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WPCNR THE POWER NEWS. By John F. Bailey.  September 16, 2008: The Federal Energy Regulatory Commission refused Monday to reveal to WPCNR the number of brokers who  engaged in selling contracts to their profit advantage, costing millions of New York electric customers overcharges that were charged back to them.

The brokers sold contracts routing electricity around Lake Erie at a  $20 MGH discount, when the electricity would automatically route directly into the New York Power Grid, resulting in Uplifts and production charges charged back to New York electric customers.  

The FERC spokesperson also declined comment on the scope of the practice. She would not say how many times each broker executed such discounted routings, the full dollar impact of the reroutings, the possible profits, and the estimated total cost to consumers, citing a non-public investigation ongoing. 

The New York Independent System Operator which oversees the New York electric spot market refused to reveal the information, either, nor how it was discovered. The reason, according to their press spokesperson Ken Klapp,   “it is in the hands of FERC.”

Senator Charles Schumer of New York perhaps will learn more when he meets with FERC Chair Joseph Kelliher Wednesday. The Senator’s office has scheduled a news conference Wednesday to discuss the issue.

Lake Erie Maneuver was Executed in Reverse on New Jersey, Pa in 2003

An energy trader familiar with the practice told WPCNR Tuesday this “game” had been worked before by energy traders in 2003, and is nothing new.  Andrew Stevens of DC Energy in Vienna, Virginia, whose study of the Lake Erie connection activities from July 2007 to June 2008 is referenced in the FERC documents issued on the Lake Erie case,  told WPCNR the Lake Erie connection was executed in reverse around Lake Erie through New York back to the Pennsylvania, New Jersey market resulting in increased charges to Jersey and Pennsylvania users.

Stevens said that he had no personal knowledge of how the Federal Regulatory Commission first noticed the practice early this past spring, saying he suspects it was the FRC’s market monitors

The actual overcharges  to New York customers resulting from this practice of the January- July Lake Erie connection are not known and range from $100 to  $300 Million, according to published reports, but may be substantially more.

A National Problem?

Stevens said  he has no evidence of similar market manipulation by routing electricity on a cost-advantageous route, by traders elsewhere in the country. He said he suspects such routing practices  for cost advantage, may be worked by other energy brokers across the country, because of the competitiveness of the market and rules that allow such routing, and that in smaller demand areas, the abuse is not as easily detected.

Impact Underestimated?

New York Municipal Power Agency, an organization representing 36  small cities in New York State, generating their own power, in a letter to the NYISO in July, put actual numbers to the problem.

NYMPA’s General Manager, Robert Mullane, wrote  that in May 2008, the additional charges generated, in part, from this practice amounted to $97 Million for one month  for just 36 municipalities – nine times NYISO’s budgeted charges to the NYMPA members for that month. NYPMA. 

In the same letter, Mullane said the NYISO uplift charge (for conveying electricity in “congested periods” for 36 NYMPA members in May 2008 was $15.3 million which was charged to customers, consumers of NYMPA electricity.

Mullane states: “The increased costs have a pernicious affect on NYMPA members’ finances. The cost of Residual Adjustments and uplift alone have increased NYMPA members’ ratepayers costs nearly one-cent per kilowatt-hour. In other words, NYMPA members’ share of these two costs for May 2008 alone was over $1.3 Million.”

The Little Towns Get Hit Hard.

 If these kinds of charges were distributed across the state, the total additional charges to power companies and utilities may be many times more. But no one knows apparently. No one knows.

The New York State cities in the New York Munipal Power Agency are not household names, and include none of the New York’s big cities, or most populated areas where, WPCNR would assume the overcharges would run into the billions. But, no one knows yet. The cities in the New York Municipal Power Agency are:

Akron, Andover, Angelica, Arcade, Bath Electric 7 Gas System, Bergen, Boonville, Brocton, Castile, Churchville, Endicott, Fairport Municipal Commission, Frankfort, Green Island Power Authority, Greene, Groton, Hamilton, Holley, Ilion Board of Light Company, Little Valley, Massena Electric Department, Mohawk Municipal Commission, Pen Yam Municipal Utility Board, Philadelphia, Plattsburgh Lighting Department, Richmondville, Rouses Point, Salamanca Board of Public Untilities, Sherburne, Silver Springs, Spencerport, Springville, Skaneateles, Theresa, Wellsville, Westfield.

