You Don’t Always Have to Feel Like you are Being Bullied by your Local Electric or Gas Utility
13 May, 2019
Have you ever felt like you were being bullied? I am sure many of you have felt this way over the years, especially if you were like me and you were the smallest boy in your high school freshman class. In 2019, bullies can take a lot of different forms, especially with social media being so prevalent these days. I think we have all read stories about bullying on social media. If you have ever had a “bully” in your life, did you have the courage to take him or her on and to stand up for what you believed was right? Victims of bullies are often portrayed in the movies…..and why is it that we always end up rooting for and cheering for the underdog? If you like rooting for the underdog, then this blog post is perfect for you.
In a lot of ways, this is a victim/bully story which seems a lot like a soap opera as there is intentional deceitfulness, blatant discrimination, drama, a lawsuit and even an unintentional endorsement of our energy consulting firm by the bully. In the end, the one we are all cheering for – the victim – yes, the victim “wins”. It is a “feel-good” story for sure but it is meant to illustrate that you don’t always have to feel “bullied” by your Utility as you sometimes do have options or choices when working with these local monopolies.
Have you ever felt like you are being bullied by your local electric or gas Utility? If you feel this way, you are not alone. Many businesses in America continue to grow and transform themselves, but, with significant growth and transformation comes the need to change operations and infrastructure to support such change. Furthermore, many businesses, particularly manufacturing businesses, are facing all kinds of competitive pressures domestically and globally and need to constantly figure out ways to extract costs out of their manufacturing processes. For many manufacturing businesses, energy is a significant portion of their COGS (“Cost of Goods Sold”) and they need to continually and proactively manage this cost in order to remain competitive. There are over 20 states in America where you can “choose” your electric supplier so you have plenty of choices, options, products and suppliers when managing your generation charges in deregulated states.
However, when looking at the non-generation related components of your electric bill, many businesses feel they have limited choices or options when it comes to these “regulated” electrical costs, often referred to as distribution costs. If you are served by a Public Utility and not by a municipality or co-op, these costs are regulated at the State level by the Public Utility Commissions in each State where the Utility serving your facility is located. When reflecting on what I have read and heard in over 20 years of being in the energy/Utility industry, there is a general feeling that the utilities hold significant influence over the Commissions and the decisions which are made in each of these States. For example, Nevada voters recently voted against electric deregulation legislation (it required voter approval) in November 2018 and it was the local Nevada public Utility which funded a large portion of the effort to get voters to vote against it. NV Energy reportedly spent $63 million to defeat this November 2018 ballot issue. In April of 2016, The Federal Energy Regulatory Commission (FERC) blocked Purchase Power Agreements, approved by the PUCO the prior month, which were meant to subsidize aging coal and nuclear plants owned by FirstEnergy and AEP Ohio. The PPAs in question guaranteed income for seven coal plants and one nuclear plant owned by AEP and FirstEnergy that were uncompetitive in interstate electricity markets. While the companies argued the plants are needed to ensure reliability and hedge against potential price increases in fuel for natural gas plants, critics labeled the eight-year PPAs as bailouts for aging, inefficient generation. The purchase power agreements were widely unpopular in Ohio and it took FERC intervention to overrule the PUCO who had already approved these bailouts. Similar to what just happened in Nevada and Ohio, it is the general feeling in most if not all States that the local Public Utilities hold significant if not unfair influence over matters such as regulated rate issues. Most Utility rate cases throughout the country pass through each State’s Public Utility Commission based approval process with limited resistance.
This is a story of a metals company, who I will fictitiously refer to a “STELCO”, which decided to fight their local Utility over a rate change/service voltage issue and won. Yes, they Won!!!! Because STELCO processes metals, including scrap metals, for sales to foundries and steel mills, energy is a significant portion of STELCO’s COGS. Furthermore, STELCO competes in an industry with thin margins so remaining competitive is very important to this family business, which is now being managed by third generation family members.
