Friday, May 15, 2009

PULP Comments on PSC Proposals to Implement 2% Utility Assessment

On April 28th, the New York State Public Service Commission (“PSC”) issued a Notice Requesting Comments following the passage of a state law establishing a Temporary State Energy and Utility Service Conservation Assessment, effective April 1, 2009 to March 31, 2014. The Temporary Assessment is applicable to public utility companies, including municipal gas and electric corporations, Energy Service Companies (“ESCOs”), and the Long Island Power Authority, but excludes telephone corporations and utilities with $500,000 or less gross operating revenues from intrastate utility operations. The Temporary Assessment imposes a charge of two percent of gross intrastate operating revenues, minus the amount of the current assessment on utilities for the PSC’s costs and expenses. The stated purpose of the Temporary Assessment is to encourage conservation of energy and other resources. Thus, it does not apply to telephone companies.

The PSC is considering issues relating to implementation of the Temporary Assessment and raised five broad topics for comment. PULP submitted its comments on May 15th on two of the topics raised: estimating ESCO intrastate revenues and rate design issues.

The PSC indicated that data on ESCO revenue is not available and so proposed a method to calculate estimated ESCO revenues by having distribution utilities multiply the amount of electric or gas delivered to ESCO customers by the commodity supply price that would be charged by the distribution company for sales to its bundled service customers. PULP raised concerns with the proposed method of estimating ESCO revenues, considering that data regarding ESCO prices and intrastate revenues is or should be readily available to accurately estimate ESCO revenues subject to the Temporary Assessment. In fact, despite the PSC’s assertion, the actual number of megawatt hours of electricity and therms of natural gas sold by ESCOs in New York State, in addition to the average retail price, is readily available for the vast majority of ESCOs.

First of all, the distribution utilities which do the billing and collection work for ESCOs already have ESCO price and revenue data for their own internal billing processes and can readily provide it to the PSC. Many ESCOs use the distribution utility bililng systems and so this data would provide for more accurate estimates.

In situations where ESCOs do direct customer billing and price and revenue data are not available through the distribution utilities, this information is also readily available due to it being reported to the U.S. Department of Energy’s Energy Information Administration (“EIA”). EIA collects price and revenue data on a monthly basis from electric and natural gas ESCOs, so the PSC can either request the data directly from the ESCOs or through EIA. As a result, it should not be a burden for these ESCOs to share commodity prices and sales revenues with the PSC in order for the agency to more accurately estimate the Temporary Assessment because this information is already made available by them to EIA on a monthly basis.
Thus, there is no reason to base the ESCO revenue estimates on distribution company prices when better data is available and is already compiled and reported by the ESCOs to the distribution utilities and/or to the federal government. The Commission should require ESCOs to submit the data already prepared and provided to the distribution utilities and/or EIA to the Commission, at least until the time the Commission develops its own data request forms on ESCO prices and revenues for calculating ESCO revenue for the Temporary Assessment. Only in those situations where price and revenue data are not available through these methods should the Commission base ESCO intrastate revenues on its proposed methodology.

Further, while PULP supports the use of ESCO price and revenue data when it is available, the method selected by the Commission to estimate ESCO sales – multiplying the known amount of electric or gas delivered to ESCO customers by the commodity supply price charged by the distribution company for sales to its bundled service customers – should not be used for another reason: it may significantly underestimate ESCO intrastate revenues. PULP has found on the PSC’s Power to Choose web page that ESCO end user prices often greatly exceed utility prices (usually after a limited “trial” period).

The distribution utility’s commodity supply price for natural gas, for example, may be 20 or 30 cents (or more) per therm lower than the actual ESCO end user rate. By proposing to estimate ESCO revenues as if there are no differences between ESCO revenue per kilowatt hour (or therm) and utility revenue per kilowatt hour (or therm), a portion of the revenues of the high-charging ESCOs would escape the Temporary Assessment.
PULP also noted it is appropriate to collect a full assessment based on the actual ESCO charges and revenues because ESCOs that charge more than the distribution utility also tend to generate a higher level of complaints at the Commission, thus draining more of the Commission’s resources.

In addition, the PSC has proposed to allocate the Temporary Assessment to each customer class based on the class’ contribution to the utility’s total revenues, including delivery and supply charges, as a means to align cost causation with cost recovery. PULP is concerned that under this proposal for the Temporary Assessment, low income customers will be unnecessarily and unfairly burdened. Most distribution utilities have either a rate classification for low income customers or a low income discount program in place. As a result, low income customers do see a reduction in their bills and household energy burdens. These reductions would be significantly diminished or offset if low income customers would be required to pay the additional assessment. The application of the Temporary Assessment would not be just and reasonable for these customers because it would have a significantly negative impact on low income households, diminishing any “benefit” they would otherwise receive from the low income rates or discounts that were intended to ease their energy burdens.

Accordingly, PULP called for a finding that low income customers either be exempt from the new Temporary Assessment or, in the alternative, that the rate cases for those distribution utilities with low income rates or discounts be re-opened to amend their overall rate designs to increase the low income rate discounts by at least the amount of the assessment.

Lou Manuta

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