New Leadership Brings Needed Changes to FCC and National Broadband Policy

Following his confirmation by the Senate, newly minted FCC Chair Julius Genachowski addressed the staff at the FCC on June 30th and in the process told the world how his administration would differ from the previous one. From PULP’s perspective, the two most important things he told the gathered group which separate him from the Martin-era FCC were:

“Our policy decisions will be fact-based and data-driven.”

and

“As the country’s expert agency on communications, it is our job to pursue this vision of a more connected America, focusing on the following goals:

• Promoting universal broadband that’s robust, affordable and open.
• Pursuing policies that promote job creation, competition, innovation and investment.
• Protecting and empowering consumers and families. . . .”
  

Then, the next day, he traveled to Erie, Pennsylvania and spoke about why a federal program to deliver affordable broadband access nationwide is essential:

“Why are we lagging in many broadband categories but comparably better in linking classrooms? Because we had a plan.

In the Telecommunications Act of 1996, Congress enacted a program called the “E-Rate” to provide discounted Internet access in schools and libraries. The FCC implemented the plan and our country has made real progress – though there’s much more to do in this area.

Today, as the government moves quickly on billions in much-needed broadband grants, we are also moving on a broadband strategic plan for the entire country so that we can renew American leadership and competitiveness for the 21st Century.”

Let’s see: a fact driven agency and a leader who sees the need for government intervention to make universal affordable broadband a reality. An excellent stepping off point for Chairman Genachowski. I met him many years ago when I was interviewing then-FCC Chair Reed Hundt for a legal publication and Genachowski was Hundt’s Chief Counsel. We had both been out of law school just a couple of years. Even during my short visit, he seemed impressive. Leadership such as what Genachowski has proposed on broadband is essential if we are going to be successful in making it universally available and affordable. At least four states, California , Maine, Texas , and Wisconsin created in-state funding mechanisms to bring broadband to schools, libraries, and community centers while the federal government dithered under the Bush administration.

Inexplicably, New York, on the other hand, continues to supports the failed “market driven” policies of the past that have given us slower, less ubiquitous, and more expensive broadband than a a growing number of nations. As we reported recently, the New York State Public Service Commission (“PSC”) told the FCC in its comments regarding its universal broadband initiative that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market.” Such blind faith in the market, we wrote, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. See PULP Network, June 12, 2009, PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service. In its comments , the PSC even questioned the need to bring broadband to every citizen today. See PULP Network, June 19, 2009, PSC's Market Ideology Clashes with Goals of Affordable Universal Broadband Service.

Maybe the time has arrived for the New York PSC Commissioners to make use of their state broadband service (not available to low-income New Yorkers who cannot afford it) to watch the new FCC Chair and FCC meetings and learn what it means to be a leader on universal affordable broadband and how to play the necessary regulatory role to make it happen in New York.

Lou Manuta

Rent Reductions in Submetered Buildings

When an owner of a master metered building obtains an order from the PSC waiving the general prohibition of retail resale of electricity, tenants in rent stabilized housing are entitled to a rent reduction when the landlord charges separately for a service (electricity) previously included in rent. Contrary to the myth that only electricity-squandering tenants will pay more when they are submetered, typically the amount of the rent reductions set in the DHCR rent reduction schedule are far exceeded by the new electric bills. See PULP's Top Ten Submetering Myths.

A document submitted by NYSERDA to the PSC in May indicates some rethinking on the topic of submetering:

In some low-income, electrically-heated buildings that are rent stabilized, rent controlled, or regulated by state or local agencies (where owners are required to pay the heat bill), and have separate circuits for heat and other electric needs (such as many Mitchell Lama buildings), two meters may be installed so that the tenant can be responsible for non-heat electric charges, and the owners will still pay for heat. NYSERDA is working with NYS DHCR to update the rent reduction formula, and determine the best implementation plans to accommodate Major Capital Improvement (MCI) issues that impact the potential for submetering projects.

The last time NYSERDA worked with DHCR on rent reduction formulas for submetering it was disastrous for many tenants. See PULP's Analysis of DHCR Rent Reductions for Conversion to Submetering, and PULP Analyzes DHCR Submetering Rent Adjustments.

PSC Implements 2% Assessment on Energy Utilities; Rebuffs PULP’s Request to Protect Low Income Customers

On May 15th, PULP reported on the New York State Public Service Commission (“PSC”) proceeding to implement the recently enacted Temporary State Energy and Utility Service Conservation Assessment. See PULP Comments on PSC Proposals to Implement 2% Utility Assessment. The "Temporary Assessment" imposes a charge of two percent of gross intrastate operating revenues, minus the amount of the current assessment on utilities for the PSC’s costs and expenses. The stated purpose of the Temporary Assessment is to encourage conservation of energy and other resources and applies to public utility companies, including municipal gas and electric corporations, Energy Service Companies (“ESCOs”), and the Long Island Power Authority. The Temporary Assessment does not apply to any telephone corporations or to energy utilities with $500,000 or less gross operating revenues from intrastate utility operations. Comments on the proposals regarding the Temporary Assessment were submitted on May 15th and the PSC issued its Order on June 19th .

PULP expressed concern in its comments that the Temporary Assessment will unnecessarily and unfairly burden low income customers, because it would “significantly diminish or offset reductions” in bills available under low income programs offered by the utilities. PULP had called for an exemption from the Temporary Assessment for low income customers or, in the alternative, to reopen rate cases to increase the low income rate discounts to off-set the Temporary Assessment, so that the new assessment would not add to their total energy burdens.

While the PSC recognized that “the imposition of the Temporary State Assessment may offset benefits from low income programs,” it found that the statute does not authorize an exception for any customer class, including low income customers. Although the statute did not expressly authorize such treatment for low income customers, PULP notes that the PSC is responsible for deciding how the assessment cost will be allocated among the various customer classes, and the statute certainly does not block the PSC from allocating the new rate burden taking into account fairness and equity to those living in hardship, just as it could with any other new rate burden. The PSC made the obvious that because the Temporary Assessment “will be collected from all customers on an equal basis within a class, the low income customers’ discount relative to other customers will remain unchanged, on a dollar basis.” However, such a conclusion does not eliminate the fact that any energy burden reductions for low-income customers the PSC approved in a prior rate case will now be reduced by application of the Temporary Assessment – a new state mandate which became effective after a utility’s rates were approved. The PSC then described opening up rate cases to correct this injustice as “impractical.” But if that is too much work, there are other familiar regulatory tools to accomplish this, such as telling utilities to defer collection of the new assessment from low income customers and later reallocating the deferred amount to be collected from other customer classes in the next rate case. The PSC has authorized such deferral mechanisms for a myriad of purposes, including the Temporary Assessment, and every utility has some deferral items. Indeed, Corning Gas filed a petition this week asking the Commission to change the proposed timing of collection of the Temporary Assessment charges, as did Niagara Mohawk.

Once again, the PSC passed up an opportunity to protect low income customers in the name of expediency.

PULP had also made a suggestion to have the PSC base its assessment of energy service company (“ESCO”) revenues on actual data instead of estimating ESCO revenues by having distribution utilities multiply the amount of electric or gas delivered to ESCO customers by the commodity supply price that would be charged by the distribution company for sales to its bundled service customers. PULP believes that estimating ESCO revenues in this fashion may inaccurately estimate ESCO intrastate revenues. The distribution utility’s commodity supply price for natural gas, for example, may be 20 or 30 cents (or more) per therm lower than the actual ESCO residential end user rate, so the ESCO revenues would be higher than estimated. Conversely, some ESCOs' revenues from some large industrial customers may be less than what the distribution utility would charge, and so their revenues may be overstated for purposes of calculating the Temporary Assessment. The PSC opted to not “undertake the more complex, uncertain, and multi-faceted plan” proposed by PULP, relying on its own less-accurate estimates instead.

PULP also provided detailed documentation showing that the ESCOs with the highest residential rates also had the most PSC complaints lodged against them, increasing demand on PSC resources, and warranting a full assessment based on their actual revenues. Despite the citation to published PSC statistics on ESCO Complaints outlining this correlation, the point was dismissed out of hand by the PSC as “highly speculative.”

Lou Manuta

PSC Rips HEFPA Safety Net for Utility Applicants with Arrears from a Prior Period of Service

In October 2007, applicants for Niagara Mohawk service sought relief from the Public Service Commission when they were denied service due to arrears on a prior account and lacked the money to pay $1,000 demanded by the utility as a down payment to reduce the arrears. They argued that Section 31.1 of the Public Service Law requires the utility to provide service to an applicant who owes the utility arrears for service provided to a prior account if the applicant

agrees to make payments under a deferred payment plan of any amounts due for service to a prior account in his name and makes a down payment based on criteria to be established by the commission. No such down payment shall exceed one-half of any money due from an applicant for residential utility service, or three months average billing, whichever is less....

Some of the applicants were homeless, living in shelters or motels at public expense, and needed to show a new landlord that they had utility service arranged in their name before they could take possession. Even though they could pay a significant down payment, some with the aid of charities, they were denied service, under Niagara Mohawk's "Grand Plan." The "Grand Plan" required full payment of arrears less than $1,000 and a $1,000 down payment if the arrears were owed for prior service exceeded $1,000, if the applicant had broken a minimum payment plan agreement during a prior period of service to a closed account.

Normally a utility is required to file all rules, terms and conditions of service as tariffs, subject to public scrutiny and PSC review, and no new rates, terms and conditions are valid unless they are publicly filed. The "Grand Plan" rules, however, were never filed.

The applicants got no relief when they called the PSC's Office of Consumer Services (OCS) Complaint Line and Emergency Hotline, which has the power to direct the utility to provide service.

This was not particularly surprising, inasmuch as National Grid had informally vetted the "Grand Plan" with OCS. OCS gave the green light and so its Hotline staff upheld the utility's denial of service when applicants could not come up with $1,000. Indeed, National Grid conducts training programs for the OCS staff who handle complaints against National Grid, indoctrinating the regulators regarding the utility's untariffed policies and practices.

Applicants were thus denied essential utility service and had no more remedies they could invoke without a lawyer.

PULP represented numerous denied applicants whose offers to pay part of the arrears they owe had been rejected by National Grid and OCS. They filed a Petition with the PSC itself for declaratory relief, seeking emergency one-commissioner orders directing National Grid to provide service. Examples of the effects of Niagara Mohawk's policy on the Petitioners included:

• A household with a 14 month old infant was without service because they could not meet the demand for $1,000.
  
• A mother with four children was evicted and became homelesswhen the father halted child support payments. The family was living in a car, and was relocated to a possibly dangerous motel situation. The mother found an apartment, but was unable to move in because the landlord required utility service to be on before giving possession. She could not resolve her homeless situation because she could not meet National Grid's demand for $1,000. The PSC Consumer Services Division was made aware of the situation and did not provideany relief.
• A senior citizen receiving SSI and moving to a different apartment where utilities are not included in rent, had arrears dating back more than six
  years from a prior episode of service, and was refused service unless he paid at least $1,000, which he did not have.
• A disabled amputee with seizures who was denied service due prior arrears because he could not satisfy National Grid's demand for $1,000.
  

When the case was filed, National Grid provided service. On each occasion that an individual case of an intervenor was presented to the Commission, the utility reversed its position - which had previously been backed up by the OCS Hotline -- provided service, and the PSC referred the complaints to OCS. Eventually some of the denied applicants received $25/day bill credits for wrongful denial of service, under PSL Section 31.5.

The PSC issued a Declaratory Ruling March 20, 2008, invalidating the "Grand Plan" rule, holding that it was not sufficiently flexible. See PSC Nullifies National Grid's $1,000 "Grand Plan" Requirement for Utility Service.

But in the decision annulling the "Grand Plan" the PSC still allowed Niagara Mohawk to demand more than half the amount due and more than the amount of three months bills as a down payment, thus gutting the clear statutory language that "No such down payment shall exceed one-half of any money due from an applicant for residential utility service, or three months average billing, whichever is less...."