Senator Schumer Meets.

Perhaps the full scope of the January to July Lake Erie  routing costs to the New York  customer will become clear Wednesday when Senator Charles Schumer meets with Federal Energy Regulatory Commission  Chairman Joseph Kelliher. Schumer says he wants to assure a “thorough and public” investigation. Schumer’s office asked if the Senator would pursue of full-blown congressional hearing to discuss regulation of the energy markets, declined to comment.

Con Edison Lobbied NYISO to Stop The Lake Erie Maneuver.

Con Edison, WPCNR has learned from Andrew Stevens of  DC Energy in Vienna, Virginia,was instrumental in alerting  the New York Independent System Operator  to the ongoing routing of electricity around Lake Erie in the spring.  Con Edison, Stevens said applied pressure to get NYISO to prohibit as of July 22 what Senator Schumer has characterized as a“sham routing scheme” by “rogue energy traders.”

Stevens told WPCNR that his firm had drawn Con Edison’s attention to the routing practice and its impact on Con Edison charges.

Senator Schumer’s office has scheduled a News Conference Wednesday to discuss what Senator Schumer discovers after Wednesday’s meeting with Mr. Kelliher. The Senator’s press office. asked  by WPCNR if the Senator would seek a full-blown congressional investigation,  would say only the Senator was seeking “a thorough and public investigation by FERC.”

FERC Declines Clarification

WPCNR sent Barbara Connors, press officer for  electric in the Federal Energy Regulatory Commission, a series of  written questions based on FERC’s Acceptance of the NYISO steps to stop the practice as of July 22:

1.How many different Energy Brokers or energy sellers did this (sent electricity around Lake Erie, enjoying a discount for “relieving congestion”).  (total number of firms is asked here.)

2. Who are they — Could the FERC release a list in total of these “brokers”?  (if you will not, why not?)

3. How many times did each broker use the counter-clockwise route?

4. What were the total $$ amount of discounts brokers or whomever used the counter-clockwise route — during the 6 months and 3 weeks this was allowed?

5. What were the total profits enjoyed by those companies during the 6 months and 3 weeks this was going on?

6.What event or entity brought this practice to FERC’s attention — what were the circumstances?

7. Does FERC contemplate investigation of energy-manufacturer costs of raw materials — oil, coal, natural gas — to assure there were no markups?

8. What arm of FERC monitors costs of those raw materials to manufacture electric power — and how often do they do it?

9. What sanctions and penalties might be applied?

“This is a non-public investigation. I cannot tell you anything more than what was already stated  about it in  in the Order Accepting Tariff Sheets of August 21,” Ms. Connors said.

Connors said traders might be subject to fines of up to $1,000,000 a day, pending the investigation’s findings.

Connors said the investigation now underway has no timetable for completion. She would not comment on the scope of the investigation.

Perhaps, Senator Schumer will have better cooperation.

WPCNR THE POWER NEWS. By John F. Bailey. September 13, 2008 UPDATED 1:40 P.M. EDT With Easy-to-Read, Comprehensive Charting:  As exclusively reported by WPCNR News and White Plains Week the last six months, Con Edison bills for White Plains consumers escalated  67% since November, and 39% of that increase coming over the 2008 June July and August period.

Con Edison,  told WPCNR exclusively on Thursday,  Westchester  residential consumers could expect their kilowatt hour charge to decline 25%in September, and be reflected in lower bills in October.  During the same three month period the cost of crude oil has declined 45%, but a price lag, presumably might be expected.

The cost per kwh has risen 67%  in White Plains since last November (2007)from 15.5 cents a kwh to 25 cents.  Con Edison explains this as being directly related to a passing on of direct fuel costs charged them by their electric suppliers.  Source: Con Edison and WPCNR

In a perhaps not-unrelated development, New York Senator Charles Schumer is calling on the Federal Energy Regulatory Commission to investigate possible price fixing and escalation of supply costs by energy suppliers furnishing Con Edison and other power companies with power through the state power grid, contributing substantially, Schumer alleges, to the Con Edison rates, and the rates other power companies are being forced to charge consumers. (Con Edison, it should be clear, is not the object of Mr. Schumer’s investigation.)

Schumer announced Friday he would meet with FERC next Wednesday to begin his probe of this year’s all-time high electric prices, and NYISO and FERC roles in regulating the delivery of power through the NYISO grid.

