Retail Unbundling

Retail Unbundling - New York
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Status: The State has comprehensive unbundling programs for its residential gas customers.

Overview: Natural gas unbundling is operational statewide in New York, with the exception of a few small utility companies representing less than 1 percent of residential and small commercial customers. According to the New York State Public Service Commission (NYPSC), 9.1 percent of residential customers were purchasing natural gas from marketers, which the State calls "energy service companies" (ESCOs), as of November 2006, up from the 7.8 percent participation in December 2005 and the 7.2 percent participation in December 2004. Only 1.8 percent of the State's residential customers were participating in December 1999.

In August 2004, the NYPSC issued two policy statements that affirmed the commission's commitment to customer choice and outlined strategies to boost participation in competitive markets. These strategies include: opening all utility retail functions (except delivery) to competition, expanding consumer education programs, continuing the option for suppliers to have utilities handle billing, and encouraging aggregation programs and utility-specific programs that help customers switch to third-party suppliers. Companies were encouraged to replicate Orange and Rockland Utilities, Inc.'s (O&R) successful PowerSwitch program, and, in May 2005, the NYPSC approved a similar plan by Central Hudson Gas and Electric Company to provide guaranteed savings to customers who purchase natural gas from marketers. Among the program's features is the utility purchase of suppliers' accounts receivable without recourse, which simplifies suppliers' operations and eliminates their need to perform credit checks. In return suppliers in the program offer a guaranteed discount to participating customers for a 2-month period and agree to take all residential and small commercial customers referred by the utility. Customers are assigned randomly to participating suppliers.

In 2006, the NYPSC continued its efforts to accelerate the State’s transition to a competitive retail energy market and approved retail access plans, either in whole or in part, for Consolidated Edison Company of New York, Niagara Mohawk Power Corporation (National Grid), and National Fuel Gas Distribution Corporation (National Fuel). The NYPSC modified electronic data interchange standards to support guidelines for ESCO referral programs and the use of the purchased receivables payment processing method. The NYPSC also directed ESCOs to post real-time price information on the NYPSC Power to Choose web site, which was set up in November 2004. Beginning December 2006, by the 5th day of each month, ESCOs must post a snapshot of prices for residential services as of the 1st day of the month. Reported price offers also must include information on terms and conditions, such as the type of price offer (fixed, variable, capped), types of payment and billing options, cancellation fees, deposit requirements, and late payment charges. ESCOs who do not comply will be notified, and if still noncompliant would be prohibited from enrolling new customers and would be dropped from the utility's referral program. Actual offers to provide service must be obtained directly from the ESCOs.

The NYPSC also continued its efforts to expand consumer education programs during the year and held several energy fairs and consumer forums to give natural gas customers an opportunity to obtain information about marketers and compare energy services. In December 2006, 41 ESCOs, or marketers, were serving residential gas customers in the State, compared with 50 in December 2001. Marketers must be certified by the NYPSC and use standard contracts. Large commercial and industrial customers have been able to purchase and transport their own gas supplies since the mid-1980s. According to the NYPSC, nearly 100 percent of the State's largest gas customers are being supplied by marketers.

EIA State Data: In 2005, New York had 4,229,396 residential and 378,889 commercial customers. They consumed 388 and 378 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies and marketers by residential and commercial customers were $14.91 and $12.88 per thousand cubic feet, respectively.

Eligibility and Participation in Retail Choice Programs:

Eligibility and Participation by Customer Class, November 2006

Customer Type	2005 Customer Total	Eligible November 2006		Participating November 2006
Customer Type	2005 Customer Total	Total	Percent of Customers	Total	Percent of Eligible	Percent of 2005 Customer Total
Residential	4,229,396	4,237,813	100	383,613	9.1	9.1
Commercial*	378,889	382,505	100	73,740	19.3	19.5
Total	4,608,285	4,620,318	100	457,353	9.9	9.9
Commercial eligibility and participation data include small-volume commercial and industrial customers. Source: 2005 Customer Total: Energy Information Administration, Natural Gas Annual 2005* (November 2006). Eligibility and Participation: New York State Public Service Commission (February 2007).

