Discussion

In Resolution G-3227 (1997), we recognized that NRG faces competition from alternative heating sources and we granted it pricing flexibility, subject to certain restrictions. NRG's charges were separated into a fuel cost component and a fixed cost, base rate charge so that NRG could flow through fuel cost fluctuations to its customers without changing the base rate. At the same time, we permitted NRG to file new commodity charges that go into effect automatically 40 days after filing, subject to a 10% annual cap on commodity charge increases not related to fuel and regulatory costs. Increases exceeding the 10% cap in any given year may be authorized by Commission resolution.

Additionally, in Resolution G-3227 we allowed special contracts, to become effective automatically upon filing with the Commission, for customers who may need other than full requirements steam service. In doing so, we also recognized that there were steam customers who could not easily convert to an alternate, competitive fuel sources, and that their interests needed protection:

Although SF Thermal has successfully demonstrated that competition is a factor in steam pricing, there are still cases where substantial barriers to heat source substitutes exist. Regulatory oversight is necessary to protect the substantial numbers of customers with no realistic substitute to steam service from SF Thermal. In granting SF Thermal the right to negotiate special contracts, we are most concerned that the captive steam customer not be harmed. In theory, pricing flexibility can improve a company's ability to maximize revenues without harming other customers as long as rates offered in special contracts at least cover the marginal cost of the services they include. (Resolution G-3227, page 5.)

It is this continuing regulatory oversight and protection of captive steam customers that NRG Energy Center seeks to invoke in its application.

Our Office of Ratepayer Advocates initially filed a protest pending an opportunity to review NRG's detailed supporting workpapers and determine whether the application presented issues that would need to be pursued in evidentiary hearings. As NRG pointed out in its application and its reply to ORA, the significant differences between proposed new Tariff Schedule S-2 for standby and partial load customers and today's full service Schedule S-1 are (a) a $50.00 per month reservation charge intended to recover additional billing costs, inspections, and heat loss as a percentage of usage, and (2) an estimated monthly usage based on the customer's full load, rather than actual monthly usage, for the base rate to cover fixed costs. As future changes are made to the Schedule S-1 fuel cost component, those same changes will be reflected in Schedule S-2. After reviewing NRG's workpapers, ORA formally withdrew its protest and now agrees the application can be handled on an ex parte basis.

Standby and partial load steam services are today available only through customer-specific contracts. We believe that it is appropriate to establish a uniform basis for providing those services without creating economic burdens on other, full steam requirements customers. Doing so will reduce the potential for cross-subsidization and discriminatory service. NRG's proposed new Schedule S-2, Appendix A to this order, serves that purpose. We will approve NRG's application.