Bob McGee, a media spokesman for Con Edison told WPCNR exclusively Thursday that Con Edison’s average bill for Westchester customers using 450 kilowatt hours (if you have a two story home you are closer to 1,000 kwhs)  would decline 25% in September from its average high of 30.42 cents per kilowatt hour in August to the more manageable 23 cents per kwh, a predicted relief of 25%.

“As you can see, there has been a significant drop in the electricity supply cost in the September bills as compared to the August bills,” McGee said.

For the White Plains resident, who paid 25 cents per kwh in August, your rate would decline to approximately 19 cents if you apply Mr. McGee’s prediction of 25% to the current White Plains August rate of 25 cents/kwh.  Mr. McGee explained the average Westchester resident’s kwh price of 30.42 cents a kilowatt hour was due to other communities in the county paying more taxes on their Con Edison bill than White Plains does.

Con Edison Rate Relief Lags Behind Crude Oil Drop.

The Con Edison rate relief is proceeding at a slower pace than the three month decline in the world spot price of Crude Oil – blamed by Con Edison for its 65% increase in kilowatt hour rates since November. The bill for the White Plains customer using about 1,000 kilowatt hours a month has exploded 65% from  8 cents per kilowatt hour last November to 25 cents per kilowatt hour today – a 200% increase.

In that time the price of crude oil went from $90 a barrel on December 31, 2007  to $102 a barrel as of Thursday’s close, an increase of 13%. Of course crude oil ballooned to $145 a barrel about mid-June, but has since plummeted back to the $101-$102 a barrel benchmark.

Since the high oil mark of $145 a barrel in June, crude oil has declined 29%.

Meanwhile Con Edison raised the cost per kwh to White Plains customers 65% since January 1. Con Edison’s “drop” in pass-along costs, has not kept pace a  predicted 25%  cut resulting in White Plains customers still dealing with a 45% composite Con Edison rate hike – though to be fair — there is a lag in the time it takes to for prices to catch up with each other and they never syncronize.

The Stealth Increase: 15.5 Cents to 18.3 in  08

WPCNR and White Plains Week first reported on the Con Edison ratcheting up of prices in March of this year noting that kilowatt hour Supply price had gone up in White Plains from 8.5 cents to 13 cents – (15.5 cents was the kwh rate in November of 2007). As of January 31, the White Plains residential customer was paying 18.3 cents a kwh.  In May it was up to 19 cents, July 21 cents, and in August the highest kwh hour price White Plains customers have ever paid per kwh – 25 cents. 

Westchester Averages from Con Edison

WPCNR was the only media to report this increase, and Con Edison did not draw customers’ attention to the increase in their bill enclosures, as they did with last week’s bill where customers  got the bad news of the 25 cent KWH rate in their September 5 bill.

The average County resident was paying more  than the White Plains resident in August — 30.42 cents per kwh, according to Con Edison figures released to WPCNR Thursday. White Plains customers paid less (25 cents), due to lower tax rates in White Plains.

The Pass Along Blues

In the spring, WPCNR talked with Con Edison. Their press office reported that they are allowed to pass on increases in supply costs without approval by the New York Public Service Commission.  WPCNR asked Westchester County Department of Communications if the consumer Affairs bureau monitored these pass-along increases. WPCNR was informed the Consumer affairs bureau did not.

The New York Independent Services Operator which monitors spot electricity sales from which Con Edison purchases its electricity, told WPCNR that they did not monitor the different power companies manufacturing the electricity they sold as to whether the raw cost of refined fuels – oil, gas and coal – was being accurately and fairly added to the wholesale prices of electricity without being “marked up”. NYISO told WPCNR this was the jurisdiction of the Federal Energy   

No FERC spokesperson could explain to WPCNR how FERC actually assures fair and equitable pricing of power in relation to fuel costs. Apparently, Mr. Schumer wants to find out

Mr. McGee when asked why Con Edison’s 25% projecting did not match the 45% drop in the oil price said that Con Edison increased the price of Electric supply directly related to their costs:

Con Ed Not Being Investigated

WPCNR wants to make it clear that Mr.Schumer is not investigating Con Edison, rather Mr. Schumer, according to his news release, is investigating circuitous, costly routing of electricity on the power grid that articificially, he charges, raises the price of electricity to power companies like Con Edison.