New York PSC Approves Default Service Pricing Changes At ConEd Meant To Reduce Volatility -- EnergyChoiceMatters.com

New York PSC Approves Default Service Pricing Changes At ConEd Meant To Reduce Volatility

May 12, 2022

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC approved several tariff changes to the default service pricing mechanism at Consolidated Edison Company of New York, Inc. (ConEd or the Company) which are meant to reduce volatility.

The Company’s Supply Mechanism is comprised of three primary billing components. The Market Supply Charge (MSC), the MSC I, and the MSC II. The MSC is presently calculated for each rate class based on New York Independent System Operator (NYISO) day-ahead hourly energy prices and hourly weights developed from class-specific load shapes for the load zone of the City of New York (Zone J) and the load zone for Westchester County (Zones H and I), separately. The rates each customer is billed are based on the actual market prices in that customer’s billing period, by location. The MSC I primarily recovers differences in actual MSC costs and revenues, as well as other non-hedging related supply costs such as, but not limited to, demand response program costs and differences in sales from prior period reconciliations. The MSC I is updated in the middle of each month for the month after the cost month.

The MSC II is used to recover hedging costs or provide hedging benefits to full-service mass-market customers. It includes an estimate of hedging costs or benefits for the billing month and a reconciliation of the preceding month’s estimated versus actual hedging costs or benefits. This factor is also updated in the middle of each month. The MSC I and the MSC II are determined once per month and remain constant for all individual billing cycles until these charges are recalculated the following month. However, the MSC, as previously described, changes with each billing cycle based on NYISO day-ahead hourly energy prices during each billing cycle.

The PSC noted that, "During the beginning of this year, after the Company set the MSC II, the NYISO market prices unexpectedly and significantly increased due to prolonged colder than normal weather as well as increased demand. The MSC II that was set on January 12th did not capture this unexpected significant increase in market prices and thus, the Company’s hedges were undervalued compared to the actual day-ahead market prices that full-service mass-market customer were billed. This unexpected increase in market prices, combined with how the Company bills its full-service mass-market customers, lead to significant bill increases for some customers toward the end of January and into the beginning of February, until the Company reset the MSC II on February 11th, which included the actual value of the hedges."

Under the adopted changes, ConEd will calculate the energy component of the MSC using forecasts of energy prices each month, along with estimates of associated hedging impacts, which is said to better align the projected value of its hedges with the expected market supply prices for its full-service mass-market customers, reducing the likelihood of significant full-service mass-market customer bill volatility.

ConEd will also allow the reconciliation of the difference between forecast and actual supply to occur over multiple months.

Specifically, the adopted tariff amendments modify the Supply Mechanism in the following manner. Instead of calculating the MSC rate for each billing cycle based on the NYISO day-ahead hourly energy prices and hourly weights developed from class-specific load shapes, ConEd will calculate the energy component included in the MSC for each rate class using forecasted energy prices, inclusive of estimated hedging impacts. The energy prices by bill cycle will be determined based on the forecast prices in each customer’s billing period. Differences between energy revenues derived from the MSC, inclusive of forecast hedging gains or losses and actual energy costs, will continue to be reconciled through the MSC adjustments.

Further, the approved tariff changes will allow ConEd to spread the MSC adjustments over multiple months. Under the Company’s modified tariff, these reconciliations would still be fixed, meaning not changing with each billing cycle. However, the very nature of the modifications of the MSC itself, providing the estimated hedge value coincident with the estimated market costs, should reduce the potential of large reconciliations, the PSC said. As noted, the revisions would allow for any large reconciliations, if they were to occur, to be spread over multiple months, the PSC said

Case 22-E-0150

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