In this blog post, I will overview the approximate two-year saga around a proposed STELCO “meter consolidation/sub-transmission access” project, identified by one of our energy efficiency partners, which would save STELCO over $200,000 annually in “regulated” electric distribution expenses. Unfortunately, the local electric Utility would not allow the requested “meter consolidation/sub-transmission access” project to be implemented. We did our homework here at Statistical Energy LLC and advised STELCO that the Utility’s tariffs supported giving them access to the higher voltage sub-transmission voltage (36-kV) service which ran right by STELCO’s plant. As you might imagine, STELCO, after their meter consolidation/sub-transmission access request was turned down by the Utility on multiple occasions, was definitely feeling bullied by this Utility as STELCO did not feel the Utility was following their own rules as outlined in their own rate tariffs. After talking with our team here at Statistical Energy LLC, STELCO’s hunch that the Utility was not following their own rules ended up being correct as “blatant discrimination” became a key part of this story and the resulting formal legal complaint which was brought before the State’s Utility Commission. Once I overview this project, I will then talk about how Statistical Energy LLC was brought in by STELCO to assist with developing a game plan to help make this important “meter consolidation/sub-transmission access” project happen. It is a great story about how STELCO felt like they were getting bullied by the local Public Utility and how we helped them develop the courage to take on the bully and win.
One of Statistical Energy LLC’s partners, who assists a few of our clients with identifying and implementing energy demand side solutions and projects, was hired by STELCO to identify energy conservation projects. STELCO is an older steel processing facility which is spread out over two connected yet separate facilities. Although you could argue it is one large facility which grew and expended over the years, STELCO has two electric meters which are both served at 480 volts on a regulated rate called “General Service Secondary” or “Rate GS”. Between their 2 meters, STELCO uses between 5 million and 10 million kWh in usage annually. One of our partner’s recommendations was that STELCO build and pay for a new transformer/substation and that the two meters/accounts be combined and served by the 36-kV service (Sub-transmission voltage) which ran right by STELCO’s facility. Since the sub-transmission service was right next to the STELCO facilities, the electric Utility did NOT need to build a new service line extension to allow STELCO to access the 36-kV service. In STELCO’s mind, it seemed like a no-brainer for the Utility to say “YES” to as STELCO would pay for the new transformer/substation and, as an added bonus, no-line extension was required by the Utility in order to provide STELCO access to the sub-transmission line. In other words, since STELCO was paying for the transformer/substation, there were no capital dollars required to be invested by the Utility to make this important project happen.
The Utility was willing to approve the meter consolidation project BUT they were only willing to allow STELCO to be served at the same basic tariff rate (General Service). Since STELCO would be building a new transformer/substation after the two meters were combined, the Utility was going to allow an increase in the service voltage from 480 volts to 13.2 kilo-volts, meaning STELCO would be served by General Service Primary (GSP is @ 13.2 kV) instead of General Service Secondary (GSS is @ 480 volts). While there would be some minor advantages in allowing STELCO to go from GS-S to GS-P including a minor voltage discount, STELCO wanted access to the Utility’s sub-transmission lines and the associated sub-transmission rate. Why does all of this matter so much you might ask? Well, the more the Utility has to step-down your power, the more they will charge you for the power when it is delivered to your facility. In other words, delivery charges for power are much less when the power is delivered at sub-transmission voltages (Rate GSU) than when it is when delivered at 13.2 kilo-volts. “Stepping down” the power after it is generated requires transformers and infrastructure and utilities will charge clients for this stepping down service. When compared against transmission or sub-transmission service, distribution service is also much more expensive because there are so many more customers served at distribution voltage, meaning a lot more infrastructure is required to serve all of these additional customers or ratepayers. Because STELCO was going to invest hundreds of thousands of dollars into their new transformer/substation, STELCO wanted access to the 36-kV line and the associated savings with this service level to generate a better return on their investment for their meter combination project. The difference in costs between the 13.2 kV (Rate GSP) and the 36-kV (Rate GSU) tariff rates was over $200,000 annually, cutting STELCO’s electric distribution costs by over 50% (fifty percent). Over a 5-year period that is over $1 million in Utility (distribution) savings for STELCO so that is why having access to the Utility’s sub-transmission service is SO important to STELCO.