The obvious intent of the language, which immediately follows language giving the PSC power to set criteria for payment plan down payments, was to limit PSC discretion. There was good reason to do so, because in the past, prior to enactment of PSL 31.1 as part of HEFPA in 1981, which is the Bill of Rights for New York's utility consumers, the PSC had allowed utilities to require payment of 100% of arrears due as a condition of service.

HEFPA and its companion public assistance legislation, Chapter 895 of the Laws of 1981, were intended to overrule that past practice. See HEFPA History. HEFPA gave the PSC power to establish criteria for down payments in payment plans, which PSL Section 37 requires to be negotiable, fair and equitable.

To prevent the PSC from being recaptured by the utilities and reintroducing harsh down payment requirements for service, HEFPA limited the PSC's power with the proviso that "No such down payment shall exceed one-half of any money due from an applicant for residential utility service, or three months average billing, whichever is less...."

Thus, in the Declaratory Ruling, the Commission crossed the "bright line" set in the statute for maximum down payments on payment plans.

The Commission said applicants who previously broke a minimum DPA (typically the poorer customers) could be required to pay more than the statutory amounts, and were not eligible for a down payment within the statutory maxima.

The Commission also rejected as inflexible National Grid's $1000 requirement, told OCS to review National Grid's policies, and directed National Grid to meet with OCS regarding the issue of down payments on payment plans and the provision of written denial notices to persons denied service, which must advise applicants of their opportunity to seek review from OCS. (Many of the Petitioners denied service by Niagara Mohawk were not provided timely and adequate notice of their administrative remedies through the PSC Complaint Handling Procedures). The Commission also denied PULP's discovery requests. See footnote 8 of the Declaratory Ruling.

PULP petitioned for rehearing and clarification, and while rehearing was pending, discovery in another case, (the then-pending Niagara Mohawk natural gas rate case), revealed that the utility had adopted a sub rosa policy to demand, instead of $1,000, 80% of old arrears as a down payment on a deferred payment plan for applicants with arrears for service to a prior account. The 80% rule again resulted in denial of service to applicants who could pay the 50% maximum down payment allowed by the statute. The instructions to utility staff were not to reveal that a fixed percentage demand was being made, just to demand an amount equal to 80%. Persons denied by the utility under the 80% rule sought help from the OCS Hotline, which consistently backed up the utility even though the demand exceeded the limits of the statute. PULP again assisted denied applicants in seeking intervention and relief from the Commission. See National Grid's "Grand Plan" May Be Gone, but its "80% Solution" Remains. Again, once each intervenor's case was brought to the Commission's attention, the denial of service was reversed.

On June 25, 2009, the Commission issued its Order Denying Petition for Rehearing, But Granting Clarification in Part. The Commission huffed about how Niagara Mohawk could have replaced its rigid $1,000 down payment rule with a rigid 80% rule. It recites how Niagara Mohawk, in private conversations with OCS, discussed the 80% rule:

We note that OCS has been meeting with National Grid regularly since the Ruling was issued. Early in this process the utility said that it wished to request an 80% down payment initially from applicants owing money under prior broken minimum DPAs, and OCS informed the utility that this was inappropriate and should not be done. However, as PULP’s subsequent submissions have shown, OCS’s instructions were not initially followed. We find the utility’s failure to follow those instructions inexplicable given the language of our Ruling.

The Commission adhered to its prior decision that it could declare applicants for service ineligible for a payment agreement if they had broken an agreement regarding service to a prior account:

It is only applicants who have arrears and have previously defaulted on a minimum DPA that are not eligible for DPAs. These applicants that have not adhered to a minimum DPA should not be given the same terms available to an applicant who owes the utility arrears, but has not broken a minimum DPA.

This added condition for a deferred payment plan with a down payment limited by the statutory maximum -- 50% of arrears or three months' bills, whichever is less -- of course, is an invention of the PSC and is not in the statute. The statute imposes a duty on the utility to provide service to any customer with arrears who agrees to a payment plan; it has no added restriction on eligibility of those who broke a payment plan during a period of service to a prior account. The down payment maximums have no exception, they are intended to limit utility and PSC power to extract large sums through denial of service.

It is now up to the courts, the Legislature, or a future Commission to rectify this situation which allows utilities to deny service with the blessing of the PSC, imposing economic demands for payment plan down payments that exceed the statutory limits intended to advance the enlightened universal service values embraced by the Legislature when HEFPA was enacted.

NYISO Needs State "Visitation"

We have observed from time to time that New York State, and in particular, the Public Service Commission, should exercise some oversight power over the NYISO, a New York not for profit organization operating as a wholesale electric utility, even though the rates set in its spot markets are under federal jurisdiction. See, e.g., FERC, NYISO and PSC Watched While NYISO Gamers Looted Consumers, PULP Network, August 21, 2008; NYISO Costs Skyrocket, Benefits Questioned, PULP Network, September 26, 2006.

Recently the New York Assembly committees that oversee energy utilities, corporations, authorities and commissions held joint hearings on the NYISO. See Assembly Committees Hold Hearing to Discuss NYISO Practices and High Electric Prices. Evidence was received from McCullough Research pointing to high bidding that seemed unlikely to be based on sellers' marginal production costs, as spot market and competition advocates theorize. See McCullough Research, “New York Independent System Operators Market-Clearing Price Auction Is Too Expensive for New York”, and New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues.

NYISO refused to provide information requested by the committees regarding the identity and anomalous bids of sellers in its electricity spot markets. The NYISO claims its internal rules, which have been approved by FERC, require secrecy about recent bids and complete "masking" of the identity of who, for example, regularly submits bids at the market maximum of $1,000/MWH, or who submitted more than 585,000 bids above $900/MWH from September 2007 to August 2008. See Data Discredits NYISO and PSC Defense of Spot Market Rate Demands; 12% of Bids Exceed $900, PULP Network March 31, 2009; and More Questions for the NYISO, PULP Network, April 9, 2009.

A Supreme Court decision issued this week in the context of state examination of federally chartered national banks, Cuomo v. Clearing House Association, L.L.C., contains an interesting historical discussion of the power of states to look into corporation matters, including those of federally regulated companies:

In 2005, Eliot Spitzer, Attorney General for the State of New York, sent letters to several national banks making a request “in lieu of subpoena” that they provide certain non-public information about their lending practices. ****

Historically, the sovereign’s right of visitation over corporations paralleled the right of the church to supervise its institutions and the right of the founder of a charitable institution “to see that [his] property [was] rightly employed,” 1 W. Blackstone, Commentaries on the Laws of England 469 (1765). By extension of this principle, “[t]he king [was] by law the visitor of all civil corporations,” ibid. A visitor could inspect and control the visited institution at will. ****

A State was the “visitor” of all companies incorporated in the State, simply by virtue of the State’s role as sovereign: The “legislature is the visitor of all corporations founded by it.” Guthrie v. Harkness, 199 U. S. 148, 157 (1905) (internal quotation marks omitted).

This relationship between sovereign and corporation was understood to allow the States to use prerogative writs—such as mandamus and quo warranto—to exercise control “whenever a corporation [wa]s abusing the power given it, or, . . . or acting adversely to the public, or creating a nuisance.” H. Wilgus, Private Corporations, in 8American Law and Procedure §157, pp. 224–225 (1910). State visitorial commissions were authorized to “exercise a general supervision” over companies in the State. I. Wormser, Private Corporations §80, pp. 100, 101, in 4 Modern American Law (1921).****

[fn] As Justice Story’s opinion in Dartmouth College stated, visitors of charitable corporations had “power . . . to correct all irregularities and abuses,”4 Wheat., at 673, which would surely include operations in violation of law. But whether or not visitors of charitable corporations had law-enforcement powers, the powers that they did possess demonstrate that visitation is different from ordinary law enforcement.

The Supreme Court upheld the information request from the New York Attorney General -- even though federal law prohibits and preempts states from exercising any "visitorial" oversight of national banks -- because his request was not for visitorial information, but for state law enforcement purposes.

The Supreme Court's decision is a reminder that there is no real barrier to New York State exercising "visitorial" powers over the NYISO to obtain information witheld from the public that would aid in ascertaining whether the NYISO is acting in the public interest for the people of the State. Unlike the national bank case discussed above, there is no federal statutory bar to prevent New York State from exercising its visitorial powers over the NYISO, as a New York not for profit organization. This inquiry could be conducted by legislative committees, by the PSC, (if it posessed the requisite curiosity and fortitude), or by the Attorney General. Also, based on results of its investigation, the legislature could find it in the public interest to reorganize the NYISO, which has a self-perpetuating board and a structure tilted toward producers and sellers. For example, after the spot market manipulation in California, the California ISO was made public benefit corporation, with its board directors appointed by the Governor, and confirmed by the state senate. See NYISO Governance, PULP Network, June 18, 2008.

Also, if NYISO persists in its refusal to release information to the state legislators about anomalous rates demanded by sellers in its markets, it could frame for judicial review the issue whether such secrecy is contrary to the Federal Power Act, which requires sellers to file all rates and rate changes publicly, and in advance of changes. FERC approved NYISO rules that

• allow hourly unfiled changes
• allow sellers to charging multiple and wildly varying rates for power made the same hour from the same power plant,
  
• mask the identities of sellers to whom FERC gives so called "market-based rate" permission and delay for months the release of masked data.
  

This system of secret, unfiled and unreviewable wholesale electric rates invented by FERC/NYISO has not been upheld by the Supreme Court. Indeed, last year the Court took pains to note it was not upholding or ratifying FERC's rationale for "market-based rates," calling it "metaphysical." See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered, PULP Network June 26, 2008. See also, May the FERC Rely on Markets to Set Electric Rates?

NY Rolls out 511 Service with Travel and Transit Data; Not All Phones Can Access the Service

With a Press Release on June 19th, Governor David Paterson announced the launch of 511 service throughout New York State . According to the announcement, 511 is a “free and comprehensive service” which provides near real-time “information about traffic incidents, roadway conditions, congestion, work zones, weather, and planned events” and is designed to benefit commuters, long distance travelers, and tourists. The service was launched last year in the New York City area, but reportedly is now available statewide 24 hours a day, seven days a week. While there is no charge to access 511, calling 511 from a landline phone will cost the same as making a local call and if a cell phone is used, airtime and roaming charges may apply.

What the Press Release failed to detail is that calls from Voice over Internet Protocol, or VoIP, providers will not work unless the company provides location address information so the system knows where the call originates. Also, customers of traditional telephone companies may not be able to reach 511 if the company has not performed the required translations in their switch (converting the three digit 5-1-1 number to a local seven digit telephone number).

Essentially, the 511 system automatically detects a landline caller’s location from where the call to 511 is placed (using the exchange or NXX code of the phone number – 518-NXX-1234) and a wireless caller’s location from the communications tower to which his or her cellular phone is connected. The system then routes the call to relevant travel information for their local region. There are nine regions in the state: New York City, Long Island, Hudson Valley/Catskill, Capital Region/Albany/Saratoga, Adirondack/Watertown/Plattsburgh, Central/Syracuse/Utica, Finger Lakes/Rochester, Southern Tier/Hornell/Elmira/Binghamton, and Niagara/Buffalo. If a caller seeks information from a different region, toll-free numbers are also available.

According to the 511 New York website, information on the following topics can be found by dialing 511:

* Emergency alerts about major transportation problems

* Traffic conditions, camera images, speeds

* Work zones and construction reports

* Border-crossing conditions

* Transit conditions

* Weather conditions and forecasts

* Transit trip-planning (door to door)

* Transit services

* Intercity bus and rail services

* Paratransit services

* Carpools and vanpools

* Park-and-ride lot locations

* Airports and airport access services

* Ferries, tunnels, and bridges

* Commercial vehicle information

* Bicycling

* Toll information

* Weather condition

Generally, alerts are updated every minute, or even sooner. Alerts will also be made available on the 511 New York website as well, .

According to the Governor, the federally funded service will cost approximately $2.5 million annually to operate and maintain. All states are required to have a 511 system in place by 2010 and 34 states are already in compliance. However, with so many New Yorkers receiving service from providers that may not have technical compatibility with the 511 service, the state may not truly be in compliance yet.

