NRG: Muni Aggregation "Not Real Competition", Proposes CCA As Bridge To Utility's Exit From Default Supplier Role

Municipal aggregation, as currently structured in several states, "is not real competition," and is dominated by three suppliers currently or formerly affiliated with incumbent utilities, the retail companies of NRG Energy, Inc. said in comments to the New York PSC.

"Government aggregation, as currently structured in several states, is not real competition or a true retail market. Government officials and their consultants choose suppliers for customers. Customers are unlikely to know the company supplying their electricity. Further, aggregated customers are unable to avail themselves of additional value-added products because the supplier is most often limited contractually from communicating and establishing a direct relationship with customers. Finally, the traditional opt-out government aggregation model results in fewer options for customers, as one monopoly (the local distribution company) is substituted by another (the winning aggregation supplier)," NRG Retail said.

"To amplify the point, in Illinois where approximately 600 communities have implemented aggregation for their residents, 81 percent of the programs are concentrated among three suppliers, of whom two companies are affiliates of the in-state Local Distribution Companies (LDC), and the third is an affiliate of the LDC in a nearby state," NRG Retail said [note: it would appear one of the three suppliers would be Homefield Energy, which was a utility affiliate at the time most of its aggregation contracts were awarded, but which has since been sold to Dynegy].

Despite the shortcomings of traditional government aggregation, NRG Retail said that community choice aggregation, when properly structured, "can be a catalyst to greater competition as well as more choices and benefits for New York residential energy customers."

To do so, NRG Retail encouraged the PSC to adopt a clear Policy Statement that the objective of CCA is to facilitate the transition to full retail energy competition in New York by engaging mass market customers in the energy market, migrating residential customer load to qualified Energy Service Companies (ESCOs), transitioning LDCs from the role of providing default generation supply service, and animating the market to deliver a wide array of distributed energy resources, renewable energy and innovative energy management products to residential customers.

NRG Retail proposed the following Guiding Principles for achieving this objective.

• CCA should only be implemented as a "temporary bridge" for transitioning the New York market from LDC-provided default service to full retail competition.

• The residential customer market should be declared "fully competitive" when a majority of the customers and load is being served by ESCOs.

• LDC-provided default service should be replaced with Provider of Last Resort (POLR) service, provided by qualified ESCOs as a temporary backstop for customers.

• ESCOs serving CCA should be provided the opportunity to establish a direct relationship with participating customers.

• To spur mass market customer adoption of REV-related products and services, CCA programs should be required to furnish distributed energy resources (DER) and services for the benefit of participating customers, from either the winning ESCO or other competitive DER providers.

• Electricity and natural gas are "essential services" that should be entrusted to qualified ESCOs possessing the financial and operational capability to manage all aspects of the process, including the ability to issue bills.

Furthermore, NRG Retail proposes that CCA programs sunset four years after a PSC order enabling government aggregation programs. "This presumes that in four years’ time a majority of New York residential customers and load will have migrated to ESCOs, either through organic switching or aggregation. Four years also allows ample time for LDCs to phase out of the default supply service role," NRG Retail said.

"At the end of the four-year transition period, customers served under CCA may choose to accept an offer from their aggregation program ESCO or switch to another ESCO. Default supply service from the distribution companies would not be an available option," NRG Retail said.

During the CCA period, upon 51 percent of residential customers being served by ESCOs, through a combination of organic switching and government aggregation, the PSC should declare the residential customer class "fully competitive," NRG Retail said. This milestone would trigger the commencement of a defined process for relieving the distribution companies of the obligation to provide default service for residential customers, to be completed at the end of the CCA period.

Contemporaneous with an Order enabling CCA, NRG Retail recommended that the Commission order the distribution companies to file plans for transitioning from default service upon a competitive declaration

NRG Retail noted that Section 9 of the Uniform Business Practices (UBP) provides for ESCOs to bill utility delivery charges, albeit with limitations insofar as enforcing bill payment. "UBP Section 9 should be revised to transfer to ESCOs all billing related responsibilities and rules, including the right to terminate delivery service for nonpayment," NRG Retail said.

Case 14-M-0224