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Michael B. Mager, Esq. Partner, Couch White, LLP Counsel to Multiple Intervenors PowerPoint PPT Presentation


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Presentation to New York State Public Service Commission May 15, 2014 Technical Conference. Michael B. Mager, Esq. Partner, Couch White, LLP Counsel to Multiple Intervenors. Technical Conference Presentation. Topics

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Michael B. Mager, Esq. Partner, Couch White, LLP Counsel to Multiple Intervenors

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Michael b mager esq partner couch white llp counsel to multiple intervenors

Presentation to

New York State Public Service Commission

May 15, 2014 Technical Conference

Michael B. Mager, Esq.

Partner, Couch White, LLP

Counsel to Multiple Intervenors


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Topics

    • Impact of Winter Gas Supply and Electric and Gas Pricing on Multiple Intervenors Members

    • Selected Recommendations for Addressing High Energy Prices


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Gas Supply Issues Had a Tremendous Impact on Multiple Intervenors Members

    • Customers with Interruptible Transportation Experienced Frequent, Prolonged Interruptions

    • Led to Unusually-High Reliance on Alternate Fuels

    • In Some Instances, Facilities Were Required to Shut-Down Operations

    • Customers with Firm Transportation Also Experienced Interruptions Due to Local System Constraints

    • Gas Prices in the Spot Market Were Astronomical


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Gas Issues Resulted in Historically-High Electricity Prices During the First Three Months of 2014

    • Many Customers Experienced Unprecedented Costs That Obliterated Annual Energy Budgets

      • One Energy-Intensive Member Reported That Electricity Costs in January, 2014 Were Responsible for the Company’s New York Division Losing Money in the First Quarter of 2014

    • Even Largely-Hedged Customers Experienced Abnormal Cost Increases That Impacted Budgets


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Representative Impacts on Multiple Intervenors Members

    • Annual Energy Budgets Were Exceeded in the First Quarter of the Year

      • Companies That Were 80-85% Hedged Still Experienced Enormous Budget Cost Overruns

    • Capital Projects Were Postponed or Canceled

    • In Some Cases, Internal Investments Targeted for New York Were Shifted to Other Regions


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Multiple Intervenors’ Recommendations

    • There is a Pressing Need to:

      • Increase Interstate Gas Pipeline Capacity in New York

      • Improve Customer Participation In – and the Effectiveness of – Demand Response Programs

      • Significantly Reduce Surcharges to Large, High-Load Factor Customers


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Increasing Interstate Gas Pipeline Capacity

    • Gas Appears to be the Most Economic Fuel for Energy for the Foreseeable Future

    • Increasing Reliance on Gas for Electric Generation

      • Base Load Generation Developed Recently Has Been Gas-Fired

      • Future Base Load Generation is Likely to Be Gas-Fired

      • Increased Deployment of Distributed Resources Likely Will Include a Significant Portion of Gas-Fired Generation

    • Gas-Fired Generators Set the Marginal Price for Energy Most Hours of the Year


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Increasing Interstate Gas Pipeline Capacity

    • Gas Problems This Past Winter Were Related Primarily (If Not Exclusively) to Shortages in Capacity, Not Supply

    • The State (and the Northeast) Lacks Sufficient Interstate Gas Pipeline Capacity

    • Commission Efforts to Expand the State’s Gas Distribution System May Exacerbate Problems Unless the Gas Transmission System is Expanded Contemporaneously

    • Absent Affirmative Action by the State, New Capacity May Be Built Through New York but for Benefit of Other States


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Increasing Interstate Gas Pipeline Capacity

    • Interstate Pipelines Will Not Expand in New York Absent Long-Term Contractual Commitments

      • Customers Generally Are Not in Position to Make Such Commitments

      • Marketers Generally Are Not in Position to Make Such Commitments

      • Generators Generally Are Not in Position to Make Such Commitments

        • Mandating That Generators Procure Firm Transportation Capacity Likely Would Increase Electricity Prices Significantly and Result in Inefficient Use of the Gas System


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Increasing Interstate Gas Pipeline Capacity

    • Recommendations for Further Consideration

      • Require Gas Utilities to Contract for Capacity and Then Release Excess

      • Potential to Develop Economic Development Programs to Leverage Capacity to Spur Investment and Retention in New York