Lou Manuta

Stimulus Funds for New York Can Be Used for Utility Assistance to Prevent Homelessness

HUD recently announced that it has allocated new economic stimulus funds to New York for prevention of homelessness, including assistance to individuals in paying utility bills when that is related to current or potential homelessness.

According to the Notice regarding the Homelessness Prevention and Rapid Re-Housing Program:

The funds under this program are intended to target two populations of persons facing housing instability: 1) individuals and families who are currently in housing but are at risk of becoming homeless and need temporary rent or utility assistance to prevent them from becoming homeless or assistance to move to another unit (prevention), and 2) individuals and families who are experiencing homelessness (residing in emergency or transitional shelters or on the street) and need temporary assistance in order to obtain housing and retain it (rapid re-housing).

Low income households are often in a situation where due to a utility shutoff, relocation is necessary, and persons in homeless shelters are sometimes stymied in securing an apartment because the landlord insists upon the tenant having a utility account that has been refused by the utility due to claimed arrears. Under the HUD program,

Financial assistance is limited to the following activities: short-term rental assistance, medium-term rental assistance, security deposits, utility deposits, utility payments, moving cost assistance, and motel and hotel vouchers. Grantees and subgrantees must not make payments directly to program participants, but only to third parties, such as landlords or utility companies.

The amount of assistance available is considerable:

HPRP funds may be used for up to 18 months of utility payments, including up to 6 months of utility payments in arrears, for each program participant, provided that the program participant or a member of his/her household has an account in his/her name with a utility company or proof of responsibility to make utility payments, such as cancelled checks or receipts in his/her name from a utility company.

The allocation of funds to grantees in New York State is as follows:

NY NY State Program $25,527,382
NY Albany $1,523,772
NY Babylon Town $526,925
NY Binghamton $955,655
NY Buffalo $6,594,081
NY Dutchess County $654,862
NY Elmira $560,951
NY Erie County $1,209,200
NY Islip Town $840,437
NY Jamestown $573,517
NY Monroe County $789,300
NY Mount Vernon $745,701
NY Nassau County $6,458,352
NY New Rochelle $686,935
NY New York $73,929,729
NY Niagara Falls $1,037,411
NY Onondaga County $897,454
NY Orange County $713,117
NY Rochester $3,954,235
NY Rockland County $860,643
NY Schenectady $1,048,938
NY Suffolk County $1,511,657
NY Syracuse $2,524,997
NY Tonawanda Town $772,574
NY Troy $845,286
NY Union Town $578,661
NY Utica $1,192,417
NY Westchester County $2,373,791
NY Yonkers $1,533,003

PSC Signals Shift in Landlord Subsidies to Implement Submetering

Background
Pressure from tenants led the PSC in 1950 to ban residential submetering, see Resale of Power in City Is Curbed. It was reintroduced in 1978 for cooperatives and condominiums whose owners request submetering, and was expanded to rental housing in 1979. Little submetering of rental housing occurred until the Pataki administration years, when conversion to submetering was promoted through coordinated action of several agencies.

• NYSERDA subsidies paid for submeters, installation, and landlord consultants,
  
• DHCR rent reduction formulas were tilted to benefit landlords financially when they submeter,
  
• PSC approved utility rate structures that encourage submetering, and
  
• scores of building-specific PSC orders waived the prohibition against submetering and winked at landlord efforts to circumvent HEFPA and the PSC role in deciding customer disputes
  

While giving routine lip service to consumer protection in its submetering orders, the PSC actually allowed submetering landlords, in practice,

• to avoid providing the safeguards of the Home Energy Fair Practices Act,
  
• to deem electric charges to be rent and to evict tenants for unpaid utility charges,
• to ignore complaints or divert them away from the PSC administrative complaint determination process,
• to avoid compliance with rate calculation requirements,
  
• to violate price caps, and
  
• to provide service without tariffs and without tenant agreement to terms and conditions of service consistent with PSC orders.

Last year, PSC staff testified in favor of extending submetering further, to more than 600,000 additional tenants in Con Edison territory.

Previously we noted how System Benefit Charge (SBC) revenue collected under PSC orders from electric customers to promote energy efficiency is being used, in the name of helping low income customers, to subsidize landlords, cause economic hardship to tenants, and foster displacement of low-income households from subsidized and rent stabilized apartments. See, e.g.,

• PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights,
  
• Submetering Challenged at Claremont Gardens in Ossining,
  
• PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants;
• Submetering Slowed at Roosevelt Island.

The PSC is key to submetering, because no submetering occurs without a PSC order allowing it, and because the PSC (not the Legislature) effectively appropriates how NYSERDA spends hundreds of millions of SBC dollars.

The EEPS Proceeding
A marathon, multi-track generic proceeding is underway at the PSC which affects how NYSERDA should spend SBC funds known as the Energy Efficiency Portfolio Standard (EEPS) proceeding. Due to its limited resources, PULP has not been participating actively in the proceeding, which entails extensive and time-consuming conferences, collaborative work groups, and comment processes.

A recent order in the EEPS case suggests that the PSC is beginning to modify its policies.

NYSERDA's Initial Proposal for More Subsidies to Landlords who Install Submeters
The Commission issued an Order on June 24 signalling a slight shift in its promotion of residential submetering. It recounts how NYSERDA initially proposed to increase subsidies to landlords to underwrite the cost of installing submeters, and master meters that will facilitate implementation of real time electric pricing passed through to captive tenants by landlords acting in the role of a monopoly utility.

The submeter rebate would be $500 for low income units and $250 for market rate units. The advanced master meter rebate would be $2,000 for low income buildings and $1,000 for market-rate buildings.

This "advanced metering" and submetering scenario creates the technical capability to introduce "real time" pricing, exposing retail customers to volatile and unpredictably spiking prices of the NYISO. This amounts to reckless human experimentation when it involves households lacking the savings or income to buffer the price spikes. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers; New York Residential Real Time Pricing Experiments Must be Voluntary. Widespread deployment of "smart meters" has been challenged as not being cost effective. See AARP Opposes PEPCO Plan for Spending on "Smart Meters".

NYSERDA's Modified Proposal for Submetering
Earlier this year, the PSC issued stays of submetering implementation in buildings where landlords were shifting costs for electric heating to tenants. Also, tenants in other buildings petitioned to vacate PSC orders allowing submetering, some involving electricity for heat, see Submetering Slowed at Roosevelt Island, and Yonkers Tenants Ask PSC to Halt Submetering at Riverview Towers, and others involve non heat related electricity, see Parker Towers Residents Petition PSC to Vacate Prior Submetering Order, and Hazel Towers Tenants Ask PSC to Act on Submetering Complaints.

According to the PSC Order, NYSERDA modified its proposal last month:

On May 19, 2009, NYSERDA filed an update to its original proposal. The update places more emphasis on market rate buildings, including condominiums and cooperatives. NYSERDA now proposes that electrically-heated, low-income buildings that are rent stabilized, rent controlled, or regulated by state or local agencies, might require the installation of two submeters in each dwelling unit – one for electric needs and another for heat. The installation of two separate meters would allow the low-income resident to continue to have their heat included in the rent, while the tenants would assume responsibility for their individual non-heating electricity usage.

This would still allow NYSERDA to subsidize submetering of electric heat in buildings with market rate tenants.

The two-meter situation, i.e., not submetering the heat, is the model implemented by Starrett Corporation at Claremont Gardens, in Ossining. This system still causes major hardship and displacement of Section 8 tenants whose utility allowances were insufficient to meet the new cost of electricity added to their rent. See Submetering Challenged at Claremont Gardens in Ossining, which contains a link to the tenant's petition. Tenant leaders say that many Section 8 tenants were driven out since submetering began. Once a subsidized tenant is evicted at Claremont Gardens, the unregulated premises can be rented at higher market rate rents.

Claims of Energy Savings Questioned
In scoring applications for SBC funds, NYSERDA evaluates the cost benefit of energy savings due to investment in energy efficiency measures. A premise of submetering proponents is that huge energy savings would occur if , instead of the landlord, the tenants pay the electric bills. This estimate of savings justifies the installation subsidies, and DHCR bases its schedule of paltry rent reductions upon, inter alia, an assumption of large usage reductions with the advent of submetering. See PULP Analyzes DHCR Submetering Rent Adjustments.

The PSC has finally begun to look beyond the claims of interested submetering applicants to check out the claims of large savings:

NYSERDA’s proposed program (both the original and updated versions) claims an annual energy savings of 20% or more due to behavioral changes alone, based on the installation and implementation of submeters in master metered buildings.
****
NYSERDA’s claims of 20% energy savings, strictly as a result of the installation of submetering (in the absence of further steps to reduce energy usage), appear overly optimistic. The Electric Power Research Institute (EPRI) cites studies examining the effect on customer behavior of obtaining better information on their energy usage. These studies show decreases in electric usage of between 5 and 15%. [footnote omitted] For the purpose of modeling expected energy savings, Staff assumed an energy savings rate of 8%, achieved strictly as a result of better information available to customers, and a payment obligation, as to their energy usage as a result of the installation of individual metering.

The PSC said to use an 8% savings estimate pending further evaluation:

In its program evaluation efforts, going forward, NYSERDA needs to establish more detailed requirements and specifications for examining the effects of the introduction of submeters on tenants' energy use than those that were required under the previously offered Comprehensive Energy Management Program (administered by NYSERDA) so that the energy savings relating to behavioral change, in the absence of other factors, can be isolated.

It is evident that there has been no real effort of the PSC or NYSERDA to arrive at an independent research based estimate of energy savings fairly attributable to changed tenant behavior despite a massive rollout of submetering and a decade or more of experience. NYSERDA has already begun using the reduced 8% estimate of savings due to changed tenant behavior. See PULP Analyzes DHCR Submetering Rent Adjustments.

Meanwhile, exaggerated claims of large savings are still relied upon by DHCR in its rent reduction schedules and by PSC staff in advocating even more submetering. Every time a rent stabilized tenant is submetered, and receives a rent reduction of about $30 and an electric bill that is a multiple of that, landlords are enriched and tenants are harmed.

A Submetering Subsidy Slowdown Pending Further Action
The PSC announced that it would not approve SBC funds for submetering subsidies to owners, except in market rate buildings, cooperatives, and condominiums, pending resolution of pending cases which challenge submetering orders and pending the outcome of its generic case considering revision of submetering regulations.

Another factor that will affect the size of the program involves the low-income segment of the multifamily market sector. As a result of our role in approving submetering plans within New York State, we are aware of concerns that have arisen in conjunction with installation of submetering in buildings with low-income residents. At the time of this order, rehearing petitions are pending before the Commission and original orders approving submetering are stayed. The concerns raised are building-specific and will be addressed by the Commission. General concerns raised on the topic of submetering in the low-income sector are being addressed through a collaborative effort to update the Commission’s submetering rules and regulations. Until the pending rehearing petitions are decided and until the collaborative effort to revise the regulations is completed, we will limit participation in the new Master-Metered Multifamily Buildings Program to market-rate rental buildings, cooperatives, and condominiums. These are market segments that could greatly benefit from this program.

The generic case to review and "update" submetering regulations was initiated not to protect tenants but at the behest of submetering proponents for further streamlining" of the requirements and the process for landlords to engage in submetering. The initial draft rules would have eliminated the landlords' need for a PSC order (which carries with it the theoretical potential of fines under Public Service Law section 25 if it is violated) and would eliminate all utility tariff prohibitions on retail resale of utility service. This could allowing landlords to submeter without notifying the utility or the PSC, and perhaps allow resale of electric service even without submeters, by allocating charges based on square footage or apartment size. Landlords sought complete deregulation of the maximum prices they can charge to their captive tenants. See Submetering Landlords Clamor for More PSC Deregulation of Electric Service; PULP Files Comments on PSC Proposal to Relax Submetering Rules; Bronx Tenant Association Objects to PSC Staff Proposal to "Streamline" Electric Submetering Rules.

Conclusion
The PSC submetering policies and practices have begun to draw the attention of the press and the Legislature due to their harsh impact on many tenants. This new attention includes several submetering bills introduced in the Legislature, including ones that would put a moratorium on any new submetering pending a thorough report to the Legislature from the PSC on the submetering that has been allowed to date. See Assembly Bill A. 7814 and the identical Senate Bill S. 5009.

