While the major gas distributors in the state of New York are close to meeting their Nov. 1 storage inventory targets despite hurricane curtailments, the New York State Public Service Commission (NY PSC) Thursday said it was concerned about the preparedness and reliability of one smaller investor-owned utility, Corning Natural Gas Corp. The commission took the “extraordinary actions” of calling on other gas companies in the state to provide supply to Corning on a mutual-aid assistance basis, and ordered Corning to show cause why a temporary operator should not be appointed for the utility.

The NYPSC’s winter preparedness review unearthed concerns about Corning’s ability to provide adequate service to 14,500 gas customers this winter. Staff’s concerns stem from the combination of significantly higher gas costs, the company’s cash-flow situation, its failure to procure fixed-price commodity hedges and its failure to adequately fill storage on a timely basis.

The staff also “is concerned that Corning customers will see winter bills that are approximately 55% higher than last year, compared to statewide average bill impacts of approximately 30-45%.” The average cost of gas in storage for all the state’s utilities for the upcoming winter season is $7.02/Dth, an increase of 24% compared to year’s average storage cost of $5.66/Dth.

Corning has a 400-square-mile gas distribution territory including 15 townships located in the Finger Lakes area of the Southern Tier of New York State.

To address “the primary and immediate concern regarding adequate gas supply,” the Commission initiated a proceeding on its own motion to determine if one or more gas corporations can provide gas supply to Corning on a mutual-aid assistance basis. New York utilities have a procedure in place to share gas supplies during certain operational contingencies. Thursday’s Commission action would build on that procedure by extending the period of assistance through the entire winter and expanding the scope to cover financial emergencies.

The NYPSC also initiated the show cause proceeding to investigate Corning’s procurement, accounting, and fiscal operations and to determine why the company should not be directed to comply with the Commission’s 1998 Statement of Policy on Gas Procurement. While policy statements are meant only as guidance, the commission said it may be necessary to impose stricter compliance requirements. Commission Chairman William M. Flynn has sent a staff team from the department for on-site monitoring at the company’s headquarters. In addition, the Commission will schedule informational forums in Corning’s service territory to explain Thursday’s actions and answer questions.

At the end of this winter, staff will be in a better position to fully assess the impact of Corning’s gas procurement practices on customers and report back to the Commission on the need for further investigation of the prudence of the company’s preparations of the 2005-2006 winter heating season, the commission order said.

The rest of New York’s local distribution companies (LDCs) as of this week have successfully replaced over three-quarters of the supplies lost to this summer’s hurricanes, reducing to approximately 1.2% the amount of the state’s overall winter requirement still in question, the staff report said. “As a result of the tighter than normal gas supply situation, it’s possible that interruptible customers could face more frequent service interruptions than in previous years.”

New York’s Department of Public Service staff monitors, among other things, gas supply portfolios, pipeline capacity, storage inventories, contract strategies and commodity pricing. Staff reported that Hurricanes Katrina and Rita initially disrupted 5% to 10% of winter gas supply, depending on the utility.

The Commission already has enhanced and expanded its “Have an Energy Smart Winter” consumer energy-saving campaign, and its chairman asked each of the utilities to voluntarily expand their customer outreach and education efforts as well. Each of New York’s natural gas utilities has responded to the critical need to raise awareness about higher natural gas prices and the steps consumers can take to better manage winter heating bills, the PSC said.

In New York State, there are about 3 million customers or 50% of the households in the state who heat with natural gas.

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