Regulatory and Legislative Actions on Retail Unbundling

Summary: The New York State Public Service Commission (PSC) published its plan for comprehensive unbundling of natural gas services on November 3, 1998, and ordered that local distribution companies (LDCs) should exit the merchant function during a 3-to-7-year transition period. By April 1, 1999, all LDCs were to stop assigning upstream capacity to customers who had chosen to purchase gas from other sources. LDCs were directed to encourage competition and to cooperate with marketers so as to increase the number of customers choosing transportation service. LDCs were also directed to explore options to mitigate stranded costs. Issues such as metering and billing and last resort service that also relate to electric utilities were to be decided in connection with electric utility restructuring. Issues regarding system operation and reliability and market power would be addressed through collaborative meetings with LDCs, marketers, consumer groups, government agencies, and the PSC. As a result of this collaborative process, a preliminary report was issued in July 2001, which concluded that the transition to a competitive retail market will take much longer than expected. The report claimed that the only competitive market at that time was the commodity market for nonresidential gas customers. It recommended that utilities eventually be forced to exit the retail market but that the current market was not sufficiently competitive to support this change.

Legislation was enacted in June 2002 that provides customers who purchase natural gas or electric power from marketers the same protections they have as utility customers. Under the law, all the protections granted utility customers under the Home Energy Fair Practices Act also apply to transactions between marketers and residential customers. Customers with billing disputes may take their complaints to the Public Service Commission.

Regulatory actions since 2004 included directing the nine largest utilities in the State to develop plans to accelerate development of competition in natural gas and electric markets and to file detailed cost analyses in future rate cases that allocate costs between competitive and noncompetitive categories. The NYPSC also recommended transitional steps toward a fully competitive market in which utilities completely exit the retail market (see overview section above). In 2006, the NYPSC directed marketers to post real-time price information on the NYPSC Power to Choose web site. Beginning December 2006, by the 5th day of each month, ESCOs must post a snapshot of prices for residential services as of the 1st day of the month.