The purpose of these bills is

To require the Public Service Commission to perform an audit regarding submetering orders it has issued in the last five years to determine compliance by building owners of utility price caps and tenant protection provisions, and to determine if submetering has resulted in energy savings in those buildings. The Commission will have twelve months to complete the audit and make a report to the legislature and until that time no new submetering orders may be approved.

The temporary slowdown of the PSC's submetering juggernaut, while welcome news, needs to be seen in this context.

FERC's Advice: Avoid Our Deregulated ISO/RTO Spot Markets

We have previously noted FERC's refusal to scrutinize the rates set in the dysfunctional spot markets it fostered and approved for wholesale electricity trading. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets. FERC again has rebuffed another plea to take a closer look.

Senator Barbara Mikulski of Maryland recently asked FERC to respond to the request of the Campaign for Fair Electric Rates "to undertake an investigation of whether the rates produced in these RTO-run markets meet the just and reasonable standard." Maryland has been ravaged by higher electricity prices since allowing utilities to sell their power plants (as did New York). This ended state control over prices charged for the production of energy, and created a huge dependency on power now purchased in wholesale markets, from sellers who have been allowed by FERC to sell at whatever price the market will bear.

FERC responded with a defense of its market rate regime and a suggestion:

Finally, as you are also aware, jurisdiction over electricity prices is both a federal and state/local issue. While this Commission has jurisdiction over RTOs and ISOs, participation by utilities in these markets is on a a voluntary basis. Federal regulations do not require anyone to make purchases from any RTO or ISO, including PJM. Many entities generate most of their own electricity or purchase it through long-term contracts and make only limited purchases through RTO or ISO spot markets. And, while these organized wholesale markets are subject to this Commission's jurisdiction, state and local regulators have jurisdiction over retail distributor procurement policies. Those policies affect the prices that utility retail customers pay.

FERC's glib remedy for those unhappy with ISO/RTO spot market prices is simple: states can tell their utilities to stop buying at the RTO/ISO spot market convenience stores and make more long-term purchases. It is consistent with what FERC said some years ago, during the California spot market manipulation, to the effect that prudent retail utilities would arrange to buy most of the energy needed by their retail customers in long term wholesale contract arrangements, and would only buy 10% or so from the spot markets.

A 2005 report indicates that about 55% of the energy in New York is purchased in the NYISO spot markets. It is possible that much of the power sold under bilateral long term contracts has price adjustment factors which link the contract price to the spot market prices.

It is not responsible for FERC just to say buyers should purchase elsewhere. Sellers with "market-based rates" are also allowed by FERC to set their own prices for their long term sales contracts, which FERC requires to be unfiled and refuses to review for reasonableness. Obviously, the sellers are informed by their predictions of what they will receive at the ISO/RTO spot markets, and so they will tend to raise their long term rates accordingly. Some long term contracts are indexed to electricity spot market prices with a premium added.

It is also not a satisfactory answer for FERC to rely on states or local utilities to discipline the high rates of wholesale sellers by threatening to buy electricity in other markets -- from the same sellers functionally deregulated by FERC. FERC cannot avoid or subdelegate its statutory duties under the Federal Power Act, which establishes a filed rate regulation system with rates actively overseen by FERC.

Relying on local distribution utilities to buy wisely and benefit their customers has not worked. If, as in New York, the retail utilities are allowed by state regulators to pass through all wholesale purchased power costs, they will have little incentive to fight high ISO/RTO prices and market power on behalf of their consumers. Also, if they have holding company energy trading affiliates, for example, Con Edison Energy and Con Edison Solutions, whose business plans rely on the RTO/ISO spot market system, the local utilities may not wish to change the status quo.

FERC is simply trying to evade its duties under the Federal Power Act, which requires all rates demanded and charged to be just and reasonable. That includes all rates set at the ISO/RTO.
As the Supreme Court has stated, "the prevailing price in the marketplace cannot be the final measure of "just and reasonable" rates mandated by the Act **** the Act makes unlawful all rates which are not just and reasonable, and does not say a little unlawfulness is permitted. " FPC v Texaco, 417 U.S. 380 (1974).

As a matter of law, it is not an acceptable solution for FERC to do nothing to correct the RTO/ISO rates and tell the public, states, and local utilities to make their own power or buy it elsewhere. See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered. Under the circumstances, however, it may not be a bad idea to secure more energy from sources less affected by the spot markets.

$128 Million of RGGI "Cap and Trade" Revenue Unspent Due to Legal Challenge

In a prior PULP Network blog post, we discussed the pending legal challenge to the Regional Greenhouse Gas Initiative (RGGI) program now being implemented by New York and nine other states in an effort to reduce CO2 emissions from power plants, in advance of any national program.

New York is the only state where a Governor, through executive action and action through a agency and a state authority (DEC and NYSERDA), attempted to implement RGGI without specific enabling legislation. As a result, NYSERDA is receiving substantial auction revenue from the sale of allowances and allocation of the revenue -- $128 million to date -- is underway without any specific enabling legislation or budget appropriation.

As with any "cap and trade" program to reduce C02 emissions, the RGGI program is raising electric rates for all electricity sold at spot market rates in New York, even that which is produced with wind, water, or nuclear rather than by burning fossil fuels like natural gas or oil. See

• "Cap and Trade" Market System for CO2 Reduction Likely to Raise New York Electricity Prices, and
  
• CO2 Cap and Trade Programs Inflate Electric Rates in Restructured States.

Also, all sellers offering to enter into long term bilateral contracts are likely to consider what they could receive in the spot markets, even if they are non fossil producers whose own costs do not rise. Litigation was commenced by a power producer with a long term contract who could not raise its prices to the buyer due to the added cost of allowances it is now required to buy under the DEC RGGI regulations.

The Petition and Complaint in the court proceeding contends, inter alia, that the Governor, DEC, NYSERDA and the PSC acted beyond the authority delegated to them by the Legislature, and that RGGI is an interstate compact not approved by Congress.

As a result of the court case and uncertainty over legal authority to operate the program, the $128 million received to date in new revenue from the auctions of CO2 allowances is not being spent by NYSERDA. See Brian Nearing, Energy Efficiency Pool Hits $128m - Lawsuit from Corinth Operator Bars State from Spending Funds, Albany Times Union, June 20, 2009.

PULP recommends -- without success to date -- that a significant portion of revenue from the sale of RGGI allowances be specifically allocated to provide energy efficiency measures to help low-income customers reduce their rising energy bills.

Low-income households typically live in older, less efficient housing with older heating systems, controls, appliances, and energy consuming fixtures. Due to their lack of income and savings, there is a chronic market failure because they cannot afford the initial cost of investments in energy efficiency measures that will reduce usage and bills over time. Thus, providing assistance to low-income households may have significant payoffs in terms of reduced energy usage and improved living standards with less distortion of markets in which affluent customers can make cost effective energy efficiency investments without the need for subsidy. See PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs, PULP Network, January 7, 2008.

See also, NYSERDA Concept Paper - Operating Plan for Investments in New York under the CO2 Budget Trading Program and the CO2 Allowance Auction Program, which contains a brief mention of low-income energy assistance as a possible use of RGGI revenue, but there is no quantification or any proposed allocation for the purpose.

PSC Didn't Provide Complete Explanation When it Ended its 315 Area Code Proceeding

As we noted earlier this week, the New York State Public Service Commission (“PSC”) formally decided to put on hold its proceeding to add a new area code in the 315 region of central New York State. The PSC press release announcing the good news claims the reason the need additional numbering resources has dropped, causing the PSC to end its plans to add an overlay area code in the region, is “primarily due to the slowing of the economy.”

While there is certainly no argument that the current “Great Recession” is causing significant economic harm across the state, PULP does not agree with the PSC that this is the primary reason for the drop in telephone exchange code demand. Rather, it was the Commission belatedly ending its ill-advised procedure to dole out multiple 10,000 telephone number exchange codes (also known as NXX codes) to multiple providers in very rural communities.

When the PSC submitted its request to the FCC in August 2005 to expand "thousands block" pooling – that is, assigning numbering resources 1,000 at a time instead of 10,000 at a time – outside the state’s major population centers, the PSC did not signal the urgency of the need and did not request expedited treatment to stem the pending numbering crisis . While it did take the FCC over a year to grant the request, the PSC sat for an additional four months prior to implementing its new authority. During this brief time period alone, (November 2006 to March 2007), 10 new 10,000 telephone number NXX codes were assigned (19 requested, nine returned), representing 100,000 telephone numbers stranded in rural areas that did not need them.

Let’s look at more numbers: Between December 2004 and December 2007, a total of 40 NXX codes were assigned in the 315 area code, averaging between 13 and 14 codes a year. The big drop off occurred beginning in October 2007, when a net of only two NXX codes were assigned in total until July 2008 (six requested, four returned). Since then, only four NXX codes have been requested through May 2009 and three have been returned. As a result, since October 2007, a net of three NXX codes have been assigned in the 315 area code, far short of the levels hit in 2005, 2006, and 2007.

However, in order to recognize this fact, the Commission would be placed in a position to admit that the reduction in NXX code demand began when it implemented thousands block pooling. However, that admission would raise questions as to why the Commission was handing out 10,000 numbers at a time (and multiple times) to over 50 rural communities in central New York, each of which has only a thousand or two living there.

On top of this, despite souring economic conditions, demand for telephone numbers continues in other regions of the state, including New York City, where the recession has hit hard. Since the beginning of the year, 19 new NXX codes have been put in place in the city.

PULP is pleased that the PSC has rectified its numbering allocation procedures, which has caused it to avoid forcing over a million people to change their telephone number and change their dialing patterns for reasons which were completely avoidable. However, don’t blame the recession for the drop in NXX code demand. The credit for forstalling the new area code goes to the PSC's new number conservation policies, no matter how tardy they may have been in coming into play.

Lou Manuta

AARP Opposes PEPCO Plan for Spending on "Smart Meters"

Spending billions on "smart meters" seems to be really in vogue in states where utilities sold their power plants, failed to make money in their Enron-like holding companies, and now have no safe place to sink investment for a regulated return. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers.

Recently the electric utility serving the Washington D.C. area, PEPCO, proposed to roll out "smart meters" with large amounts of spending that would be underwritten in part by consumers through higher utility rates and in part by taxpayers through the use of federal ARRA stimulus funds.

The invocation of high tech and environmentalism sounds keen and green.

But on closer examination, testimony submitted today by AARP's expert witness, Barbara R. Alexander, shows that the "smart meter" proposal simply is not cost effective.

PSC’s Market Ideology Clashes with Goals of Affordable Universal Broadband Service

Last week, PULP reported on the comments filed at the FCC regarding the development of a national universal broadband policy. See PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service. The New York State Public Service Commission (“PSC”), in conjunction with the state’s Chief Information Officer, submitted comments which in essence argue for continued reliance on failing market-based policies, policies which exacerbate the digital divide and have left millions of households without broadband. A review of other comments filed with the FCC reveals that New York is behind the times and out of step with every other state that submitted comments.

As we reported, the PSC comments did not directly voice support the goal of affordable, universal broadband, grudgingly acknowledged that the FCC has been tasked to address the problems, and then endorsed a lack of government involvement in broadband deployment:

“The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put. The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.”

Essentially, the PSC seems to be saying that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market” - which in most localities is a duopoly of landline and cable providers. Such blind faith in the market, however, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. The PSC even questioned the need to bring broadband to every citizen today:

A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.

This is a familiar refrain to defend market power of existing providers: someday the market will bring providers with a new technology that magically would bring affordable service to unserved or underserved areas, so therefore regulators and government should do nothing.

Groups that provided comments similar to those of the PSC were free-market think tanks, such as Americans for Prosperity, FreedomWorks Foundation, and Americans for Tax Reform (ATR). ATR, founded by anti-tax radical Grover Norquist. The PSC’s positions closely resonate with the comments of ATR, which glossed over the market failure and reduced competitive position of the United States in comparison to other countries, and wrote:

We are on the right track; the free market is working. Consumers are enjoying an ever-expanding array of choices and performance. . . . In order for free-market models to provide for the further development of broadband access, however, it is absolutely critical that government intrusion not prevent private capital from recouping its investment. If private capital becomes convinced that its ability to recoup its investments is less likely, it will be less likely to make the significant investments in broadband that is the very goal of this FCC inquiry.”

