N.Y. ESCO Seeks Changes to Utility Pricing to Remove Barriers to Choice

Plymouth Rock Energy, LLC has sought changes to the pricing of default natural gas supply at KeySpan New York (National Grid) to remove barriers to competition.

KeySpan New York has filed tariff changes to modify the calculation of the monthly cost of gas for sales customers provided service under Service Classification Nos. 4A, High Load Factor Service; 4A-CNG, Compressed Natural Gas Equipment Service; and 4B, Year-Round Air Conditioning Service.

Plymouth Rock Energy welcomed these changes, but said that KeySpan New York did not address the other cost components of the SC 4A rate that also require update or modification.

Plymouth Rock Energy said that the SC 4A rate is comprised of three basic components prior to application of various adjustments. These components include the following:

1. Weighted Average Unitized Cost of Gas;

2. Weighted Average Unitized Fixed Costs; and

3. Unitized Fixed Cost Credits

"For the month of October 2013, the Company reported a Weighted Average Unitized Commodity Cost of Gas of 23.2027 per cents per therm applicable to SC 4A. For the comparable period the NYMEX settlement price was approximately 34 cents per them. In other words, the utility commodity price was approximately 10 cents per therm lower than the comparable NYMEX closing settlement commodity cost for the same period. It is inconceivable that absent a pricing structural infirmity that such a commodity cost pricing disparity can arise between the market and National Grid," Plymouth Rock Energy said.

Plymouth Rock Energy said that at the annual ESCO meeting held on September 25, 2013, National Grid acknowledged that the below market cost was conceivably a result of its access to lower cost gas from the Leidy Pennsylvania storage capacity source. This lower cost capacity source is currently not made available to ESCOs, Plymouth Rock Energy said.

Regarding Weighted Average Unitized Fixed Costs, Plymouth Rock Energy said that the actual rate design including the level of the demand charges was developed more than a decade ago. "Needless to say, much has transpired at the Federal level (e.g., Order 636) and at the State level including reliance on new supply and capacity routes and sources. Nevertheless, the SC 4A demand/fixed costs have remain unchanged and probably further divorced from an accurate reflection of current market costs," Plymouth Rock Energy said.

Additionally, "the Unitized Fixed Costs have remained relatively static (in the range [of] 4 cents or so) while the fixed costs for other firm classes have risen," Plymouth Rock Energy said.

"Under the National Grid Transportation & Balancing program all ESCOs are assessed a swing charge that are intended to reflect the level and attendant cost of capacity assets (including peak assets) allocated to serve the entire pool served by each individual ESCO. The swing charge is inversely related to the overall load factor of the ESCO's pool. An ESCO with a high load factor (reflecting more constant annual usage) is assessed a lower swing charge than an ESCO with a low load factor (predominant peak usage). It thus behooves each ESCO to attempt to lower the pool load factor in order to reduce the applicable swing charge. In this regard, enrolling high load factor SC 4A customer[s] would be quite beneficial as their usage is relatively constant and not solely a function of the peak heating season. However, if the SC 4A sales rate is artificially depressed, ESCOs are inhibited from marketing to this class," Plymouth Rock Energy said.

"The Commission should direct National Grid to revise all of the cost components of the SC 4A&B rate to ensure that they accurately reflect market costs and do not create a barrier to meaningful retail competition," Plymouth Rock Energy said.

Case 13-G-0439