Regulatory and Legislative Actions

Legislation	06/02	Legislature Approves Energy Consumer Protection Act of 2002. Gives consumers who buy natural gas or electricity from marketers the same protections they have as utility customers. The law makes marketers subject to the same late-fee caps that apply to utilities and requires them to offer budget billing plans. No prepayments are allowed, and deposits can be collected only from consumers with a bad payment history. Marketers may shut off service to customers who do not pay their bills under the standards specified in the Home Energy Fair Practices Act. The law becomes effective in June 2003.
Regulatory Actions	12/06	PSC Approves Orange and Rockland Utilities, Inc. (O&R) Retail Access Plan, with Modifications. The plan outlines O&R’s current and proposed initiatives to educate customers about competitive energy markets and energy service companies (marketers) and foster migration of customers to retail access options. O&R was directed to expand its Market Expo invitation pool to all customer classes and continue to host Energy Fairs for residential and small business customers. It was also directed to provide detailed information about how the company will facilitate customer aggregation in its service territory and also how it will improve bill formats. A compliance filing is due within 45 days.
	11/06	ESCOs Directed to Post Prices Online Each Month. Beginning December 2006, by the 5th day of each month, ESCOs must post on the NYPSC Power to Choose web site a snapshot of prices for residential services as of the 1st day of the month. Reported price offers also must include information on terms and conditions, such as the type of price offer (fixed, variable, capped), types of payment and billing options, cancellation fees, deposit requirements, and late payment charges. ESCOs who do not comply will be notified, and if still noncompliant would be prohibited from enrolling new customers and would be dropped from the utility's referral program. Actual offers to provide service must be obtained directly from the ESCOs.
	11/06	PSC Approves 3-Year Rate Plan for St. Lawrence Gas Company, Inc. Plan funds a new billing system and promotes economic development and customer choice in gas suppliers. According to the PSC, the plan better aligns rates for each customer class to reflect the actual costs of providing service to the various customer classes. The company is required to survey ESCOs and other parties to determine if there is enough interest for an energy aggregation program.
	10/06	PSC Approves 3-Year Rate Plan for O&R. Plan includes provisions for the continuation of programs to ensure customer choice of gas suppliers. The company will be allowed to retain a percentage of potential excess earnings if it can ensure customers understand their supply options.
	09/06	PSC Staff Recommends Approval of Rochester Gas and Electric Corp. (RG&E) New Billing System. Proposed tariff establishes billing charges for each service class. Although RG&E has not filed a full rate unbundling proposal, it will use the current back-out credit as a proxy for a competitive service cost-based billing charge.
	08/06	PSC Issues Order Relating to Electric and Gas Metering Services. Endorses electric and gas utility investment in advanced metering infrastructure where feasible and encourages pilot programs to test a variety of proposals for development of advanced metering systems. Requires gas utilities to assess advantages of and need for advanced metering systems and submit plans, if necessary, for installation of new advanced metering technologies. Authorizes competitive meter-reading services for daily gas balancing for certain gas customers.
	07/06	PSC Approves Central Hudson Gas and Electric Corp. (Central Hudson) 3-Year Rate Plan. Continues customer choice initiatives and best practices, such as the ESCO referral program “Energy Switch,” the Market Match, Market Expo, and ESCO Ombudsman. Bills will be further itemized to allow better commodity price comparisons between Central Hudson and ESCOs.
	06/06	PSC Approves National Fuel Gas Distribution Corporation’s (National Fuel) ESCO Referral Program. Participating customers would receive a 2-month discount of 7 percent from National Fuel’s current month Gas Supply charge. The program will be open for continuous enrollment through July 31, 2007. Each ESCO will tell customers what the price for service after the introductory discount period will be and when it will change. A call center will obtain customer authorization, process enrollments, and provide ESCOs with customer information. Enrollment can be done electronically, in writing, or by recorded phone call. Participation will be limited to customers who are currently receiving commodity service from National Fuel.
	06/06	Consolidated Edison Company of New York, Inc. (ConEdison) Presents Plan to Support Customer Participation in Retail Energy Market. Voluntary participation in ConEdison's "Power Your Way" program will be encouraged through its ESCO Referral Program (“PowerMove”) for residential and small business customers and new educational efforts, such as a redesigned web site, brochures, bill inserts, and advertising. The PowerMove program offers a 2-month introductory discount of 7 percent for supply from an ESCO. Customers can receive one bill for both supply and delivery and can change suppliers at any time without penalties.
