New dual-fuel penalties being considered.

Pushed by an administrative judge's decision against its current penalty practices, Con Edison is trying to change the way it calculates penalties for dual-fuel customers. Under the proposal, smaller penalties will be assessed based on actual usage, but can be incurred more often. Those using pilot lights will pay firm gas rates to run them and will not be penalized. Additionally, Con Ed will not forgive penalties for using gas because of malfunctioning equipment.

About 780 customers will be affected, including hospitals, universities (including Columbia University), and the City of New York, along with many co-ops and other buildings around the city and in Westchester. According to one report, the city paid $415,000 in penalties last year.

"Dual-fuel" gas customers enjoy more favorable rates than "firm" customers, but much switch to oil during very cold weather when the demand for gas is greater and supplies are tight.

Under current rules, a dual-fuel customer is supposed to be penalized at twice the monthly charge for remaining on gas when they are not supposed to. So if the monthly cost is $39,000, the penalty would be $39,000 - even for a day of gas use - and the total monthly cost would be $78,000.

In practicality, when a customer notifies its Con Edison borough office that they are experiencing difficulty with a burner or the switchover equipment is malfunctioning, they are not usually assessed penalties.

Explained Gerald Pindus, president of TedPin Realty, who owns several buildings as well as U.S. Energy Controls that provides monitoring equipment for heating systems, "The way its been treated in the past, is that if the burner broke down, you would call up Con Ed and say you have to use gas, and they won't give you a fine. Now they can electronically tell that you are using gas and they can catch you right away."

Con Edison recently disclosed that with its new metering and communication equipment in place, a representative does not have to make an on-site visit to determine when gas is being used. This will also help eliminate the "no access" penalties.

According to Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), an owner's group, Con Edison workers would in the past make an on-site visit to ensure the burner had switched over. If the worker could not gain access to the boiler room, "even if the super just went for lunch," the customer would get hit with a penalty, even if the burner, in fact, had switched over properly.

"They would penalize you if they found the seal broken on the thermostatic control," said Margulies. "A variety of members have had to fight them with varying success."

Last year, because the weather was so severe and curtailment periods were often and long, many dual fuel customers were hit with penalties. They have complained bitterly, filing more than 70 complaints with the Public Service Commission (PSC), that according to one estimate will take "years" to resolve.

In one of the first rulings decided in the last few weeks, the administrative judge had suggested a penalty of four times the actual usage, rather than two times the entire monthly bill.

The owner, along with the Owners Committee on Electric Rates, had argued for a two times the actual usage penalty, said Joel R. Dichter, the group, s associate general counsel and a partner in the law firm of Klein Zelman et al & Dichter.

Con Ed, however, insisted on a penalty of ten times the customer's average daily cost for using a small amount of gas and fifteen times for using a large amount of gas.

The company is now trying to get approval rom the Public Service Commission for this change, as well as other modifications that are being made based on customer complaints.

Some customers also charged that Con Edison borough offices were treating customers differently. Sources within Con Edison agree that some supervisors are more flexible, allowing more changeovers without penalties.

To treat customers equally, Con Edison is proposing that the penalty cost be imposed across the board, even if the boiler is down for servicing. Its proposed tariff changes state. "Customer notification of equipment failure shall not excuse the customer from penalty billing," while "prior notification of equipment failures will remain a customer responsibility, but will only be used for information and system load planning purposes."

"If that is their policy we will be complaining to the Public Service Commission," said Margulies. "The alternative is not to switchover and let the tenants freeze, nor is the penalty appropriate when there is an emergency situation and they need to do work on the system."

Margulies also complained about Con Edison's "sloppy" inspection techniques and allegations of tampering with equipment that in the past were found to be inaccurate. "Brooklyn Union Gas has similar provisions but it doesn't raise as many problems," noted Margulies. "It's also true that in Brooklyn you are treated better."

Robert Loftus, a spokesperson for Brooklyn Union Gas said, Whatever posture we take it would be reasonable with our customers."

Other Con Edison customers were hit with costly penalties last year because they had to maintain a pilot light, eve after converting to oil. Con Ed is proposing to bill those customers at a firm rate for the ignition fuel use without need to install piping to a separate meter.

Con Ed must still gain approvals from the Public Service Commission for any change, but that may be pro forma, according to real estate sources, since they already agreed to the settlement of the case in review, based on the Con Edison proposal.