Additionally, STELCO was also having power quality issues and there were also frequent power outages on the current 13.2 kV distribution line at this Utility. The 480-volt service, STELCO’s current service voltage after the utility steps down their power from 13.2 kV to 480 volts, is served by the same 13.2 kV distribution line. Currently, there is a Utility owned transformer which steps down the power from 13.2 kV to 480 volts. By switching over to the sub-transmission service, STELCO, after installing capacitors as part of their proposed 36-kV transformer/substation, would improve the quality of their power and there would also be significantly fewer power outages on the 36-kV line. Reducing power outages (both momentary outages and longer outages) would significantly reduce both STELCO’s manufacturing downtime and the corresponding loss of product which usually occurs during such outages. Although the numbers have been changed to protect STELCO’s data, the following illustrates the type of analysis we provided STELCO when evaluating their regulated rate options:
| Rate GS | Total Current Situation | Company ABC | |||||||
| kWh | KVAR | kW | KVA | PF | LF = KWH/ KVA/ 730 |
Total Charges Distribution | ¢/kWh | ||
| 1 | Jun-15 | 1,455,716 | 2,340.0 | 4,371.8 | 5,030.0 | 86.9% | 39.64% | $70,107.22 | 4.82 |
| 2 | May-15 | 1,388,658 | 2,151.4 | 4,286.8 | 4,852.1 | 88.3% | 39.20% | $68,331.75 | 4.92 |
| 3 | Apr-15 | 1,186,546 | 2,039.0 | 4,228.0 | 4,738.8 | 89.2% | 34.30% | $65,905.14 | 5.55 |
| 4 | Mar-15 | 1,455,716 | 2,340.0 | 4,371.8 | 5,030.0 | 89.0% | 37.69% | $70,107.22 | 5.13 |
| 5 | Feb-15 | 1,388,658 | 2,151.4 | 4,286.8 | 4,852.1 | 89.0% | 38.96% | $68,331.75 | 4.98 |
| 6 | Jan-15 | 1,186,546 | 2,039.0 | 4,228.0 | 4,738.8 | 89.1% | 38.93% | $65,905.14 | 4.94 |
| 7 | Dec-14 | 1,455,716 | 2,340.0 | 4,371.8 | 5,030.0 | 88.6% | 37.97% | $70,107.22 | 5.07 |
| 8 | Nov-14 | 1,388,658 | 2,151.4 | 4,286.8 | 4,852.1 | 87.6% | 39.07% | $68,331.75 | 4.88 |
| 9 | Oct-14 | 1,186,546 | 2,039.0 | 4,228.0 | 4,738.8 | 87.7% | 38.49% | $65,905.14 | 4.98 |
| 10 | Sep-14 | 1,455,716 | 2,340.0 | 4,371.8 | 5,030.0 | 87.8% | 43.69% | $70,107.22 | 4.49 |
| 11 | Aug-14 | 1,388,658 | 2,151.4 | 4,286.8 | 4,852.1 | 86.4% | 45.53% | $68,331.75 | 4.28 |
| 12 | Jul-14 | 1,186,546 | 2,039.0 | 4,228.0 | 4,738.8 | 87.4% | 41.56% | $65,905.14 | 4.66 |
| 16,123,680 | $817,376.44 | 4.87 |
| Rate GSU | Total Proposed | Company ABC | ||||||||
| Diversity | 90% | |||||||||
| kWh | KVAR | kW | KVA | PF | Lf | Total Charges Distribution | ¢/kWh | Total Charges Distribution Savings | ||
| 1 | Jun-15 | 1,455,716 | 2,340.0 | 3,934.6 | 4,371.8 | 97.5% | 45.61% | $34,588.72 | 2.38 | $35,518.50 |
| 2 | May-15 | 1,388,658 | 2,151.4 | 3,858.1 | 4,286.8 | 97.5% | 44.38% | $33,514.04 | 2.41 | $34,817.71 |
| 3 | Apr-15 | 1,186,546 | 2,039.0 | 3,805.2 | 4,228.0 | 97.5% | 38.44% | $31,121.46 | 2.62 | $34,783.68 |
| 4 | Mar-15 | 1,455,716 | 2,340.0 | 3,934.6 | 4,371.8 | 97.5% | 42.33% | $34,786.22 | 2.48 | $35,321.00 |
| 5 | Feb-15 | 1,388,658 | 2,151.4 | 3,858.1 | 4,286.8 | 97.5% | 43.78% | $32,477.68 | 2.43 | $35,854.07 |