	05/06	Electronic Data Interchange Standards and Uniform Business Practice Guidelines Modified. Changes will support new retail access initiatives, such as guidelines for ESCO Referral Programs and the use of the Purchased Receivables payment processing method. They will enable utilities to enroll customers without an ESCO Request and ensure that ESCOs have enough information on purchased receivables to maintain adequate financial records.
	04/06	PSC Approves Niagara Mohawk Power Corp.’s (National Grid) Collaborative Plan for Promoting Competitive Retail Markets. Plan includes “New Choices” program in which residential and small business customers can receive a 7-percent discount on natural gas supply for 2 months if they choose an ESCO. Customers can select a specific ESCO or let National Grid choose one for them. National Grid will purchase the receivables of participating ESCOs. Participants are eligible to receive only one discount for the life of their account. Customers with both electricity and gas services can receive the 7-percent discount on each service.
	12/05	PSC Adopts ESCO Referral Program Guidelines. PSC issues order adopting ESCO referral program guidelines and approving an ESCO referral program subject to modifications.
	07/05	PSC Directs Central Hudson to End Its Fixed-Price Option. The company is to end the plan when the program expires on October 31, 2005, because the PSC determined that the company's firm sales customers were subsidizing those on a fixed-price plan. Marketers are encouraged to offer similar programs in Central Hudson's service area.
	07/05	PSC Approves 2-Year Rate Plan for National Fuel Gas Distribution. The plan includes several new retail access programs directed mainly to large-volume sales customers. One program allows customers to exchange information electronically and receive offers from marketers, while another commits to at least two market forums for non-residential business customers to receive offers from marketers and exchange information about retail choice.
	05/05	PSC Approves Central Hudson Gas & Electric's Retail Access Plan. Plan includes a customer choice program that gives introductory savings to customers who choose to buy from a marketer. The plan is modeled after Orange and Rockland Utilities' power switch program. Customers who enroll retain the option of returning to Central Hudson's sales service. The company is to expand its consumer outreach and education programs, through both written inserts and Web site information.
	08/04	Statement of Policy on Unbundling and Order Directing Tariff Filings. Presents guidelines for accurately quantifying a fair utility rate that marketers can compete against. Directed utilities to conduct comprehensive cost-of-service analyses that would allocate costs between competitive and noncompetitive services.
	08/04	Statement of Policy on Further Steps Toward Competition in Retail Energy Markets. Policy adopted encouraging customer choice and affirming that competitive markets are the preferred means of promoting efficient energy services. Outlines strategies to boost participation in competitive markets, including: opening all utility retail functions (except delivery) to competition, expanding consumer education programs, continuing option for suppliers to have utilities handle billing, and encouraging aggregation programs. Long-term supply contracts are discouraged and marketers should either take assignment of LDC-contracted capacity or contract directly with the pipeline. Utility has first right to purchase marketer capacity if marketer exits the market.
	01/04	Comments Requested on Specific Strategies to Facilitate Customer Choice. Companies asked what should be done now to increase customer choice and what would be the expected benefits and cost of recommended actions. Asked to consider ways to eliminate barriers to customer aggregation programs and the pros and cons of auctions, incentive mechanisms, long-term contracts, and minimum capacity commitments for marketers.
	03/03	Recommended Decision on Unbundling Track Embedded Cost Studies. Administrative law judge recommended that an embedded cost of service study approach should be used in cost analyses for energy service provider studies, which would be based on cost-causation principles, but sufficiently flexible to consider consumer interests.
	05/02	Proceeding on Competitive Gas Metering. Comments requested on pros and cons of allowing large customers to get metering and meter data services from competitive providers, as well as many other meter issues including whether residential and small commercial customers should be able to utilize competitive gas metering..
	03/02	Consumer Protection Measures Strengthened, Case 00-M-0504. PUC issued new requirements that apply to marketers offering prepayment plans or requiring deposits from customers. Rules were in response to a company bankruptcy that resulted in some customers being unable to get back their deposits.
