New York PSC Seeks Comments on Default Service Hedging, Utility Fixed Price Options in Wake of Polar Vortex

The New York PSC has sought comment on a variety of issues emerging from a technical conference on winter rates, including the hedging practices for default service and the offering of fixed price default service by utilities.

The PSC noted that some stakeholders expressed the view that utilities could hedge more than they did last winter to reduce their electric supply portfolio price volatility. The PSC asked:

a) Should utilities increase the amount of their residential and small commercial and industrial supply customers' load that is hedged during the summer and winter months?

b) What criteria should be used to determine the appropriate amount of such hedging?

c) Please comment on the use of physical vs. financial hedges in this context.

The PSC further noted that a concern was expressed that there do not seem to be adequate fixed price options available for consumers to lock in their electric prices and avoid the volatility of prices. The PSC asked:

a) Should utilities be required to offer a fixed priced electric supply option to their residential customers and/or to their small non-demand metered commercial and industrial customers?

b) If so, for what duration(s) should the supply prices be fixed?

c) Should these fixed price products be available to customers continuously or only at certain intervals, and what terms and conditions (i.e., early termination charges) should apply to these products?

d) Should energy service companies be required to offer fixed price electric supply products to residential and small customers as a condition for being certified to provide commodity in New York?

e) How might budget billing programs be better used to reduce customer bill volatility?

f) Are there changes to the utilities‟ budget billing programs that might enhance their effectiveness in mitigating customer bill volatility?

The PSC noted similar concerns with natural gas default service, and asked:

a) Were adequate quantities of firm gas available to customers for home heating throughout this winter?

b) Should gas utilities increase the amount of their heating supply customers' load that is hedged during winter months?

c) What criteria should be used to determine the appropriate amount of such hedging?

d) Should gas utilities be required to offer a fixed priced supply option to gas heating customers?

e) Should energy service companies be required to offer fixed price gas supply products to gas heating as a condition for being certified to provide commodity in New York?

Other notable questions asked by the PSC include:

• What mechanisms should be in place to encourage generating units capable of burning oil as an alternate fuel to maintain adequate fuel oil inventories on site or readily available for short-term delivery?

• What mechanisms could be employed to encourage generating units capable of burning alternate fuel to remain operational (i.e. not retire)?

• What mechanisms could be employed to bring new dual fuel resources on-line?

• How should fuel diversity be valued and priced in the market place?

• Who should be responsible for ensuring that adequate gas transportation capacity is available for gas fired electric generators? (e.g., the New York Independent System Operator, generators, gas utilities, electric utilities?)

• How should the costs associated with increased gas transportation capacity be recovered (e.g. through New York Independent System Operator supply charges, through electric delivery rates)?

Matter No. 14-00933