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Non-ESCOs Raise Concern With Utility ConEd's Proposed Optional Renewable Electricity Supply Plan For Customers

October 27, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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In comments at the New York PSC, several non-ESCO parties have raised concerns with Consolidated Edison Company of New York, Inc.'s (the Company) proposal to provide residential and small commercial full-service customers with an optional renewable, carbon-free electricity option (the 'Green Power Program'). was first to report ConEd's petition for a proposed green power program, see details on the proposal in our prior story here

Consumer Power Advocates, a coalition of not-for-profit commercial healthcare and educational institutions, said in its comments that, "the Company’s proposal would see it entering the competitive supply market where it would have the benefit of its substantial resources to register subscribers."

"Due to the unmatched name recognition, customer database, and access to marketing resources possessed by the Company, the GPP would act as a chilling effect on the competitive electric market which would negatively impact consumers in New York. CPA urges the PSC to reject the Company’s proposal," Consumer Power Advocates said

Consumer Power Advocates stated, "While we applaud the Company’s desire to see more residential and small commercial customers using a clean energy product, we believe the PSC should reject the GPP for the following reasons: 1) The Company has failed to demonstrate that SC 1 and SC 2 customers cannot have their demand met by the competitive market. 2) The Company’s proposal would put it in direct and unfair competition with ESCOs that have just recently had their business restricted to the very service Consolidated Edison is proposing to promote."

Advanced Energy Economy (AEE), on behalf of the Alliance for Clean Energy New York (ACE NY), said that it, "broadly support[s] efforts to increase access to renewable energy for customers."

AEE stated, "When considered in isolation, we do not have specific concerns with the program Con Edison has proposed. However, when considered within the context of broader state policy on voluntary REC purchases, the renewable purchases under the proposed program will lack additionality."

While not calling for rejection of the ConEd proposal, AEE sought additional transparency and disclosures to customers

Noting that voluntary green purchases are counted in meeting overall state mandates, AEE said, "Unless policy is changed to ensure that voluntary purchases are in addition to, rather than a replacement for, renewable purchases that fulfill binding compliance targets, the program should be modified to accurately and transparently describe the impact of a voluntary purchase to customers. The marketing materials should explain to prospective customers that their participation in the voluntary program lowers the costs of meeting state clean energy goals to non-participating customers (whose renewable purchases are reduced) rather than providing support for renewable purchases that go beyond state goals. Some customers may choose to provide this financial support to their fellow customers, but they can only knowingly make that choice if they have first received accurate information about the impact of their voluntary purchases."

AEE noted that, "Both the 2016 Order Adopting a Clean Energy Standard ('2016 CES Order') and the recent 2020 Order Adopting Modifications to the Clean Energy Standard ('2020 CES Order') make clear that voluntary renewable purchases count toward the overall state goal and result in commensurate reductions in the amount of renewables that Load Serving Entities (LSEs) must purchase in order meet the CES requirements. Initially, the Commission set up a triennial review, whereby it would track progress toward the CES, and adjust the Renewable Energy Standard (the portion of the CES targets that are binding on LSEs) downward based on the volume of voluntary market purchases. Per the 2020 Order, this review and adjustment now takes place on a biennial basis."

"This in effect causes voluntary renewable energy purchases to replace RES procurements rather than add to them. Because voluntary purchases in New York ultimately reduce LSE compliance obligations, they are not additional," AEE said

The City of New York said that the proposed program should be modified and that, "an appropriate Con Edison Green Power Program should be designed to increase the percentage of renewable resources within New York City (and Westchester County)."

"To that end, the Commission should consider requiring a minimum purchase requirement from within the entirety of the Company’s service territory," the City of New York said

"A Con Edison Green Power Program would be well-suited to facilitate and incentivize downstate access to renewable resources. To be clear, the City is not advocating that Con Edison build renewable energy projects. However, the Company could sponsor their development through competitive procurements and other arrangements paid for by its Green Power Program participants, using the resources’ output and environmental attributes to satisfy the program participants’ energy, capacity, and renewable energy credit requirements," the City of New York said

The Sierra Club generally expressed support for ConEd's proposal, but did note that the program would not result in levels of renewable generation in New York that exceed what is already required by the CLCPA, but rather that the program will shift compliance costs related to the CLCPA (as voluntary purchases reduce the amount of green energy costs needed to recovered from non-voluntary customers). "Sierra Club supports approval of the Green Power Program but urges ConEd and the Commission to use the revenue generated by the Program specifically to reduce the CLCPA compliance costs for lower-income ratepayers," Sierra Club said

Sierra Club also said, "Given the track record of the energy service companies (ESCOs) to date, customers may prefer to purchase clean power from their default service provider."