	01/02	Provider of Last Resort Pilot Program. Orange and Rockland Utilities proposed a 6-month pilot POLR program for about 5,000 residential gas customers. Participants will be assigned to gas marketers on a rotating random basis so that each marketer has about the same number of customers. Program will evaluate customer and marketer reaction to the program and test whether "conveying a sense of urgency to customers re need to choose a supplier is an effective means of promoting retail access." Program targeted for 2002-2003 heating season but probably will not be ready until the 2003-2004 heating season .
	07/01	Study of the Future of Competitive Gas and Electricity Retail Markets, Case 00-M-0504. Preliminary report recommended that major changes be delayed until enough pipeline capacity is installed to ensure reliable and competitive retail markets. Report also recommended that rate-term agreements be no longer than 3 to 4 years so as not to fix prices after a competitive market develops. In addition, report recommends that the PSC require marketers to provide the same consumer protection measures required of utilities.
	04/01	Initial Approval of Data Exchange Standards and Uniform Billing Practices. The PSC adopted a set of uniform business and payment processing practices to be included in utility tariffs and procedures and approved a plan requiring LDCs and energy service companies to standardize certain data systems to ensure electronic data interchange throughout the State.
	04/01	Investigation into Business Practices of Energetix, Inc., a marketer supplying gas in the Rochester area. Concerns centered around a price increase in fixed price contracts and short time given for customers to evaluate changes. Concerns also raised about relationship with its affiliate RG&E. Agreement was subsequently reached in which Energetix rescinded price increase.
	04/01	Study of Generic Gas/Electric Unbundling Issues, Case 00-M-0504. Report issued on collaborative efforts, "Concepts, Issues, and Views of the Future." Next phase will be to examine policy issues statewide, including how to calculate unbundled costs, rate treatment for stranded costs, and cost functionalization.
	02/01	Decision Issued Approving Measures to Encourage Competition in RG&E Service Area. Measures include: (1) "retail back-out credit" of $45 per year to be paid to competitive supplier to reflect utility avoided costs when a customer chooses an alternative supplier, (2) gas delivery management options that allow competitors to use and pay for storage on RG&E's system, (3) and communication protocols to share system info with users and customers including emergency planning, system alerts, etc. Decision also reduces delivery service rates for customers from 7/00 through 6/02.
	12/00	Interim Restructuring Plan Approved for Key Span NY and LI (1/01-6/01). Plan includes: (1) One-time bill credit against the delivery charges paid by heating customers. (2) Incentive payment to marketers equivalent to 8% of monthly delivery charges incurred by marketer's firm service customers. (3) Pilot program to reduce frequency of meter tests. (4) Consumer education program re/ competition. (5) Survey to measure gas marketer satisfaction.
	11/00	Orange and Rockland Utilities, Inc. Restructured to Encourage Competition. Delivery and commodity charges are to be itemized separately in customer bills. O&R will provide a marketer $25 for each customer (up to 10,000) who switches to that marketer and also implement a "backout credit" to cover utility avoided costs. O&R will offer pilot program to help marketers manage gas delivery and also implement a program to notify marketers of available capacity.
	10/00	Order Restructuring Niagara Mohawk. Final order issued on measures approved by Commission in 7/00 to foster competition in Niagara Mohawk service area. The LDC will make more pipeline and storage capacity available to marketers/suppliers and offer balancing services and billing services. Bills are to delineate actual costs of services and the LDC is to initiate a consumer education program and provide grants to counties to develop aggregation programs for low-income customers. Delivery rates to customers will be frozen through 8/31/03.
	02/00	Single Billing Option Approved. Customers who choose an alternative gas supplier can receive a combined bill for service, to be issued by either the utility company or the supplier. The entity issuing the bill will be responsible for bill printing and mailing, receiving and processing payments, and remitting the amount owed to the biller.
	12/99	Order Concerning Reliability. Requires each LDC to submit a Gas Transportation Procedures Manual that describes the LDC's services, day-to-day and critical period operating procedures, and the rights and responsibilities of gas marketers and direct customers. The manuals are to include: (1) information regarding LDC and marketer contact personnel, (2) a requirement that all market participants have Internet access, (3) procedures for day-to-day and periodic communications including via Internet, conference calls, and regular meetings, (4) uniform daily nomination schedules reflecting the GISB standards, and (5) communications procedures during critical periods such as during OFOs or system alerts. The Order also established procedures to reexamine gas curtailment issues, established a default position on capacity requirements that requires marketers to have firm primary delivery point capacity for the 5 winter months, and established a process to explore long-range capacity dedication issues. Comments on these issues are due March 31, 2000.