Both the PSC and ATR take these “hands off” positions when it comes to the price and deployment decisions of the cable and phone company duopoly, even though

• millions of people who in theory have “access” to broadband cannot afford it,
  
• the U.S. has some of the world's slowest, most costly broadband (per megabit per second),
• the U.S. subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more affirmative broadband policies surge ahead.

See The Broadband News Is In, but it Isn't All Good. The myths spouted by the PSC and ATR about markets and competition are addressed in the comments of Consumers Union:

The disappearance of potential competitors through mergers, the domination of the in-region wireless market by the dominant incumbent local exchange carriers, and the failure of CLEC competition on the platform have left residential consumers with, at best, a cozy duopoly that dribbles out bandwidth at high prices. While the Commission should prioritize its efforts according to the extent of market failure – zero providers is a worse outcome than one and one is worse than two – it should not fool itself in to believing that the mere presence of two competitors is sufficient rivalry to ensure consumers will get the benefit of real competition. This is particularly true in urban areas, where low-income households have been priced out of the marketplace. There is nothing in economic theory or real world experience to suggest that two is enough for vigorous competition.

In contrast to the New York PSC, other states that submitted comments recognized reality: the marketplace is failing to provide universal affordable broadband and that more steps need to be taken if the United States is to keep up with countries that have a sound broadband policy and program. This is what they had to say:

The Michigan Public Service Commission (“MPSC”) hit many important notes in its comments , stating:

the FCC should develop a national broadband plan with the goal that all Americans have physical access to broadband service . . . at the location of their residence. While physical access alone does not imply that all Americans choose to adopt broadband service due to constraints like price, the FCC should not overlook this essential component. . . . The best solution would be to work toward an infrastructure that allows for broadband connections at reasonable prices at every residence, as well as robust broadband connections at free or further reduced prices available at community centers such as libraries. These two goals need not be mutually exclusive. While the national broadband plan will likely need to prioritize which of these types of projects to fund with public money, such as the money available under the [American Recovery and Reinvestment Act] ARRA, the FCC should ensure that the ultimate goal of the national broadband plan is true access for all Americans, including access through community centers and at their place of residence.
* * *
While the MPSC believes that demand-side policies will help encourage competition, thereby reduce price for consumers, it cautions the FCC against simply ‘allowing market forces to work.’ Due to the largely deregulated environment for broadband technologies, the FCC should closely monitor the competitive marketplace for broadband in order to address any areas where the market fails to provide broadband services at reasonable prices and with reasonable privacy protection. In the cases where the market does not produce sufficient demand for broadband at reasonable prices, the national broadband plan should include recommendations for reforming the universal service fund in such a way that broadband services would be supported.

Similarly, the Vermont Public Service Board and the Vermont Department of Public Service wrote that the deployment of broadband needs to be supported by the Universal Service Fund, stating:

The Vermont Public Service Board and the Vermont Department of Public Service (“Vermont”) are of the view that our national communications and technology culture have evolved to the point where broadband has become an indispensable tool for how Americans obtain and disseminate information, and communicate with each other about that information. Furthermore, for rural states such as Vermont, broadband internet service is vital for efforts to promote job creation and to retain a modern and technologically literate workforce. For these reasons, it is imperative that a national broadband policy be implemented that facilitates the deployment of a robust, inclusive broadband infrastructure that reaches American communities large and small with rate and service parity and reliability. To this end, Vermont recommends that the Federal Communications Commission (“FCC” or the “Commission”): (1) adopt a technically robust definition for “high speed” broadband; and (2) treat the deployment of broadband as a service to be supported by the Universal Service Fund (“USF”).

Vermont favors creation of a separate Broadband Fund, as outlined in the Federal-State Joint Board Recommendation, which would be tasked with expanding broadband Internet services to unserved areas.

The New Jersey Department of the Public Advocate's Division of Rate Counsel made several recommendations in its comments, including expanding universal service support to include broadband services and to make broadband affordable for all citizens.

Absent such regulatory intervention, the United States may become a two-tiered society of disparate access to and use of broadband.

The California Public Utility Commission in its comments stressed the need for government involvement for a broadband universal service fund:

At the federal level, we do support a limited federal Lifeline/Link-up Pilot Program to provide computers and discounts for monthly Internet access service to low-income consumers as a way to gauge the costs of such a program. However, if the Commission or Congress decides to permanently add Internet access or broadband service to the definition of federal ‘universal service’, all broadband and Internet access providers should be required to contribute to the federal Universal Service Fund. The FCC should then expressly clarify state authority to seek contributions from all broadband providers and Internet access providers for their respective universal service programs.
* * *
Another suggestion for funding of broadband would be for the FCC to explore universal service, at least initially, as a matter of ubiquitous availability of broadband infrastructure separate from universal subsidy of broadband service. If the broadband infrastructure is in place universally, then service plans and their costs can be approached relatively free of the costs associated with infrastructure deployment.

The Massachusetts Department of Telecommunications and Cable supports a broadband fund in its comments:

In response to the Commission’s queries with regard to universal service, the Joint Commenters affirm the [Massachusetts Department of Telecommunications and Cable] MDTC’s previous position that universal service support should be expanded to include broadband. Specifically, if the Commission were to incorporate broadband access into high-cost support, then it should establish a separate broadband fund for that purpose. In fact, the Commission should adopt the creation of a Broadband Fund comparable to that proposed by the Federal-State Joint Board on Universal Service.

The biggest telecom providers in New York support movement away from market-based solutions that have not worked. For example, Verizon in its comments stated its support for “policies that increase computer ownership, teach people how to use those computers and navigate the Internet, and demonstrate the relevance and benefits of broadband to their lives could go far in increasing broadband adoption.” Its preferred method to address affordability, however, was for refundable tax credits for low income families to help them afford broadband access. Time Warner Cable in its comments wrote that it:

encourages the use of federal funds to support broadband demand side programs, with a focus on outreach and education, subsidies for low-income consumers, and
programs that distribute laptops to low-income schools and families. Such initiatives are a core component of the broadband stimulus legislation, and figure prominently in the Rural Broadband Strategy. Even where broadband services are available from multiple providers, penetration remains relatively low in certain at-risk communities. Addressing that gap should be among the Commission’s highest priorities, facilitated by the process of obtaining improved information about the extent of that gap already underway, independent of this proceeding.

In sum, every state that submitted comments, consumer groups, and two of the largest voice and broadband providers in New York all recognized the need for a national policy and action to address the inadequate deployment and unaffordability of broadband. It is unfortunate that the New York PSC still has its head in the quicksand of the last century's market ideologies and continues to leave broadband deployment and pricing to the whims of the duopoly "marketplace" – despite the duopolies’ continuing failures to bring affordable broadband to all.

Lou Manuta

ESCO Advertises 9.75% Tax Savings on Delivery Service

We commented previously on the odd tax break given to ESCO customers which reduces the cost of delivery service still provided by the utility, enabling the ESCO actually to charge more for the part of the service it provides, i.e., the "commodity" portion of gas or electric service, and still show total bill "savings" to the customer. See ESCO Tax Subsidies: A Hidden $128 Million Cost of the New York PSC's "Retail Access" Scheme

We recently received a glossy flyer in the mail from "Energy Plus", an ESCO, claiming that residential customers who buy electricity commodity will get up to 9.75% savings -- on the utility-provided delivery service taxes:

Monthly sales tax savings
Save up to 9.75% on the delivery portion of your bill every month since you will no longer have to pay sales tax when you select EnergyPlus as your supplier.

These savings are because of a law that exempts sales tax on the delivery service part of the ESCO customer's total bill. According to a publication of the state tax department, sales taxes vary locally, but in no location are the total state and local sales taxes more than the 8.75% rate for Erie County.

According page 149 of the latest New York State Division of the Budget (DOB) Annual Tax Expenditure Report, the foregone public tax revenue due to this loophole

• was $6 million/year in 2002
  
• was $128 million/year in 2008,
  
• is projected to reach $154 million in 2009, and
  
• is still rising at a rate of more than $20 million/year.

There is no valid reason to subsidize an industry built upon arbitrage of tax breaks for financial middlemen who do not produce electricity. This permits companies who resell the same services at higher cost to win customers by splitting the savings from the unjustified tax break. This tax break rather than superior value may account for the widespread switchover of large industrial and commercial customers to ESCO commodity service.

It is difficult to imagine why DOB regularly proposes to axe worthy programs, in the name of balancing the budget, but doesn't propose elimination or phaseout of the increasingly expensive corporate welfare tax break favoring ESCOs and their customers, which might hit more than $150 million next year. For example, the Governor proposed a slow phasein of welfare grant increases, which had not been adjusted for 18 years, whose annualized cost, when phased in fully, will be $109 million a year. While some of the ESCO sales tax break is for local sales tax, ending the ESCO tax break could have helped New York's poorest families cope.

Energy Plus customers will get US Airways "dividend miles" for each dollar they pay for their electricity. Perhaps one function of the "plus" is to add a perk - frequent flyer miles - making it even more difficult to make an "apples to apples" comparison of what is being really charged for fundamentally identical ESCO utility service. See PSC Makes ESCO Service Comparisons Difficult; and PULP's Con Edison Bill Estimator.

There is no representation in the flyer of the rates actually being charged by Energy Plus for the unbundled commodity portion of electric service. The flyer claims that "we buy electricity every day at the best possible price and use that price to set our rate." Other than the vague puffery about the "best price possible," and that we "use that price to set our rate" which might be something other than the best price possible, the only clear representation of any savings is the tax break on the portion of the bill for utility-provided delivery service - there is no real representation that total bills will be any less than the charges of the traditional utility for full bundled service.

An article about at least one Energy Plus customer's experience indicates that savings may be illusory. See ESCOs Cost More -- A Familiar Experience. There is no evidence that shopping for other ESCO suppliers of residential utility service pays off over time, and those who switch often find themselves paying more than if they had not switched. See Think Twice Before Switching Utilities.

PULP's recommendation to customers wanting to reduce their electric bills: conserve.

For more on ESCO service, see PULP's webpage on ESCO issues.

Assembly Passes Bill to Correct Diversion of Complaints Regarding Submetered Electric Service

The Basics - The PSC Decides Customer Complaints over Utility Service
The Public Service Law and the Home Energy Fair Practices Act (HEFPA), enacted in 1981, have always provided for administrative adjudication by the Public Service Commission of customer complaints regarding residential utility service and bills. HEFPA was a major reform tantamount to a utility consumer bill of rights, and part of the package was a more customer-friendly PSC complaint adjudication system that can be invoked by customers with a phone call, letter, office visit, or an email or online complaint.

HEFPA Applies to Submeterers
The PSC administratively revived the practice of residential submetering in the late '70s, allowing owners permission on a case by case basis to resell electricity to occupants, a practice generally forbidden since 1951. In its submetering orders, the PSC repeatedly includes a statement, as it did in a February 2009 order, wrongly suggesting that HEFPA's coverage of submetered service was something entirely new that came about only in 2002:

Prior to the amendment of PSL Article 2 (HEFPA) by addition of PSL §53, HEFPA only applied to the provision of residential service by natural gas, electric and steam corporations and municipalities.

The above revisionist statement is completely belied by the fact that the PSC's own submetering regulations, on the books since the 1980's, allow waiver of the prohibition against resale of electric service only if the submeterer 's application provides for "complaint procedures and tenant protections consistent with HEFPA."

When the Legislature clarified HEFPA with the Energy Consumers Protection Act of 2002 (ECPA), it should have been crystal clear to all, including the PSC, that nontraditional providers of utility service like ESCOs and submetering landlords must comply with HEFPA. Most critically, ECPA clarified PSL Section 53 so that the PSC has no power whatsoever to waive HEFPA requirements, a power it had previously asserted regarding ESCOs, and apparently has done with submeterers. Perhaps prior to 2002 the PSC thought it could waive some HEFPA requirements, and that illusion ended with the Legislature's clarification.

