Dismissing ESCO Concerns, New York Adopts NYSEG Plan for Merging Gas Supply Areas

The New York PSC approved, as proposed by NYSEG, the consolidation of NYSEG's remaining two Gas Supply Areas (GSAs) into a single GSA, and the adoption a system-wide weighted average cost of capacity (WACOC) for the release of capacity to ESCOs (09-G-0716).

In doing so, the PSC found that the action is required to prevent the subsidization of ESCO customers by bundled service customers, and dismissed various concerns raised by ESCOs.

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

More details on the merger, and calculation of the system-wide WACOC, can be found in Matters' prior story (click here)

ESCOs had raised concerns about the introduction of the single WACOC on April 1, 2013, before the GSA consolidation on September 1, 2013.

However, the PSC said that this schedule, "insures that costs reflected in the WACOC are properly allocated between utility supply customers and ESCO supply customers."

Under the current mechanism, "it is likely that utility supply customers currently bear some costs that should be allocated to ESCO supply customers," the PSC said.

"Ending this improper cost subsidization expeditiously justifies introducing the single WACOC at a time earlier than the GSA consolidation," the PSC said.

The PSC further said that ESCOs' filed data concerning the customer cost impacts of the proposed change, "is likely related to the elimination, necessarily implemented without undue delay, of cost subsidization of ESCO supply customers by NYSEG's supply customers."

The PSC found that, "the consolidation of the WACOC and the GSAs benefits ratepayer without impeding the development of competitive markets."

"The consolidation merely results in the combination of the WACOC and other existing gas supply charges, currently calculated separately for each GSA, into one set of charges applicable across NYSEG's entire service territory. As the Companies point out, the consolidation is justified because their portfolio of gas supply arrangements underlying the gas supply charges generally supports the provision of commodity supply throughout their service territory, and so customers generally benefit from the portfolio as a whole. Moreover, consolidation ensures that costs are properly allocated, instead of the current circumstances, where utility supply customers likely shoulder costs that should be the responsibility of ESCO supply customers," the PSC said.

The PSC declined to require NYSEG to make specific reports related to the implementation of auto-balancing as sought by ESCOs, but did advise NYSEG and RGE, "that they are obligated to update the ESCO parties on auto-balancing system development at the GMOG [Gas Marketers Operating Group] meetings."

"The Companies shall also furnish ESCOs with reasonable advance notice of the date operation of auto-balancing will commence, and inform them of any obligations they must undertake regarding auto-balancing within a reasonable time before the obligation attaches," the PSC said.