	09/99	Uniform Business Practices. Order requiring utilities to file tariff amendments by October 1, 1999, to comply with all aspects of Uniform Business Practices, Case 98-M-1343.
	08/99	Order Concerning Issues Associated with Future of Natural Gas Industry and Role of LDCs, Case 97-G-1380. Continues requirement that marketers with firm service customers have "firm, non-recallable, primary delivery point capacity for November through March" or as an alternative provide firm, secondary capacity and pay "standby charges" to the LDC for backup service. LDCs are to establish their standby charges for the 1999-2000 heating season by October 1, 1999. Also by that date marketers are to indicate their interest in such service and then confirm that interest by October 15, 1999. An LDC who releases 7 months of capacity at maximum rates would be considered to have met the PSC's directive to minimize stranded costs.
	05/99	Order Concerning Stranded Capacity Costs (2/99) Adopted as Permanent Rule, Case 98-G-1785 et al.
	04/99	Order Clarifying Gas Policy Statement (11/98). Clarifies that LDC ratemaking and unbundling proposals in compliance with Gas Policy Statement are to be public information. Includes guidelines for the presentation of rate proposals, including data requirements.
	04/99	Order Modifying Uniform Business Practices, Case 98-M-1343. Supersedes 2/99 order, slightly modifying provisions for late payment charges, security posting, switching notification, information costs, and usage and load profile information. Practices are to be effective by June 1, 1999.
	03/99	Stranded Costs. Order Concerning Capacity Assignment, Case 97-G-1380 et al. LDCs are to establish mechanisms (to be called "transition surcharges") for recovery of stranded capacity costs. The unit rates for upstream capacity cost recovery should be applied on a volumetric basis using the gas cost adjustment clause and a surcharge on post-aggregation firm transportation customers. LDCs must continue to offer capacity to parties that desire it; the cost of that capacity will be based on the LDCs weighted average cost of capacity. Stranded capacity cost calculations shall include all capacity release credits associated with the nonassigned upstream capacity after April 1, 1999.
	02/99	Order Concerning Recovery of Stranded Capacity Costs: Emergency Measure, Case 98-G-1785 et al. Requires LDCs to review tariffs to ensure that transportation customers are not receiving system reliability benefits without paying for them. States that LDCs may recover "prudent" stranded capacity costs from all firm sales and post-aggregation firm transportation customers (after 3-28-96 order).
	02/99	Opinion and Order Concerning Uniform Business Practices, Case 98-M-1343. Establishes guidelines for standardized retail access business practices across the electric and natural gas utilities, such as standards for marketer creditworthiness, customer information, billing practices, switching, slamming prevention, and dispute resolution process. These practices are to become effective on May 1, 1999.
	11/98	Policy Statement on Issues Associated with Future of Natural Gas Industry and Role of LDCs, Cases 93-G-0932 and 97-G-1380. The PSC ordered that LDCs would stop selling gas and be completely out of the merchant business at the end of a 3-to-7-year transition period. By April 1, 1999, all LDCs would "cease assigning capacity to migrating customers." LDCs would remain the suppliers of last resort, at least in the short term. Negotiations on new rate terms and revenue requirements for LDCs during the transition period will be on a utility-specific basis. LDCs are to quantify the potential for stranded costs and devise mitigation plans and long-term rate plans that unbundle distribution and upstream costs. LDCs will continue to have access to sufficient supply and storage for system operation and can impose some restrictions on marketers in order to maintain system reliability. LDCs will also be responsible for customer educational programs.
	09/97	Order Clarifying April 1998 Excess Capacity Filing Requirement, Case 93-G-0932. PSC spelled out procedures expected of LDCs to prepare for competition. At the same time, a staff report was released for comment that recommended that all LDCs in the State stop selling gas and become solely gas distributors over a 5-year period.
	03/96	Order Concerning Compliance Filings, Case 93-G-0932. The PSC approved LDC aggregation programs and allowed LDCs to "assign upstream capacity to aggregation customers for 3 years." LDCs were to report on their efforts to reduce "excess" capacity and mitigate stranded costs in filings due on April 1, 1998.
	12/94	Regulatory Guidelines for Natural Gas Distributors, Order 94-26, Case 93-G-0932. Established regulatory guidelines for natural gas distributors that led to the implementation of small customer aggregation programs.