"Concerned" ESCOs Seek Relief from New York PSC Regarding Utility's Pricing Advantage due to "Discriminatory" Capacity Release

A group of retail suppliers filing as the Consortium of Concerned ESCOs has petitioned the New York PSC to resolve, "discriminatory pricing practices and inequitable and anticompetitive policies regarding the allocation and access to all gas capacity assets," at KeySpan New York and KeySpan Long Island (National Grid).

The ESCOs alleged that National Grid, "has implemented and intends to continue highly anticompetitive pricing practices and preclude ESCO access to more economic capacity assets throughout the 2013-2014 heating season. Such behavior has and will undermine the financial viability of all ESCOs operating in New York and Long Island and even prompt ESCOs to discontinue service in the Company's service territory."

"Due to the Company's practices, the lower cost shale gas available from Leidy [the Transco Leidy firm transportation storage path] is accessed by the Company for the benefit of sales customers, whereas ESCOs and transportation customers are denied comparable access to Leidy and are instead compelled to acquire the vast majority of their supplies from much higher priced gas emanating from the Gulf of Mexico," the ESCOs said.

This has led KeySpan's GAC to be lower than NYMEX prices by over 10¢/therm, such as in August where the KeySpan GAC was 23¢, while the NYMEX settlement was 34¢/therm.

The ESCOs said that at a September ESCO meeting, National Grid, "acknowledged that the reported low GAC prices were due in whole or material part, to its retention and allocation of certain low cost capacity/supply assets that were made available to sales service customers and that ESCOs were precluded from obtaining comparable access to these assets in order to deliver lower cost supplies."

"Furthermore, National Grid stated that absent corrective action this pricing advantage would continue throughout the winter heating season," the ESCOs said.

"Thus the Company acknowledged publicly that it obtained the cost advantage by securing supplies from the Transco Leidy firm transportation storage path that allows deliveries of shale gas priced well below the NYMEX. In contrast, ESCOs are primarily released assets by the Company that rely on higher cost Gulf sources of supply. This particular Leidy delivery path is not available to other parties either on a firm or secondary basis -- a fact which was confirmed by the Company at the meeting -- even though ESCOs pay for the all [sic] capacity costs associated with this path through a 'swing' charge. In addition due to the enormous size of the Leidy related assets under the Company's control, its ability to leverage this path to gain access to lower cost supplies dwarfs any non Gulf based paths released to ESCOs (i.e. via Millennium pipeline)," the ESCOs said.

"In addition, at the meeting several other pricing disparities were disclosed, including that sales customers would be charged a lower cost of gas for storage service during the winter than ESCOs, and that the capacity Tier 2 bundled pricing assessed to ESCOs were not comparable to the pricing afforded to sales customers. In both cases the Company is able to leverage access to obtain access to Marcellus gas supplies directly at Leidy solely on behalf of sales customers, while ESCOs are denied equivalent access. Moreover where storage service and Tier 2 pricing is provided to ESCOs at a price above the cost incurred to provide the service the differential is refunded back to the firm sales customers through a GAC adjustment thereby compounding the negative cost effect on ESCOs and their transportation customers," the ESCOs said.

Although National Grid has said that for the 2013/2014 winter heating season it would modify the pricing structure of the Tier 2 and 3 Capacity to help promote greater price comparability, the ESCOs said that with respect to access to the Leidy storage path, National Grid, "proposed no timely resolution and only enigmatically hinted that it would 'explore options to provide ESCOs with access to storage assets that ESCOs currently do not have.'"

"In other words, no corrective action would be currently implemented to modify the Company's restricted access to Leidy storage capacity[,] the primary driver of the Company's pricing advantage," the ESCOs said.

"In effect, as implemented by the Company, certain critical low cost assets -- Leidy firm transportation and related storage assets -- have been significantly reserved to the Company and equivalent access thereto has been unilaterally denied to ESCOs and transportation customers. As a direct result, ESCOs have and will continue to be at a distinct competitive pricing disadvantage," the ESCOs said.

"It is respectfully requested that the Commission through the dispute resolution process direct National Grid to immediately provide ESCOs with access to the Leidy storage path on a non-discriminatory basis pursuant to terms equivalent to those obtained by the Company. If physical access cannot be provided immediately, the Company should be directed to apply a financial adjustment to ensure pricing comparability between the Company and ESCOs reflecting equivalent use of such assets," the ESCOs said.

The Consortium of Concerned ESCOs includes: Great Eastern Energy; Direct Energy; East Coast Power & Gas; S.J. Energy Partners; Plymouth Rock Energy, LLC; Big Apple Energy, LLC; North American Power & Gas; LLC; IDT Energy; Agway Energy Services; Kiwi Energy, LLC; Ameristar Energy, LLC, SouthStar Energy, LLC; Infinite Energy, Inc.; Major Energy, LLC; Energy Discounters, LLC; and IGS Energy.