| 6 | Jan-15 | 1,186,546 | 2,039.0 | 3,805.2 | 4,228.0 | 97.5% | 43.71% | $32,620.20 | 2.43 | $33,284.94 |
| 7 | Dec-14 | 1,455,716 | 2,340.0 | 3,934.6 | 4,371.8 | 97.5% | 42.85% | $32,812.52 | 2.46 | $37,294.70 |
| 8 | Nov-14 | 1,388,658 | 2,151.4 | 3,858.1 | 4,286.8 | 97.5% | 44.59% | $35,088.08 | 2.41 | $33,243.67 |
| 9 | Oct-14 | 1,186,546 | 2,039.0 | 3,805.2 | 4,228.0 | 97.5% | 43.89% | $34,991.00 | 2.43 | $30,914.14 |
| 10 | Sep-14 | 1,455,716 | 2,340.0 | 3,934.6 | 4,371.8 | 97.5% | 49.75% | $34,862.88 | 2.27 | $35,244.34 |
| 11 | Aug-14 | 1,388,658 | 2,151.4 | 3,858.1 | 4,286.8 | 97.5% | 52.69% | $37,303.82 | 2.19 | $31,027.93 |
| 12 | Jul-14 | 1,186,546 | 2,039.0 | 3,805.2 | 4,228.0 | 97.5% | 47.57% | $36,074.08 | 2.32 | $29,831.06 |
| 16,123,680 | $410,240.70 | 2.39 | $407,135.74
|
In the preceding hypothetical situation, “Company ABC” would achieve savings of over 50% in regulated electric utility distribution charges by moving from Rate GS to Rate GSU. Although I am not disclosing STELCO’s actual results, STELCO would also save over 50% by moving to Rate GSU. In addition to the savings forecasted by changing rate tariffs, there would also be additional operational savings for STELCO resulting from “improved power quality / fewer power outages” which were forecasted by having access to the more reliable 36-kV service. That is a lot of money (six figure savings) and this large dollar impact is why this project was so important to STELCO and it is also why the Utility fought the change as much as they did.
With the help and assistance of our energy efficiency partner, the following lists summarizes what Statistical Energy LLC recommended to STELCO:
1. Combine meters to take advantage of sub-transmission level service rather than through separate secondary service of both meters
2. Achieve savings of over $200,000 annually by combining service under rate GSU, sub-transmission level service
3. Install capacitors to increase power-factor to 97.5%, driving additional savings
4. Savings on energy purchasing costs via deregulated supply agreement – demand (kW) will be lower after STELCO’s 2 meters are combined. There is a lot of electrical engineering behind this 4th point but basically one plus one does not equal two but something less than two when combining electric meters. It has to do with the non-coincidence of electric demand and properly explaining what this means is beyond the scope of this blog post.
Statistical Energy LLC works with a lot of clients behind this Utility and it is interesting to note that we have a number of clients who are on the GSU rate and their loads are less than one-megawatt, meaning they are significantly smaller than STELCO. Why is it that STELCO, who would be over 2.5 megawatts of load when they combine their two meters/accounts, is being denied access to sub-transmission service when many other loads, who were much smaller, were currently being served by GSU? As we will find out, this “discrimination” or “fairness” question, which kept popping in my head, would become a central issue in how STELCO’s situation would ultimately be resolved.