The Association for Energy Affordability, Inc., "supports Con Edison’s petition to offer a Green Power Program as long as Con Edison also meets important consumer protections and transparency requirements."

"We believe the Green Power Program can meet the demand among Con Edison’s customers for a 100 percent green power product from a known and familiar energy supplier," the Association for Energy Affordability said

The New York League of Conservation Voters supports ConEd's program, stating, "The proposal avoids many of the consumer protection issues that have plagued the ESCO system in New York by allowing customers to enroll in and exit the program at any point at no charge and promises full transparency around pricing."

Various ESCO parties urged the PSC to reject the petition

ESCOs noted that the ConEd program is specifically designed to support Tier 2 resources, but noted that, in the intervening time, the PSC has now addressed the issue of Tier 2 resources by ordering all LSEs to meet compliance mandates with respect to Tier 2 procurements

Family Energy, Inc. noted that, "One of the primary reasons cited by ConEd for offering the green power program is to retain Tier 2 RECs in the State that would otherwise be exported. At the time of ConEd’s filing there was an outstanding petition filed by NYSERDA with the Commission on the establishment of a competitive Tier 2 REC procurement program to be funded by LSEs based on load share. The NYSERDA Petition was likewise submitted to address the retention of Tier 2 RECs in the State that would otherwise be exported. ConEd noted that it and other utilities opposed the NYSERDA petition, and ConEd expressed its opinion that the voluntary green power program that it proposed was preferable."

"The Commission has since addressed this issue in its recent Order adopting modifications to the Clean Energy Standard wherein it approved NYSERDA’s Petition to establish a competitive Tier 2 REC procurement program and corresponding funding obligation imposed on LSEs. The Commission did so in view of trends of increasing exports of baseline renewable generation and the pending expiration of Renewable Portfolio Standard contracts and the impact it would have on attaining Climate Leadership and Community Protection Act (CLCPA) targets. The Commission’s action to create the Tier 2 program has obviated the purported need for ConEd’s separate Tier 2 program. Indeed, the central assumption of ConEd’s proposal about REC availability to satisfy the CLCPA targets has now been markedly changed. For this reason alone, ConEd’s proposal should be rejected," Family Energy stated

Family Energy, Inc. also stated, "In the instant proposal, ConEd seeks to undo twenty years of utility restructuring and Commission precedent and offer a competitive product as a regulated utility monopoly."

"ConEd’s Corporate Structure Conditions adopted over twenty years ago in the ConEd/O&R merger case explicitly provided for the utility’s phased exit from competitive functions, and a focus on transmission and distribution functions aimed at ensuring the safety and reliability of service. The Conditions did not contemplate or condone the future expansion of competitive functions or the addition of competitive energy products by the regulated utility monopoly," Family Energy said

"The reasons for this corporate structure and separation of functions remain just as important today to facilitating robust retail competition – the regulated utility monopoly enjoys significant economies of scale and scope, has the ability to exercise market power, controls access to the delivery system and has superior knowledge about delivery system conditions, and controls access to customer information critical to providing service to consumers. The corporate structure and separation of functions at the utility was intended to level the competitive playing field with ESCOs and other competitive providers in the provision of energy products and services. None of the conditions requiring these measures has changed, and are perhaps now even more important to realize the goals of the Reforming the Energy Vision (REV) proceeding and the utility’s defined role as an enabler of the market. Any proposal that would undo or undermine these important safeguards and permit the regulated utility monopoly to compete with a new product in the retail marketplace should be rejected," Family Energy said

Family Energy said that if the Commission ultimately were to permit ConEd to offer a green product, it should be through an arms-length competitive affiliate

The Retail Energy Supply Association stated, "by offering the Program, ConEd would be providing just such a value-added service. Consequently, the Program is functionally a competitive supply product. In fact, ConEd would promote it and endeavor to enroll customers with marketing campaigns, just like ESCOs promote and endeavor to enroll customers in their products. Thus, given ConEd’s role as a distribution utility, ConEd should not be permitted to offer the Program. If ConEd wishes to provide the Program in New York, it could assign this task to an unregulated subsidiary, so long as appropriate standards of conduct are in place. In fact, at one time, a ConEd affiliate was registered as an ESCO in New York50 and even marketed voluntary renewable products, enrolling over 20,000 customers. There is no reason why ConEd could not use a similar method for offering the Program now."