Waterside Plaza, one of the first large rental buildings to be converted to submetering, claimed that it could have an alternative system for deciding complaints of its 1400 submetered tenants but this was rejected in 2006 in a court decision which stated

Those who submeter electricity for sale to residential end-users are utilities within the meaning of Article 2 of the PSL. Accordingly, those entities must provide all HEFPA protections.

Those protections, of course, include the right to get a PSC decision on a dispute.

The PSC's Submetering Regime Fosters Diversion of Complaints
Despite the clear statutory requirements, for years, both before and after the 2002 ECPA the PSC has allowed landlords to evade and escape HEFPA requirements. [One of the methods, discussed elsewhere, is to allow landlords to "deem" charges for electric service to be rent, and to avoid many HEFPA protections like deferred payment plans, which are triggered by utility termination notices, by evicting the tenants in landlord tenant court if they did not pay in full the electric charges demanded].

Another way around HEFPA's reach was to approve terms and conditions of owner-provided electric service that diverted complaints to owner-hired private arbitrators rather than telling tenants about the opportunity to obtain PSC determinations.

Even after the 2002 ECPA clarification, the PSC routinely issued - and continues to issue - orders that provide a route for landlords to divert customer complaints about their electric service to private arbitration before owner-paid arbitrators. For example, in a decision issued in May, 2009, the PSC discussed the submeterer's internal grievance procedures -- which require written complaints not required by HEFPA's simplified procdeures -- and stated:

Thereafter upon receipt of the protest, the matter may be submitted to arbitration under the provisions in the Bylaws of Argyle Condo by the Applicant or the resident, to resolve the grievance. All residents can also contact the New York State Public Service Commission if they are dissatisfied with either the managing agent or Board’s response to their complaints.

The process described thus approves time-consuming arbitration of utility service issues. In a January 2009 decision the PSC allowed the landlord to commence court proceedings against the tenant for eviction or for damages to decide disputes over electric bills instead of direct customer access to the PSC complaint determination function:

If dissatisfied, the tenant may request a review of the determination by filing a written protest to the Applicant within fourteen (14) days from the date of the property manager’s response. Upon such protest, the property manager will initiate, at no cost to the tenant, a proceeding in either Small Claims or Housing Court in New York City. All tenants can also contact the New York State Public Service Commission if they are dissatisfied.

The orders merely say that "all residents" or "all tenants" can "contact" the PSC -- but there is never an actual reference by the PSC to its duty to decide individual complaints under Public Service Law 43.

Wishy washy PSC orders such as this allow submeterers to discourage and deter complaints with the spectre of formal and risky arbitration and court proceedings, and encourage landlords to evade full disclosure of the real decisional function and duty of the regulatory agency.

The confusing PSC orders issued over the past decade affect more than 28,000 tenants. For detailed examples of these orders, see Under HEFPA, the New York PSC Must Decide Complaints of Submetered Customers. Even worse, if tenants check their leases or information provided by landlords when they submetered, they will typically find misleading gibberish about having to arbitrate disputes before landlord-hired arbitrators in formal arbitrations, or being taken to landlord/tenant court, and no solid information at all about the PSC complaint handling procedures and detailed information about how to access them.

The PSC's Laissez Faire Approach
Generally, we have found that landlords with PSC submetering orders never provided adequate notice to their tenants of their statutory right to have their complaints about electric service decided by the PSC, just as landlords never implemented other requirements of the orders, such as including essential terms and conditions of utility service in agreements signed by the tenants, as riders to their leases. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections.

A consequence of this subversion of utility customer rights is that PULP's research cannot identify a single PSC complaint determination involving submetered electric service, even though an estimated 28,000 rental apartments have been submetered in the past decade, and even though there is considerable tenant dissatisfaction with chronic billing errors, high bills, defective meters, shared meters, miswiring, violation of the rate cap provisions of submetering orders, and other service issues. Parenthetically, we also note that even though the PSC's Office of Consumer Services logs a high level of complaints lodged involving ESCO service, we cannot find a single PSC decision in a case against an ESCO. Shifting customers to unregulated utility providers, a legacy of the Enron era, still remains part of the New York PSC deregulation agenda: at least circumstantially, it appears that part of that deregulation agenda may be never to issue a precedental decision regarding the service of the new providers of utility service, i.e., ESCOs and submetering landlords.

Pending Legislation to Require Notification to Submetered Tenants of PSC Complaint Remedies
Assemblyman Micah Kellner sponsored a bill, A.7867, as part of a five-bill package to address submetering issues. A.7867 requires all submetering landlords to notify their tenants annually of their right to have disputes over landlord-provided electric service decided by the PSC. As stated in the Memorandum of Support for A.7867:

These alternative venues for complaint adjudication all involve time consuming and comparatively formal proceedings. They may also prove to be expensive and risky, for example, if an eviction case is the forum for resolution. These factors may serve to deter customers with meritorious complaints from making them, and reduce awareness at the Public Service Commission of the nature and quality of customer service actually provided by certain utilities.

Assembly Passes A.7867
Today, the New York State Assembly passed A.7867. A counterpart bill is pending in the State Senate, S. 5252.

For more information see PULP's website page on submetering.

PSC Seeks Comments on Petition of Hazel Towers Tenants to Halt Submetering

Tenants at Hazel Towers, a former Mitchell-Lama housing project in the Bronx, petitioned the Public Service Commission to halt submetering previously authorized by a PSC Order that waives the general prohibition against resale of electric service. The Petition alleges noncompliance with the Home Energy Fair Practices Act and the Commission Order. See Hazel Towers Tenants Association’s Petition for Investigation and Remediation of Noncompliance with Prior Order for Vacatur or Modification of Order Establishing Terms and Conditions of Submetered Electric Service at Hazel Towers and for a Stay. PULP is representing the Hazel Towers Tenants Association (HTTA).

The Petition of the Hazel Towers Tenants Association maintains that no valid agreements exist between the landlord and tenants for providing electric service to the tenants at rates, terms and conditions approved by the PSC, and that the Commission cannot now retroactively approve charges for service not agreed to by the tenants and not provided in accordance with the terms and conditions in its prior Order. Some tenants were overcharged in six out of the first twelve months of submetering, which began in 2007. Tenants disputing their landlord's charges for electric service were not given notice of the opportunity for PSC decisions on their complaints, and were threatened with court action or arbitration of disputes before private arbitrators hired by the landlord. Tenants first complained to the PSC more than one year ago. See Hazel Towers Tenants Ask PSC to Act on Submetering Complaints, PULP Network May 6, 2009.

On June 6, 2009, the PSC issued a Notice Establishing Comment Period providing for comments from interested parties by July 15; reply comments are due by August 15. Comments are to be filed with PSC Secretary, Hon. Jaclyn A. Brilling, at the Public Service Commission, 3 Empire State Plaza, Albany, New York 12223 and electronically via email at Secretary@dps.state.ny.us.

For further information see "Top Ten Submetering Myths" and PULP's web page on submetering.

Update on Lack of Lifeline Information at the PSC Website

A PSC representative took issue with our statement in All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies that

We could look for details on Lifeline and LinkUp assistance at the New York PSC’s Lifeline webpage -- but there isn’t one.

In fact, about all the consumer information you’ll find by searching the NY PSC website is an “Options for Telephone Consumers” page, which offers a one sentence description of Lifeline.

We were pointed to another PSC-funded web site, "AskPSC.com. It has a page on the Lifeline assistance program.

Still, the site index on the main PSC website does not mention Lifeline and Linkup, nor does the "A-Z Index" on the main PSC site.

The vast majority of eligible customers eligible for but not receiving Lifeline assistance should not have to "ask" the PSC and apply one by one at the alternative website or through their telephone company. Indeed, many of the households eligible for Lifeline assistance may be living in hardship made worse by high phone bills, and they cannot afford the internet service or computers they need to find information via the internet and the "AskPSC" website.

They should be more efficiently automatically enrolled in the reduced rate through a confidentiality protected match of records of customers receiving Food Stamps, HEAP, and other Lifeline-qualifying programs.

On the PSC's watch

• the major provider, Verizon, was allowed to adopt tariffs restricting Lifeline assistance when the customer buys service in a package,
  
• competing telephone service providers such as cable companies are allowed to avoid providing Lifeline, and
• the automatic enrollment system pioneered in cooperation with PULP, state agencies, and telephone companies is broken, with only 300,000 households getting the assistance out of an easily found population of four to five times that number.

As a result, a million easily identifiable eligible households are not getting assistance, low-income New Yorkers are losing hundreds of millions of dollars every year in telephone assistance, and New Yorkers are paying universal service surcharges that go to other states.

Update - July 7, 2009
According to latest available statistics, 309,000 customers received telephone lifeline assistance in 2008. While this is more than the 300,000 mentioned above, it reflects the downturn since the peak of 746,000 customers about ten years ago, and illustrates the failure of the PSC to commit to providing assistance to all who are eligible for Lifeline and to oval of barriers to enrollment.

PSC Acknowledges 315 Area Code Change is Not Needed

With the release of a three sentence Notice on June 15th, the New York State Public Service Commission ("PSC") brought an end to a proceeding to provide area code "relief" to the 315 area code region in central New York. This case began with a December 2007 Order to resolve the apparent diminishing availability of exchange (or NXX) codes in this area, a problem created by the PSC itself when it assigned multiple 10,000 telephone number NXX codes to competing phone companies in rural communities.

PULP identified this issue of waste and stranding of unused numbers in filings over the ensuing months - contending that a new area code should not be necessary for the mostly rural area with about 1.4 million residents and asking the PSC to reconsider its action:

• PSC Considering "Area Code Relief" For 315 -- Where Did All The Numbers Go? ;
• PULP Asks PSC to Investigate Need for New Telephone Area Codes in the 315 Region;
  
• PSC Puts 315 Area Code Changes on Hold Pending Investigation;
• PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes;
• PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315;
• PULP Provides Further Proof That Area Code Changes Are Not Needed Now in the 315 Area;
• 315 Area Code Number Exhaust Pushed Back Another Year: No Need to Add New Area Code Now;
• PULP Submits More Evidence to PSC Showing that a New Area Code in 315 Region is Unnecessary;
• PULP Submits New Evidence to PSC Showing No Need for Area Code Changes Now in Central NY 315 Area.

The Commission defended its action, saying it was correct in how it allocated upwards of 50,000 telephone numbers to each of over 50 tiny rural exchanges with just a couple of thousand residents each, stranding hundreds of thousands of telephone numbers that could have been used elsewhere.

Until today, the Commission had forged ahead with the proposal to add a new area code, and decided to implement it with an "overlay" code. If the "overlay" had been implemented, new numbers within the existing 315 area code would have a different area code, requiring the public to use ten-digit dialing instead of the current seven-digit dialing to make local calls. A company across the street or across town could have a different area code, requiring changes in signs, advertising, and directories.

• PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes;
• ALJ Recommends "Overlay" Telephone Area Code Requiring 11-Digit Dialing, Despite Plentiful Numbers and Exchange Codes in Central New York's 315 Area;
  

The legislature began to review the PSC's process for deciding whether to add area codes. In the 315 case, the PSC only had public hearings on how to implement a new area code ("split" versus "overlay") and refused to hold an on-the-record proceeding to hear evidence on whether to add a new area code. See Bill Would Require PSC to More Closely Scrutinize Area Code Changes. The Assembly passed the bill last month.

While the Notice does state that the 315 area code proceeding will merely be “held in abeyance” until the need for relief has arrived, with 100 NXX codes still available (with 10,000 telephone numbers each) and no NXX codes being requested at all in 2009, the case should be in "abeyance" for at least 10 or 20 years. The residents of the 315 area will thus be spared the cost and inconvenience of an unnecessary area code change.

