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New Gas Supply Paradigm, Outdated Tariffs Challenging New York ESCOs

March 31, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The shale gas revolution, and outdated utility tariffs, are challenging New York retail natural gas suppliers' ability to compete with default service on a cost basis, Great Eastern Energy CEO Matt Lanfear told EnergyChoiceMatters.com in a recent interview.

"In New York, the biggest thing you're facing is the new paradigm of the shale revolution, and the cost advantage that the utilities have because the assets that they hold in their portfolios make their gas costs difficult to compete with," Lanfear said.

"Even though, in theory, we're supposed to be on a level playing field with them, we're not, because they have more assets [and] the way a lot of the tariffs were written, were written for 10 and 20 years ago, when the paradigm of gas supply was much different than it is today," Lanfear added.

"The inequity of the Gas Adjustment Clause has gotten ridiculous," Lanfear said.

Lanfear noted that as migration to transportation service has increased, benefits from the utilities' asset optimization activities get distributed over a small pool of utility supply customers, which creates a bigger adjustment on an annual basis to utility supply customers.

Notably, the annual reconciliations of utility gas supply costs have led to significant credits to default service customers. For example, for the current period, Consolidated Edison's reconciliation resulted in a 10.28¢/therm credit to default service firm gas customers for 2015, and the Orange & Rockland reconciliation resulted in a GSC refund of $1.370/Mcf.

Lanfear said that there has to be a mechanism which fairly distributes incremental revenue and margin that the utility makes due to migration, that applies not just to the gas adjustment clause, but also transportation charges.

"It's the most important thing our industry has to get fixed in the next 12 months," Lanfear said.

See More From Our Interview With Great Eastern's Matt Lanfear:

Electricity Growth Propels Great Eastern Energy Past $400 Million in Annual Revenues

REV Provides "Unlimited Opportunity" to Retail Suppliers

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