I did some research by calling my contacts at this Utility and here below were the reasons given by the Utility for denying the request for to allow STELCO access to the 36-kV sub-transmission service line:
• Electric Service Regulations – “Delivery voltage will be specified by the company and will be based upon the availability of lines in the vicinity of the customer’s premises and the size of the customer’s load
• Rate GSU – Choice of voltage shall be the option of the company (Utility)
The preceding comments are Utility “boiler plate” responses when the Utility wants to protect themselves; however, this response, which I have documented in an email from the Utility, did not come with any data or supporting documentation to substantiate the preceding statements. In regards to the first bullet-point above where it indicates “availability of lines in the vicinity of the customer’s premises”, there was nothing in the Utility’s response about the location of the sub-transmission lines in relation to STELCO’s facility. I believe they were being purposefully vague here in their response because they knew the 36-kV line runs right past STELCO’s facility. Furthermore, in regards to their “size of the customer’s load” as well as the “choice of voltage shall be the option of the Utility” comments above, the Utility did not provide any data analysis of the combined load after the two meters were combined nor did they compare that load to other customers served at the 36-kV level. Again, they were being purposefully vague here because STELCO’s combined load, after the meter consolidation project, would be in excess of 2,500 kW and they also knew their own tariff(s) suggested that loads in excess of 2,500 kW qualify for being served at transmission level service voltage. The utility failed to recognize this “loads in excess of 2,500 kW are generally served at transmission level service voltage” in any of their formal responses to STELCO or me. In other words, when you look at the 2 preceding statements given by the Utility, they make some sense as stand-alone statements but when you dig-in and analyze them, they make little if any sense at all. Because I did not feel like I was getting a well thought out data driven answer from the Utility, I continued to press on with my research to advocate for my client. It is worth noting that an energy broker provides clients with a variety of services but one of our primary missions is to advocate for our clients with both Utilities and suppliers.
I spoke to several attorneys, with significant experience working with Public Utilities and Public Utility Commissions, about STELCO’s situation and they all told me that there was a discrimination issue here based on the other smaller client (i.e., not STELCO) loads being served by the same Utility sub-transmission service. In fact, I know for certain this Public Utility was encouraged to settle this STELCO issue many times by several different and reputable lawyers but they chose not to. I also wondered why this Public Utility, which continues to have significant rate cases go up before the Utility Commission in the State where STELCO is located, would keep fighting this smaller dollar “STELCO” issue (as compared to the volume of dollars associated with a rate case) given they had a more important rate case which they are trying to get the regulators to approve. In other words, why have a formal service voltage complaint filed with the Public Utility Commission where, if the Public Utility loses the case, The Public Utility’s regulated monopoly status sticks out like a sore thumb. I thought to myself that losing this case could negatively impact regulators’ and legislators’ impression of the Public Utility in an important rate case year so why take the risk? Since taking a case before the commission can be expensive (i.e., legal fees), I guess the Public Utility thought STELCO was bluffing and did not think that STELCO would follow through with filing a formal complaint. Or, perhaps the Public Utility did not properly do their homework and had a misguided perception of their ability to win the case. Furthermore, as pointed out to me by professionals from the Utility, I knew that the Utility tariff stated that loads in excess of 2.5 megawatts are generally served at Transmission Line Service. STELCO, after they combine their 2 separately metered accounts into one combined service meter, appears to now qualify for transmission service as specified in Utility’s tariff(s). Please note I said STELCO qualifies for transmission service, which is higher voltage level than sub-transmission service. In an effort to be very clear here, the tariff states STELCO qualifies for transmission service – it does not state sub-transmission service which is the line which runs by STELCO’s facility and the line which STELCO was requesting access to. If STELCO wanted to be difficult, I guess they could have requested access to transmission level service and that type of service voltage request would have required a line extension and either the Utility or STELCO would have had to pay for this extension. STELCO wanted to be reasonable and that is why they requested access to the sub-transmission 36-kV service.
I went back to the Utility one more time and spoke to the head of their Rate Department and presented this “discrimination” argument to them one last time and was told again they would not allow STELCO access to the 36-kV line. I knew one of the former Chairman of the State’s Utility Commission was now working at a well-regarded law firm in the State’s capital city and this type of case would be right up his alley. I called him and reviewed the STELCO situation and my concerns. With STELCO’s approval, I also sent the attorney the information on STELCO’s situation. He reviewed the documents I sent him and agreed there was a potential discrimination issue here. I then scheduled a time for him to present to STELCO and his team overviewed a 3 step-process for STELCO to follow as follows:
1. Contact Utility: This Former State Commission chairperson, along with the support of his new law firm, would call the Utility directly and talk with them about STELCO’s situation and encourage them to settle with STELCO.