Lou Manuta

Update
See No New Area Code for Syracuse, Syracuse.com, June 15, 2009

PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service

A New York state goal "to ensure that every New Yorker has access to affordable, high speed broadband Internet," was articulated by former Governor Spitzer, and it looks like the current Governor also well understands the connection between broadband availability and economic development. Governor David Paterson's recently released report, Bold Steps to the New Economy: A Jobs Plan for the People of New York, affirms the state commitment to universal broadband service:

Universal broadband is the keystone to creating equal access to opportunity in the innovation economy. The pace of business in the global economy has far surpassed the age of dial-up Internet connections. Governor Paterson is taking steps to ensure broadband is universally available throughout New York.

The crafters of American Recovery and Reinvestment Act ("ARRA") also recognized the need to improve access to broadband service. Among its numerous provisions to help jump start our ailing economy, Congress, through the ARRA, directed the FCC to develop a national broadband plan to bring broadband access to all Americans.

The FCC requested public input, and more than 500 entities submitted comments, including the New York State Public Service Commission ("PSC") in conjunction with the state's Chief Information Officer/Office for Technology. While the FCC requested and received comments on a variety of issues, including data mapping (which is used to determine where broadband is lacking and to focus activities), public safety, and network diversity, the New York PSC's positions on broadband availability are worthy of note. Indeed, they are disappointing and unsupportable.

The PSC began its comments by taking a position in seeming direct opposition to Governor Paterson's public statements about the benefits of broadband deployment.

The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put.... The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.

Is the PSC displaying its true colors here, adhering to a laissez faire deregulation approach and opposing meaningful governmental action to bring affordable broadband to all?

In addition, the State's Chief Information Officer, who signed onto the PSC's broadband comments to the FCC, stated in the New York State Universal Broadband Council's recently released Annual Report:

There has never been a more critical time in our history to invest in the future of our children, to enable us to jumpstart our economy and compete on a global level. We must continue to effectively educate our citizens on how to use technology resources and Internet applications to enrich their lives.

So, how did the PSC, a representative of the state, take positions in comments to the FCC on broadband seemingly at odds with what the Governor himself - and his Chief Information Officer - publicly stated in the "Bold Steps" document and the state's own universal broadband report?

The whole purpose of ARRA's broadband provisions is to reallocate public resources in order to make affordable broadband universally available. The current "hands off" PSC approach has been a major failure - today the U.S. has some of the world's slowest, most costly broadband (per megabit per second) and the subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more proactive broadband policies surge ahead. See The Broadband News Is In, but it Isn't All Good, PULP Network, June 5, 2009.

The PSC comments went on to share the Commission's antagonism to expanding universal service support for eligible low-income broadband customers:

We're concerned that decisions will be made to subsidize the supply of broadband which would in turn be funded by the Commission's Universal Service Fund. This would harm New York, a net payer into the fund. New York would subsidize states that have not undertaken the investment - an unreasonable burden.

While it is true that New York is a net payer into the Universal Service Fund ("USF"), why is this so? Perhaps a reason is the New York PSC's own deficient policies which reflect a sad lack of commitment to universal service, a lack of direction, and a failure to devote resources needed to increase universal service support to New York's low-income telephone consumers:

Over the years the PSC has passed up many opportunities to expand Lifeline eligibility criteria, advocate for increased participation to keep federal universal service dollars from leaving New York for other states, and to work with the providers and the Office of Temporary and Disability Assistance to make automatic enrollment work better, but has chosen to sit on the sidelines. As a result, everyone loses. . . . According to the FCC's most recent Universal Service Monitoring Report (with 2007 data), New Yorkers contributed $445,600,000 into the federal USF in 2007, but New York telephone companies only received $248,838,000 in return ($36 million for Lifeline). The difference - nearly half of what is contributed - goes off to help fund programs in other states, most notably Alaska, Kansas, Louisiana, Mississippi, and Oklahoma. With an increase in the number of Lifeline customers in New York, more of this money would stay in New York, with little (if any) impact on the contribution level.

See All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies, PULP Network, March 21, 2009.

So now, under PSC logic, the failure of the New York PSC to revive and roll out the low income telephone assistance program, which makes New York a net payer into the federal USF, becomes a justification not to support universal service programs that would make broadband more affordable to the poor!

The failure of the PSC to advocate for increased federal support for broadband - because New York pays more into the USF than it receives when the reason for that disparity rests at the feet of the PSC -- is disingenuous and harms low income residents. Is that a valid reason to oppose a broadband Lifeline program? Or should New York's telephone Lifeline assistance program be fixed instead. In addition, somehow, the PSC believes it deserves a pat on the back for the "success" of its automatic enrollment process ("In New York we have increased our efforts on automatic enrollment program for lifeline and worked with other state agencies to streamline the applicability process.") The automatic enrollment process is obviously broken when there are more than a million easily identifiable recipients of Food Stamps yet the number of Lifeline customers is dropping in a nose dive - from over 750,000 Lifeline customers in 1996 to under 300,000 in 2008. See Low-Income Telephone Lifeline Assistance Reaches Fewer than 300,000 New Yorkers, Lowest in 20 Years, PULP Network, June 5, 2009.

In any event, the PSC does not seem to be too concerned about low income customers - or broadband ubiquity - in its comments. The PSC wrote:

A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.

The PSC advocates this position, while asserting that 95 percent of New Yorkers have access to broadband, yet only 71 percent subscribe. Besides the fact that the U.S. census claims only 54.1 percent of New Yorkers subscribe to broadband, the PSC offers no explanation for the large gap between availability and subscribership. Why do 20 (or 40) percent of those with "access" to broadband fail to subscribe? Obviously the PSC is not seeking answers to whether the cost of broadband is affordable to those low-income households not now subscribing, or causing hardship to those who do.

Could it be the combination of a lack of digital literacy and a lack of affordability? While PULP does support the PSC's goal of bringing broadband to libraries and schools (which the PSC referred to as "community gathering places"), we do not believe that stopping there will promote broadband in the home at some later date. Yes, educating people to the benefits of broadband is vital and is a natural role for libraries and schools, but creating a broadband Lifeline program is an equally important goal that should not be pushed off until some time down the road. See Is There a Need for a "Broadband" Universal Service Fund?, PULP Network, April 23 2008 Universal broadband means the service runs to the front door and the customer can afford to subscribe. Obviously if 20 to 40 percent of New Yorkers do not subscribe when it is on their doorstep, cost is a major factor.

In these comments, the PSC may have displayed its true colors - an agency out of step with its own administration, an agency which still wishfully believes the market will take care of all when market failures are abundantly clear, and an agency which caused most of the problems it discussed but tried to present as victories. New Yorkers need and deserve better.

Lou Manuta

GAO Report Supports Broadband Stimulus Goals, Coordination Needed

On June 10, 2009, House Energy and Commerce Committee Chair Henry Waxman, Communications, Technology, and the Internet Subcommittee Chair Rick Boucher, and Congressman Zachary Space released the Government Accountability Office (“GAO”) report entitled Broadband Deployment Plan Should Include Performance Goals and Measures to Guide Federal Investment.” The Report found that despite the efforts of the market-based policies of the previous Administration to deploy broadband, gaps remain, primarily in rural areas. Because of limited profit potential, investments may be targeted to other more profitable areas, regions or countries.

The GAO noted that the American Recovery and Reinvestment Act of 2009 provided more than $7 billion to the Department of Commerce’s National Telecommunications and Information Administration (“NTIA”), the FCC, and the Department of Agriculture’s Rural Development Utilities Program, to map broadband infrastructure in the United States, develop a plan for broadband deployment, and issue loans and grants to fund broadband access and availability in rural areas. “This funding,” found the GAO, “will greatly increase the potential for achieving universal access, but overlap in responsibilities for these new broadband initiatives makes coordination among the agencies important to avoid fragmentation and duplication.” It added that “[t]hese efforts will help guide federal involvement in deploying broadband in the coming years. Additionally, the efforts complement each other.”

Specifically, it was found that NTIA’s data will allow all agencies to identify and cost effectively target federal funds to the areas with the largest unserved or underserved populations and will assist in the creation of the plan developed by the FCC. The GAO called on the FCC to include additional elements, such as timelines, specific performance goals, and clearly defined roles and responsibilities for the involved federal agencies to achieve transparency and accountability in the use of federal funds. “Increasing accountability for achieving intended results is especially important given the potential costs of expanding broadband deployment to currently unserved or underserved areas.”

As a result, the GAO recommended that the FCC’s national broadband plan, which is due to Congress by February 2010, include performance goals, measures, and time frames for achieving the goals. The GAO went on to recommend that the FCC Chairman consult with the Secretary of Agriculture and the head of NTIA on those goals, and work with them to define the roles and responsibilities of these agencies in carrying out the plan.

Lou Manuta

South Carolina Finds Cable Phone Service to Be a Telecom Service; What about NY PSC?

The Public Service Commission of South Carolina ruled that Time Warner Cable’s digital voice service is a telecommunications service subject to its jurisdiction in a June 5, 2009 order. Most importantly, it found that neither the FCC nor any federal court has expressly preempted state regulation of telecommunications services offered by fixed interconnected Voice over Internet Protocol (“VoIP”) providers such as Time Warner Cable. As a result, the company must now contribute to the state universal service fund.

PULP considers this to be good news as we look to level the playing field between carriers providing fundamentally similar local telephone service using related, but different technologies. South Carolina now joins Kansas, Missouri, Nebraska, and New Mexico in requiring VoIP providers to contribute to the state universal service fund. Where is the New York PSC?

PULP has expressed our support for VoIP providers contributing to New York’s universal service fund, the Targeted Accessibility Fund (“TAF”). See The Time Is Now - New York Should Begin Requiring VoIP Providers to Support State Universal Service. We wrote:

Today, both nomadic and fixed VoIP providers have become vibrant competitors in New York. The cable companies, primarily Time Warner Cable and Cablevision, are the second and third largest local telephone service providers in the state. However, for every customer they migrate from the incumbent, the state loses regulatory assessment fees (which are used to run the Public Service Commission), gross receipts taxes, and TAF assessments. TAF is New York’s version of a state Universal Service Fund and supports Lifeline discount telephone service, 911 connectivity, and the relay service for the deaf. Contributions to TAF are dwindling due to migration of customers to unassessed cable telephone or other VoIP service, and the situation has reached the point where consideration of assessing VoIP providers has become not just a question of fairness, but one of necessity.”

There was a time when the New York State Public Service Commission (“PSC”) was one of the leading state regulatory agencies in the country. About 10 years ago, the PSC led the way with establishing the parameters for permitting the dominant local exchange carrier into the long distance business and with creating customer migration guidelines -- both of which have been duplicated around the country. Now, we are behind other states on this vital issue of fairness, which results in reduced state revenues, diminished benefits for the most needy New Yorkers, and an unfairly tilted playing field favoring some competing providers of similar services. The time for the PSC to bring VoIP into the fold is now.

Lou Manuta

Study Finds High Profits for New York's Electric Power Generators

In March, a McCullough Research report, New York Independent System Operators Market Clearing Price Auction is Too Expensive for New York estimated that New Yorkers pay $2.2 Billion per year more for electricity due to the high prices obtained by sellers in the flawed York Independent System Operator (NYISO) wholesale power spot markets. The report cites the example of a seller who offers power consistently at the highest amount allowed by NYISO, $1,000/MWH, as an indicator that prices are not based on marginal running cost - as predicted by spot market enthusiasts - but on other factors, perhaps to game the market.

A high bid can effectively withold power from the day-ahead and hourly spot markets. When sellers demand an extremely high price for part of the output they may be "hockey-stick" bidding as a stratgem to drive prices higher than if they had made a cost-based bid.

In response to hearings held by the New York Assembly, the NYISO and its defenders (the New York PSC, the NYISO market monitor consultant, and the merchant power industry) refused to identify the seller who regularly demanded $1,000/MWH. They pointed out that NYISO rules filed with FERC require the identity of sellers and the price they demand to be completely confidential for six months and then for the identities of sellers to be "masked" when the prices they demand are eventually released. They also argued that a $1,000/MWH price demand is rarely paid and might even be justified in some hypothetical circumstances, and that the NYISO's private consultant "market monitor" had vetted the system for manipulation.

McCullough Research responded with further analysis of NYISO data showing that high bids are not an isolated anomaly, but are in fact quite common.