PSC officials were unavailable for comment because of the holiday and a Con Ed spokesperson was for the same reason unable to obtain information to comment on the company' plans.

Because gas fuel supplies are short during colder weather, Con Edison provides a price break for those that agree to switch to oil at certain outside temperatures, so it can supply its more lucrative firm customers.

There are different dual-use categories and rates, depending at which temperature the customer agrees to switch. An SC12 rate at priority C means the customer will switch to oil at a temperature of 19 Degrees F and is allowed to go back on gas at n degrees F.

If a customer's oil burner is down or being serviced during this curtailment period, rather than leaving the system off completely, they use gas and are supposed to be penalized. Penalties are also imposed for not switching to oil, or switching back to gas before the end of the curtailment period. There are automated switching devices, but the older ones have a reputation of being unreliable.

Con Ed's proposed penalty is based on a daily usage calculated on 1/365 of the customer's annual consumption. For 25 percent or less of the average daily usage the penalty would be ten times the average daily, use while the penalty would be fifteen times the average cost for a use greater than 25 percent of the average daily quantity.

Under the proposal, if a SC12 priority C customer who pays 39 cents per therm consumes 100,000 therms of gas per month and has a curtailment consumption of 1,000 therms, the penalty would be $6,500 for using less than n percent of the average daily quantity and $9,750 for using more than n percent, based on a firm gas cost of 25 cents per therm. If the monthly bill was $38,610, along with the one time penalty, their total monthly cost would be less than $49,0000 - but that is only for one day's penalty.

Under the current rules, no matter how many penalties were applied during the month, the cost would be two times the monthly bill, or about $78,000.

"The fine was worse, but now you can incur a series of penalties," observed. Pindus, who attended a recent dual fuel users meeting in Queens where Con Ed revealed its plans.

A representative from the General Services Commission said at the Queens meeting that the city paid $415,000 in curtailment penalties last year.

"They want to push gas, "insisted Margulies. "The real thrust here is to discourage interruptible systems and go to gas."

He explained the incentive programs to convert to gas are tied to the price of oil, so that an owner who wishes to convert to gas might receive a per unit grant or credit to finance the replacement of a boiler, or an agreement to lock in a lower rate for gas that is tied to the price of oil.

"But now that gas is more expensive - despite the fact they encouraged people to put in the interruptible systems - the more miserable they make life for people, the more people will go back to straight oil," said Margulies. "You can always change to oil systems."

Pindus agreed, saying, "If they do this, anybody who has the ability to convert totally to oil should convert. Why bother leaving yourself open to penalties? Oil is cheaper in Con Edison territory than gas. So I question whether it pays to be on gas at all."

Margulies explained the most important reason for small owners to use gas is that the systems are easier to maintain. "They are essentially more idiot-proof, but they are not necessarily more cost-effective," he said, "Con Edison has a bad reputation which pressures a lot of people to stay with or switch back to oil, and it's remarkable to me that you just don't have the same thing from BUG."

Dichter explained that it is hard to calculate which is cheaper because oil is sold by the barrel or gallon and gas is sold by cubic feet or therm. Generally gas is less expensive than oil but from time to time oil is less expensive," he said. "Additionally, some people have environmental problems burning oil.

Ironically, because of the way Con Ed calculates its charges, when big users buy their own gas, it is cheaper for them to bring the gas from Louisiana to New York than it is to get it serviced to the customer's building by Con Ed, Dichter added.

"I'm hopeful the commission will reconsider their decision and put in a more consider their decision and put in a more fair and equitable charges," said Dichter. "Even a two times penalty is two times the cost of oil and should be more than enough of an incentive not to burn gas [during curtailment periods]. I'm trying to deliver this message to the PSC."

Dichter said owners should know they have the right to challenge these bills and should be writing to the PSC now, voicing their concerns about these issues.

It is expected that a meeting of the large dual-fuel customers and the PSC will take place in mid-December, at which time Con Edison will formally make these proposals.

Meantime, dual fuel customers should also be setting up procedures within their organization so that personnel are prepared to handle notices of interruption even on Friday or on weekends, Dichter advised.

One Con Edison official believes the company's proposed tariff changes should be modified to allow for occasional equipment breakdowns. "If Mr. Jones has problem after problem after problem, that's another story," the official agreed. "We are in the business of selling gas and the bigger fear should be that they will go to oil."