2. Contact The State Public Utility Commission: If step 1 did not work, then step 2 would be having this former Commission chairperson, along with the support of his new law firm, calling the appropriate representatives at The State Utility Commission and ask them to call and put pressure on the Utility to settle with STELCO. My contact used to be in charge of this State’s Utility Commission so he knew who to call and how to get things done there at this Public Utility Commission.
3. File Formal Complaint: If steps 1 and 2 listed above do not work, then step 3 is to file a formal complaint or lawsuit against the Utility with the State’s Public Utility Commission.
The first two steps above are not overly time consuming and do not take a lot of legal dollars to follow-through on. If the first two steps are unsuccessful and the process advances to the step three, then a business decision would need to be made by STELCO on if they should proceed with Step 3 and formalizing a complaint with the Public Utility Commission or not. Obviously, legal proceedings, including formal public Utility commission complaints, are not cheap and almost anyone who has been through them before will tell you that the guilty party usually loses but not always so there is always a risk of failure when proceeding with such a case.
STELCO ended up engaging the attorney and the law firm recommended by Statistical Energy LLC. After hiring the law firm where the former Utility Commission Chairperson now worked, STELCO proceeded through the first two steps and did not have any success in convincing the Utility to change its mind or making it willing to try and settle with STELCO. STELCO and their legal counsel were still convinced that there was a discrimination issue here and they also knew the Utility’s tariff indicated that STELCO qualified for sub-transmission service. This was because STELCO’s combined load would be in excess of 2500 kW after their meter consolidation project was completed. Plus, key Utility rate department employees had stated to me that there were no reasons documented in the Utility’s GSU tariff which would prevent STELCO from being granted access to sub-transmission service. Based on this feedback and other feedback obtained from various stakeholders in the first 2 steps outlined above, STELCO, after reviewing a legal budget provided by the law firm recommended by Statistical Energy LLC, ended up moving forward with step 3 by filing a formal complaint with the Utility Commission (August of 2017) and eventually won the case in October of 2018. Yes, STELCO defeated the Utility bully! The Utility was ordered to take all necessary steps to migrate STELCO to sub-transmission service as soon as practical.
In the final case summary document (which is a public document – so what I am discussing here today in the balance of this blog post is public information although I will keep the names hidden to protect my client’s identity), the Commission called the Utility’s decision to deny STELCO’s request to migrate to sub-transmission service unjust, unreasonable and unduly prejudicial. Wow those are some harsh words. The case summary goes on to explain that the Utility “unduly discriminated” against STELCO by denying their request to take service under another rate. The case further states that the Utility has wrongfully refused to supply STELCO with sub-transmission service in accordance with the Utility tariff and despite having sufficient capacity to do so. Remember, I indicated earlier that the Utility was not providing STELCO with a well thought out data driven response for its denial of the request but they were instead providing vague boiler plate answers. If there was a capacity issue on the transmission line, the Utility would have clearly stated so early on but they did not. However, there was not a capacity issue, as documented in the case summary, and the Utility knew it so that is why they deferred to the vague, boiler plate answers.
