Con Edison electricity customers have likely noticed a significant increase in delivery costs over the last 12 months. There are two specific variable components that have caused these rates to skyrocket in 2021:
The Revenue Decoupling Mechanism (RDM): This is Con Edison’s cost recovery mechanism that reconciles, in a trailing six-month period, lost sales revenue to the utility
The MAC (Monthly Adjustment Clause) Charge: A monthly reconciliation used by Con Edison to true-up their base tariff rates to their actual distribution and transmission costs
Most of this year’s cost increases, through June 2021, can be attributed to the RDM charge. As the name suggests, Con Edison is using this mechanism to offset significant losses in revenues, especially as they relate to lower energy usage during the pandemic. The RDM charges protect utilities against many factors including mild temperatures, higher fuel prices, and changes in demand.
RDM adjustments are established for each rate class and are adjusted twice per year, in February and in August. Most of Con Edison’s large commercial customers are in the SC 9 rate-class, which has experienced the most dramatic adjustments of all rate classes so far this year.
Figure 1 shows how the RDM adjustment has varied over the last six years. The height of the blue bar shows the increase or decrease in the value of the adjustment (in $/kWh). Note that negative numbers indicate a period where the adjustment was a credit on the delivery bill. Also note that for the first time since 2015, there have been three consecutive adjustments, in the amounts of $0.00779/kWh, $.01523/kWh, and $.01211/kWh which have appeared as charges on the delivery portion of the electricity bill for SC 9 customers.
These incremental charges are significant. For context, consider a commercial office building that uses 3,500,000 kWh per year in electricity. The pre-pandemic adjustments in August 2019 and February 2020 would amount to a charge of approximately $4,700, while adjustments made in August 2020 and February 2021 would be approximately $80,000.
Chart 1: RDM Charges August 2015 - August 2021 from conEd.com
According to a recent presentation by the New York Independent System Operator (NYISO), energy usage in New York City is expected to return to pre-pandemic levels by mid-to late-2022. If that forecast is accurate, SC 9 rate class members should expect RDM charges to continue as adjustments are made in February and August 2022. Those increases will likely be more than in 2019, but not as high as what has recently been experienced in the last three adjustments.
The team at 5 is actively engaged with Con Edison’s rate engineering group and will continue to share additional insights when available. Please contact your energy advisor to learn more about how these RDM charges will affect your specific facility.