Utility Seeks to Modify Choice Program, Citing Burden Placed on Default Service Customers

Unitil (Northern Utilities) has petitioned the Maine PUC for a series of tariff changes in its non-residential natural gas choice program, arguing that the changes are needed to ensure appropriate planning and reliability

One of the concerns cited by Unitil is a "cost-benefit mismatch" in the current capacity assignment rules. Under the current program in Maine, only 50% of a customer’s design day requirements are assigned capacity resources when they migrate from Sales Service to Delivery Service. New customers to Northern’s system have the option of electing Delivery Service without any assignment of capacity

"This leaves the remaining Sales Service customers to bear the costs of the unassigned capacity resources," Unitil said.

Also, Unitil annually assigns retail suppliers only five months of storage and peaking resources through a company-managed service, even though retail suppliers pay the equivalent of twelve months of demand charges and, therefore, cannot utilize this capacity during the other seven months. In addition, the current program imposes fees and restrictions on customers who migrate between sales and delivery service.

Furthermore, charges for Unitil-managed service are based on estimated system average costs, as opposed to the actual costs of the assigned resources, leading to price distortions.

"The Company-managed commodity prices are based on a blend of estimated direct costs and estimated system average costs, rather than on the actual, direct cost of service. Suppliers have a known, monthly price when service is nominated, but the cost of service is not known by the Company. Northern recovers any difference in cost of service and Company-managed commodity prices from Sales Service customers. Delivery Service customers benefit from known, monthly prices, since marketers will only nominate supplies when market prices are higher than the known Company-managed commodity price, but Sales Service customers bear any potential costs of this aspect of the program. Specifically, Northern’s peaking supply contracts typically include a substantial exposure to daily index pricing, but the Program shields marketers from this completely by providing known monthly prices," Unitil said.

To address these concerns, as well as the need for greater planning and capacity additions, Unitil proposed the following changes to the program:

1. Adapting the Company’s planning, procurement, and assignment responsibilities to include all customer loads, including capacity exempt C&I Delivery Service customers;

2. Assigning capacity to all C&I Delivery Service customers based upon 100% of their winter period, design day requirements;

3. Recalculating annually for Delivery Service customers the amount of assigned capacity based upon updated winter period, design day requirements;

4. Providing retail suppliers with a physical release of assigned capacity that includes pipeline and storage resources, continuing the Company-managed service only to provide on-system peaking service; setting charges for the Company-managed service based on actual costs;

5. Assigning capacity on a “slice-of-system” basis, in which all customers are assigned a pro-rata share of the Company’s supply portfolio based on their winter period, design day requirement;

6. Releasing all pipeline and storage resources in accordance with the terms of the underlying agreements; removing use restrictions, such as seasonal limitations; and

7. Eliminating fees and restrictions on migrations between Sales Service and Delivery Service.

Unitil said that it plans to request approval for similar changes in New Hampshire