RESA further said that if ConEd is permitted to offer the product, it should be subject to the same consumer protections as ESCO products.

"[I]f the Commission determines that ConEd should be permitted to offer the Program (which RESA vehemently opposes), it should require ConEd to comply with clearly-specified, robust consumer protections, including all of the consumer protections that have been established for ESCO voluntary renewable products and marketing. For example, ConEd proposed to implement changes in the Program’s subscription price simply by providing customer with 'advance notice' of the change.52 However, material changes to ESCO products—such as changes in price—require express customer consent. Similarly, the UBP imposes a set of marketing standards applicable to ESCOs and their marketing representatives. However, in the Petition, ConEd, although noting that it would market the Program, did not indicate whether it would adhere to any particular marketing standards. Consumers should not receive less protection simply because ConEd is responsible for the marketing and pricing," RESA said

"Further, if it will not regulate subscription prices, the Commission should subject the Program to the same restrictions to which ESCO voluntary renewable products are subject. For instance, ESCOs may not enroll a low-income customer in a voluntary renewable commodity product unless they can guarantee that the customer will 'pay no more than he or she would have paid to the utility.' Low-income customers of ConEd are just as deserving of this protection as low-income customers of ESCOs. Thus, the Commission should require that ConEd offer the Program (together with default service) to low-income customers at a price that is guaranteed to be lower than default service. Alternatively, if the Program is approved, the Commission should permit ESCOs to offer renewable commodity products to low-income customers at prices that do not exceed the sum of the ConEd default price and the Program subscription price," RESA said

RESA said that, "ConEd’s Petition raises serious concerns about the potential for cross-subsidies," noting that, as previously reported, the program includes a 'backstop mechanism.'

"Under this mechanism, Program costs will be recovered from ConEd’s entire full-service residential and small commercial customer base - even customers who do not subscribe to the Program. Subscribing customers would pay subscription fees, and revenues from these fees would be credited to ConEd’s entire full-service residential and small commercial customer base to offset the charges incurred to fund the Program. However, to the extent subscription prices are not sufficient to pay Program costs, ConEd’s entire full-service residential and small commercial customer base would bear the risk of any shortfalls. In fact, because of ConEd’s unreasonably optimistic view of interest in the Program, the potential for such subsidization is high," RESA said

"This ratemaking scheme violates principles of cost causation because non-subscribing customers will not have caused ConEd to incur any Program costs. Moreover, this ratemaking scheme is inequitable because the Program will compete with ESCO voluntary renewable products who do not have the same ability to recover expenses not covered by revenues. As a consequence, this rate-making treatment will send inaccurate price signals making it impossible for customers to accurately compare ESCO voluntary renewable prices with those of ConEd," RESA said

CleanChoice Energy, Inc. also filed comments in opposition to ConEd's proposal

Among other things, CleanChoice Energy said, "The concern here is that Con Edison’s entry into the competitive marketplace while relying on captive ratepayers gives it an unfair advantage and has the potential to disrupt, undermine, and potentially destroy the marketplace. Moreover, Con Edison has access to information and customer data that competitors simply do not have access to because Con Edison is the regulated utility."

"Pursuant to Con Edison’s Petition, the general body of ratepayers initially would fund all of the costs related to the renewable supply program, with no guarantees of reimbursement from participating customers. In other words, unlike a competitive entity such as CleanChoice whose shareholders bear the risk of the success or failure of the entity’s efforts, Con Edison is seeking to pass all risk of this proposal onto its customers," CleanChoice noted

"Another concern pertains to the ratepayer funding that does not appear to be captured in the proposal. Con Edison claims that the incremental expenses relate primarily to marketing. The planned marketing activities appear to rely on pre-existing education and outreach activities, such as use of Con Edison’s customer service call center, web site, social media platforms, and attendance at community events. Ratepayers have funded and continue to fund all of these activities, and Con Edison now proposes to take advantage of them for its entry into a competitive marketplace where none of its competitors (such as CleanChoice) have any opportunity to access these platforms. In other words, Con Edison will be at a significant competitive advantage over other electric commodity providers with which it will be competing. Allowing Con Edison to leverage ratepayer-funded resources associated with its monopoly service, including its call center, website, social media platforms, and community events to promote a renewable product offering is anti-competitive, harmful to customers, and will negatively impact other electric commodity providers, including CleanChoice," CleanChoice said

Case 20-E-0386

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