In the litigation portion of the case, STELCO alleged that the loss of revenue was the primary reason the change in tariff request was being denied by the Utility. This “loss of revenue” is well over $200,000 although the actual dollar amounts were removed from case summary at STELCO’s request. The Utility denied such “revenue reduction” reasons for their decision but instead tried to argue that limiting the Utility’s transmission system to only those customers who require service helps ensure that this system can continue to reliably serve its “critical backbone function” for all Utility customers. It is particularly interesting that emails from the Utility’s representatives were presented by STELCO attorneys which suggest that the Utility was not being truthful about being revenue neutral on this issue – I will talk about those emails in a minute. The Utility even suggested that adding STELCO to this line could impact (“adversely impact” is implied here) thousands of customers. The fact that the Utility offered to put STELCO on to General Service Primary service voltage also did not work in their favor. More specifically, it was noted in the case summary that STELCO was offered more than one service voltage. Therefore, the case summary goes on to say if they were offered one option (GS-Primary,) why should they not also be offered another voltage option, GSU, as the GSU line runs right by STELCO’s facility. Of the two sub-transmission lines which run near STELCO’s facilities, it was also argued by STELCO that their load will be larger than both the median and mean of the 135 customers on these 2 circuits. As documented in the Utility’s GSU tariff, STELCO successfully pointed out during the proceedings that if 2,500 kW of load is commensurate with a delivery voltage of 69,000 volts (Transmission Service), then STELCO’s load is certainly commensurate with a delivery voltage of 36-kV or 36,000 volts which is what STELCO was requesting. In other words, it was documented in the case summary that STELCO could have argued for 69-kV, which would have caused the Utility more issues as only the 36-kV sub-transmission lines run right past STELCO’s facilities. It was also noted in the case summary that the Utility’s rate department professionals were also on record of having said that there was nothing in the Utility’s GSU tariff which would prevent STELCO from being served at 36-kV and this point was argued by STELCO during the hearings. Because STELCO’s manufacturing process involves electric induction furnaces, STELCO argued that the frequent outages on the 13.2 kV line cause STELCO manufacturing employees to have to go through a complicated restart process, meaning each outage is very costly to STELCO. Over a 2-year period, there were 24 outages (12 outages were momentary and 12 outages were in excess of five minutes) on the 13.2 kV service but only one outage was recorded on the sub-transmission service.
As to the discrimination issue, STELCO argued the following:
1. Utility representative for STELCO repeatedly denied STELCO request for Rate GSU before discussing it with the Utility’s engineering department
2. Unusual steps were taken in order to find reasons not to allow STELCO’s request
3. Utility unfairly refused STELCO request due to a manufacturing lack of need for 36-kV service while at the same time providing new 36-kV service to ten other premises despite having no evidence of any need for the majority of those new connections.
If you recall from my earlier comments, the Commission stated that the Utility “unduly discriminated” in denying STELCO access to the 36-kV line so the preceding arguments were key to STELCO winning this case. More specifically, in reading the case summary, I had to admit that one the best parts for me personally was to read where it stated the following occurred (I attempted to summarize these statements for ease of reading but the intent of what was said remains essentially the same):
• The customer service manager at the Utility only became involved after learning that STELCO had retained an energy consultant who was requesting the change to 36-kV service to take advantage of the GSU rate. The manager stated in an email to the engineering and planning department (note: this email became part of the case documents) that the consultant would encourage other similarly situated customers to migrate to rate GSU. The customer service manager also stated that he would like to protect the Utility’s right to dictate the voltage with which we feed our customers. He asked the engineering manager at the Utility to provide him with some reasons to deny this request. He went on to write that his real fear is that this consultant will dig up more customers that would benefit from going to rate GSU.
The energy consultant referred to here is Statistical Energy LLC. Wow, that type of unintentional endorsement of Statistical Energy LLC by the Utility representative in a formal Public Utility Commission hearing is powerful isn’t it? When reflecting on the old saying, “be careful what you put in writing (including emails)”, I have to admit that this trusted saying is always true and could not be more applicable here. I say this in jest but I wish I could quote this Utility customer service manager in our marketing case studies and marketing videos – I don’t know if I have ever had better and legally documented endorsement of our energy consulting services. He unintentionally provided Statistical Energy LLC with one of the best recommendations a Utility could provide an energy consulting firm. After reading the case file, I have to admit that these emails likely hurt the Utility’s case as much as any of the evidenced presented as they are very self-incriminating and essentially prove STELCO’s discrimination claim. Please note I am not a lawyer and I am not allowed to offer opinions on what is and is not discrimination. I make this statement based on what I read in the case filing summary – the author of the case summary definitely provided some opinions in the document, which was called an “Opinion and Order”.