      • The State (e.g., NYSERDA, New York Green Bank) Could Contract for Capacity and Then Release Excess

      • Efforts Could Be Undertaken to Increase Gas Storage Capacity in the State; Shares of New Storage Assets Could Be Leased to Marketers and/or Customers

      • Facilitate Efforts by Third Parties (e.g., Shale Gas Developers) to Expedite Construction of In-State Pipeline Capacity and Provide for Releases of Capacity for Use in New York


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • The Need to Improve Demand Response Programs

    • The Level of Surplus Capacity in the State Has Declined Considerably in Recent Years

      • During 2010-2013 Period, More Than 3,700 MW of Generation Capacity Located in New York Exited the Market

      • The Need for Successful Demand Response Programs Has Grown; the NYISO Depends on Such Programs to a Much-Larger Extent

    • Demand Response Programs Provide End-Use Customers with the Means to Influence Energy and Capacity Prices

      • Successful Programs Would Reduce Demand During High-Peak Periods, Resulting in Lower Prices and Improved Reliability


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

Sources: NYISO Special Case Resources Monthly Reports and NYISO Spot Market Auction Results, as posted on the NYISO Website.

Change in Price = +1,900%

Change in SCR Enrollment = -50%


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

Sources: NYISO Special Case Resources Monthly Reports and NYISO Spot Market Auction Results, as posted on the NYISO Website.

Change in Price = +93%

Change in SCR Enrollment = -17%

Change in Price = +2,359%

Change in SCR Enrollment = -42%


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • The Future of Demand Response Programs

    • The Reasons for Decline in Enrollment are Numerous and Beyond the Scope of this Technical Conference

      • Multiple Intervenors Participates Actively in the NYISO’s Stakeholder Process on Demand Response Issues

    • Promoting Demand Response Programs at the Retail Level Could Offset Some or All of the Failings of Current Wholesale Level Programs and Lead to Increased Customer Participation

    • Multiple Intervenors Looks Forward to Addressing Demand Response Issues as Part of the REV Proceeding


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • The Need to Reduce Customer Surcharges

    • The SBC, EEPS and RPS Surcharges Have Grown Tremendously Over Time

    • For Large, High-Load Factor Customers, Those Surcharges Exceed the Cost of “Traditional” Delivery Service (Customer Charge + Demand Charge)

      • Huge Impacts for Large Non-Residential Customers

      • Costs Exceed Economic Benefits, Making New York Operations Less Competitive with External and Internal Competitors


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • The Need to Reduce Customer Surcharges

    • Example #1 – Niagara Mohawk S.C. 3-A Transmission Customer with 20 MW Demand and 85% Load Factor

      • Annual Cost of “Traditional” Delivery Service: $709,200

      • Annual Cost of SBC, EEPS and RPS Surcharges: $1,178,106.12

    • Example #2 – Central Hudson S.C. 13 Transmission Customer with 40 MW Demand and 90% Load Factor

      • Annual Cost of “Traditional” Delivery Service: $1,768,920

      • Annual Cost of SBC, EEPS and RPS Surcharges: $2,431,425.60

    • Additional Examples Available Upon Request

    • The New Clean Energy Fund Proceeding May Lead to Steps in the Right Direction, But Relief is Needed Now


Michael b mager esq partner couch white llp counsel to multiple intervenors

Technical Conference Presentation

  • Multiple Intervenors’ Concerns Regarding Surcharges

    • Magnitude of Surcharges to Large, High-Load Factor Customers are Exorbitant and Reduce Competitiveness

    • Large Non-Residential Customers Appear to be Subsidizing EEPS Programs Targeted Primarily at Small Non-Residential Customers

    • Customer Funds Targeted at, Among Other Things, Reducing Demand, Increasing Renewable Generation Capacity, and Market Transformation Initiatives Should Not Be Recovered on a Per kWh Basis

      • Methodology Has Disparate and Inequitable Impacts on Large, High-Load-Factor Customers (Who Typically are the Most Efficient Energy Consumers)

    • Many Other States Have Enacted Limitations on Percentage Impacts of Surcharges and/or Amounts That Can be Recovered From Individual Customers, and Offer Customer Opt-Out or Self-Directed Programs

    • A Sizeable Surplus Exists That Would Allow For Meaningful Rate Relief


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