Because the changes requested by the Company will allow for more efficient communication with affected ESCOs and is responsive to the dynamic nature of the natural gas market in North America," the PSC approved RG&E's request.

RG&E was directed to submit the GTOP changes prior to when the tariff changes are scheduled to go into effect (September 1, 2012). "This will give both the Department of Public Service and market participants the opportunity to review and comment prior to the GTOP changes becoming permanent," the PSC said.