In the conclusion section of the case summary, four specific concerns regarding the Utility’s handling of STELCO’s initial request were given:
1. The Utility’s account representative’s initial emails were made without any consultation from planning or engineering or that a formal request is necessary to move forward in the process is unacceptable. Furthermore, the account manager’s testimony is quite damaging to her own credibility and to the Utility’s claims about the reasonableness of the process and decision in this case.
2. The public utility commission could not find adequate documentation that there was a sufficient basis for the Utility to conclude that STELCO is receiving adequate service.
3. The customer service manager was attempting to come up with reasons to deny STELCO’s request before any independent study was conducted by engineering.
4. The public utility commission stated that it is hard to ignore statements from the Utility rate department, among whom several Utility witnesses testified are the most qualified to determine questions regarding tariff application, that indicate there is no apparent basis for denying STELCO’s request.
So, what can you learn from STELCO’s case? First of all, the Utility is not always right and they are almost always driven by their own monetary and operational interests rather than the interests of the public and their “ratepayers”. Additionally, it is advantageous for businesses to work with energy consultants who have a thorough understanding of these regulated tariff rate and service voltage issues and who also have a deep rolodex of industry contacts who can also assist and provide prudent counsel. If I had not worked at a Public Utility, gaining a good understanding of the issues described herein, and if I did not have a long list of trusted Utility contacts (i.e., lawyers with extensive Utility experience and former Utility rate department professionals – who both have a deep understanding of these issues) who could provide me with solid and prudent counsel on this sub-transmission access issue, I likely would have never recommended to STELCO that they pursue their claim on the basis of discrimination. Absent my involvement, STELCO more than likely would not have filed a formal complaint against this Utility and they would probably be spending hundreds of thousands of dollars more each year than they should.
The main point here is businesses should choose an energy broker/consultant to work with based on more than just the consultant’s ability to shop your electric and gas in a deregulated States. Does your consultant understand regulated rates and does your consultant have the intellectual capital to recommend non-traditional energy and Utility solutions which can add additional significant value to your operations? Just because you may not be the size of STELCO doesn’t mean that such non-traditional solutions are not available to your organization.
In order to provide full-disclosure on how we are paid by STELCO, Statistical Energy LLC became STELCO’s electric and gas broker in the summer of 2018 for supply agreements starting in the 4th quarter of 2018. After STELCO worked directly with a large gas and electric suppliers for years (i.e., no energy broker), our team at Statistical Energy LLC ended up saving them a lot of money on their electric and gas purchases by leveraging certain terms and conditions of their supplier contracts for STELCO’s benefit. In the end, it was cheaper for STELCO to broker their gas and electric purchases via Statistical Energy LLC than by working directly with a supplier. In other words, we leveraged our intellectual capital for STELCO’s benefit, which is the job of a good broker advocate anyway. The commission case outlined in this blog-post was almost settled before STELCO became a brokerage client of Statistical Energy LLC. Additionally, we were able to find STELCO an energy supplier who also provides low-cost financing options to help finance the additional energy efficiency initiatives our partner, who assists a few of our clients with identifying and implementing energy demand side solutions and projects, has also identified for STELCO. In other words, not only did we provide them with several recommendations which ultimately saved them money on both their regulated and unregulated energy supply relationships, but we also helped them find below-market financing for their energy demand-side initiatives.
If you are not working with a broker with demonstrated ability to bring solutions like what is described in this blog post, please feel free to give our team at Statistical Energy LLC a call at 614-505-4007 or email us at info@statisticalenergy.com. We would be happy to provide you with a no-cost evaluation of your energy portfolio.
Jim Risk, CFO/Partner at Statistical Energy LLC, began his energy and Utility career in 1997 at Ohio Edison. He was the first sales employee ever employed at FirstEnergy Solutions and was the founding business development executive at The E Group, the energy consulting group owned by FirstEnergy Solutions. Statistical Energy LLC (www.statisticalenergy.com), currently provides gas and electric brokerage services, along with many other energy management solutions, to clients in 15 States (USA) and 2 Canadian provinces.