The problems posed by NYISO's lack of transparency amply demonstrate that the [PSC Staff] are unable to provide convincing explanations for the hockey stick bid in New York that is continuously posted by bidder 55446280. Even worse from a policy perspective, it appears that the Public Service Commission has not yet been briefed on the full extent of the problem.

* * * * Hockey stick bids are not simply the province of a single bidder in New York State. Bids higher than any plausible level of marginal cost are made continuously by a number of different bidders. Our database of NYISO bids, for example, has non-economic bids (over $900/MWh) made by 95 different bidders. On average, each bidder submitted non-economic bids for seven different generating units.

* * * * In the twelve months from September 2007 through August 2008, the New York ISO received 585,043 bids at $900/MWh or more. This appears to be a very large number of anomalous bids – 12% of the 4,859,186 bids entered into the NYISO markets during this period.

* * * * If (as appears reasonable to assume from the limited data available) the complex and secretive bidding process at NYISO is creating an environment where anomalous bidding is a frequent occurrence, this should be part of the public debate concerning NYISO's reform.

New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues, and A Short Review of Anomalous Bidding at the New York ISO from September2007 through August 2008. See McCullough hits back at NYISO report, Larry Rulison, Times Union Blog, March 31, 2009.

In reaction, on May 29, 2009 the director of New York's trade association representing the merchant power industry authored an op-ed article extolling the benefits of a "free market." See Free market means cheaper power, Times Union, May 29, 2009.

The "market-based rate" system of the NYISO spot markets allows sellers to charge what the market will bear (within the $1,000/MWH cap), and to avoid running at any hour when their costs will not be covered by the market price. FERC allows the market to set the price when it believes the sellers lack market power and it assumes the market prices are reasonable without reviewing the prices demanded and without public disclosure of who demands what and who won the hourly auction bids.

In contrast, the traditional test of whether wholesale electric rates are "just and reasonable" as required by the Federal Power Act has been based on transparent disclosure of all rates demanded and evaluation of some measure of cost, with rates fixed so that sellers have a fair opportunity to recover their prudent operating costs plus a reasonable regulated return on their investment. Thus, an examination of the earnings of the power producers is another way to test whether the market prices in New York are reasonable.

On June 5, 2009 McCullough Research issued a memorandum with an analysis of the estimated earnings of New York power producers in 2008.

A combination of high fuel costs and non-economic bidding practices at the New York In-dependent System Operator (NYISO) made 2008 a very profitable year for generators in New York. The profits of the largest plants in New York were very high. On the most conservative basis, assuming no debt in the capital structure, the profits range from 19% to 99%. Alternatively, assuming a 50/50 capital structure, the profits range from 31% to 186%. The before-tax weighted average of 100% equity is 50%, and the same measure for 50% equity is 93%.

PRE-TAX RETURN ON EQUITY

50/50 Capital Structure / 100% Equity
AES Cayuga 186% / 99%
AES Somerset LLC 112% / 61%
Astoria Generating Station 122% / 67%
Athens Generating Plant 44% / 27%
Bethlehem Energy Center 40% / 23%
C R Huntley Generating Station 155% / 81%
Danskammer Generating Station 85% / 46%
Dunkirk Generating Station 154% /81%
Indian Point 2 51% / 28%
Indian Point 3 114% / 60%
Nine Mile Point Nuclear Station 102% / 54%
R. E. Ginna Nuclear Power Plant 72% / 39%
Ravenswood 31% / 19%
Weighted Average: 93% / 50%

McCullough Research Memorandum, June 5, 2009.

See Electricity Price Gougers, N.Y. Post June 6, 2009; Deregulated Electric Market Allows New York's Electric Generation Plants to Reap over 100% Profits, Yonkers Tribune, June 5, 2009.

New York's Household Telephone Penetration Holds Steady, Remains Low

In its latest report on telephone penetration in the United States, the FCC found that from July 2008 to November 2008 (the date of the most recent data), the percentage of households in New York State with a telephone grew from 94.3 percent to 94.7 percent. By comparison, the national average is now 95.0 percent, down from 95.4 percent in July. The New York numbers are lower than neighboring states Connecticut (97.1 percent), Massachusetts (96.1 percent), Vermont (97.4 percent), Pennsylvania (98.3 percent), and New Jersey (95.4 percent). To ensure the most complete, accurate results, in recent years, residents in the FCC survey are asked “Does this house, apartment, or mobile home have telephone service from which you can both make and receive calls? Please include cell phones, regular phones, and any other type of telephone.”

We estimate that with its 95% household telephone penetration rate, about 369,000 New York households lack telephones.

If New York achieved the 98.3% penetration rate of Pennsylvania, 243,565 more New York households would have telephones than have them today.

The report also includes data on telephone penetration by income. Nationwide, in November 2008 only 92.9 percent of households with incomes under $20,000 a year had a telephone, while 98.2 percent of households with incomes up to $100,000 had a telephone.

Lou Manuta

The Broadband News Is In, but it Isn’t All Good

Dr. Melodie Mayberry-Stewart, New York’s Chief Information Officer, head of the state Office for Technology , and Chair of the New York State Council for Universal Broadband, took to the podium at the Opportunity Online Broadband Summit on June 3rd and delivered the sobering news: the Council’s just released NYS Universal Broadband Annual Report for 2008 revealed that the U.S. lags behind much of the world in broadband penetration, broadband speed, and price per megabit. In addition, while New York’s median download speed, 4.14 megabits per second, does exceed the nationwide average of 2.35, our country is ranked in 15th place worldwide, far behind Canada (7.6), France (17.6), Finland (21.7), South Korea (49.5), and Japan (63.6). She added that 48 percent of households throughout New York state lack broadband connectivity, roughly 3.7 million households or 10 million people.

On top of this, recently released U.S. Census data shows that 61.5 percent of New Yorkers had Internet access at home in 2007, but only 54.1 percent had broadband connectivity. While these figures slightly exceed the national average (50.8 percent of Americans had broadband in the home in 2007), it is safe to say that millions of New Yorkers currently lack broadband access.

What do these statistics hold for economic development, educational opportunities, and job training? Plenty.

In one of his first public statements since being elected President, Barack Obama stressed the importance of broadband when on December 6th he said that “It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online.” N.Y. Times, Dec. 8, 2008, Obama Pledges Public Works on a Vast Scale. The President and Congress began to follow up on this commitment with a $4.7 billion universal broadband program as part of the federal stimulus package. As stated in a National Telecommunications and Information Administration (NTIA) press release:

The U.S. Congress has appropriated $4.7 billion to establish a Broadband Technology Opportunities Program for awards to eligible entities to develop and expand broadband services to unserved and underserved areas and improve access to broadband by public safety agencies. Of these funds, $250 million will be available for innovative programs that encourage sustainable adoption of broadband services; at least $200 million will be available to upgrade technology and capacity at public computing centers, including community colleges and public libraries; $10 million will be a transfer to the Office of Inspector General for the purposes of BTOP audits and oversight. Up to $350 million of the BTOP funding is designated for the development and maintenance of statewide broadband inventory maps.

Dr. Mayberry-Stewart gets it: Broadband access to the Internet is critical for success in economic development, educational opportunities, and job training. However, global competitiveness dictates not only ubiquitous broadband availability, but the ability of every citizen to know how to use it and to be able to afford the service. Rolling out fiber optics and ensuring everyone has a computer to access broadband are certainly critical, but what happens when the monthly service fees are beyond the ability of most people to pay? Should a discount program for low income families and those on various forms of public assistance be made available for broadband, as currently exists in the Lifeline assistance program for local telephone service? Let’s not pave the superhighway, only to price the automobiles out of range for many.

What can the state do to boost broadband deployment and participation? Certainly the creation of the New York State Council on Universal Broadband and placing a knowledgeable expert like Dr. Mayberry-Stewart in charge gives the movement credibility and a chance at success. While the New York State Public Service Commission may balk at taking a lead role in achieving universal broadband, claiming that it lacks jurisdiction, that argument may not work for long. Just this week, the Minnesota Court of Appeals ruled in Bridgewater Telephone Company, Inc. v. City of Monticello (File No. 86-CV-08-4555) that broadband access can be a utility service provided by a municipality, just like water or electricity. The court found that:

The definition of municipal public utilities appears broad enough to contemplate Internet service. . . . Furthermore, Merriam Webster dictionary defines telecommunication as ‘communication at a distance (as by telephone).’ . . . Internet services seems to meet this definition. E-mail, instant messaging, and talking via web cam are all ways to communicate at a distance utilizing Internet service.

While this decision has no direct bearing on New York State, the decision recognizes that broadband service can be considered a utility, and that concept carries with it the public service duties including the obligation to make it available to all, at reasonable cost, in accordance with nondiscriminatory policies.

Yes, broadband is out there for some and more needs to be done to bring broadband to the door of every school, library, and home. No doubt about it. But, what more can be done to sustain this development? If people don’t use it or can’t afford it, the benefits of universal broadband connectivity – including concepts not yet dreamed of – will never become reality.

Lou Manuta

PSC Pulls Lifeline Tariff Language from Non-lifeline Providers

Back in February, PULP Network reported on a competitive local exchange carrier purporting to “Lifeline” telephone service even though it had not been certified as an “eligible telecommunications carrier” (“ETC”). See When Is Lifeline Not Lifeline?. ETC status makes the company eligible to be compensated for a large portion of the Lifeline rate reduction out of the federal Universal Service Fund (“USF”) and New York’s Targeted Accessibility Fund (“TAF”) . The federal USF is paid for by most telephone customers in the country who contribute to the fund through a surcharge on their monthly phone bills. The New YorkTAF is a mandatory contribution made by certified local exchange carriers in the state and is based on a percentage of their intrastate revenues. While the ETC is reimbursed for most (but not all) of its costs through the USF and TAF, true Lifeline customers pay a fraction of the normal installation charges (under the Link-Up program) and are exempt from most of the taxes and surcharges attached to the phone company’s charges, including the $6.50 subscriber line charge. These taxes and surcharges can add $15 or more to a typical phone bill.

In the situation reported in February, since the carrier in question is not an ETC and is not eligible for reimbursement, their “Lifeline” customers do not see these discounts; rather, they may “save” say $2 or $3 off the regular price of service (which is far less than true Lifeline), but the customer still must pay the subscriber line charge and the other taxes and surcharges not applicable to Lifeline customers. As a result, without any notice, these “Lifeline” customers are paying far more each month than they should.

PULP brought this situation to the attention of the staff at New York State Department of Public Service (“DPS”). We learned that many smaller carriers opt to just copy the DPS’s model local exchange and access tariff and treat this tariff as their own. While there is nothing inherently wrong with using the model tariff, it included Lifeline language even though the carriers can not offer Lifeline without ETC status. As a result of PULP’s input, the model tariff’s Lifeline language was changed to reflect ETC eligibility requirements and seven competitive carriers (in addition to the one initially reported on) deleted the Lifeline language from their individual tariffs this week.

While PULP supports as many providers offering Lifeline as possible, we are glad that these carriers decided to remove the Lifeline language from their tariffs as the current situation was confusing and cost customers wanting real Lifeline assistance more than they should have paid.

Lou Manuta

With HEAP Closed, More Electric and Gas Customers Facing Termination

Utility terminations are soaring after the closure of the federally funded HEAP block grant program on May 15. Assistance under that program often covers only part of a customer's bills, and utilities are required under their vendor agreements with OTDA to continue service for only 30 days. After the HEAP program ended May 15, customers facing termination for nonpayment of bills are being confronted with demands to pay arrears beyond their means to pay, and some utilities are not providing new payment plans, on the ground that the customer broke a prior payment plan.

There is a bit of a "Catch-22" here. Much of the assistance available through the HEAP program is "Emergency HEAP," eligibility for which is triggered by a utility service termination notice. See Needy Households Must Stop Paying Energy Providers to Obtain Supplemental HEAP Benefits. It is not uncommon for utilities to "coach" or "educate" customers who fall behind in their winter bills to draw a termination notice - by not paying - and then obtain Emergency HEAP to help cover the arrears.

The PSC, however, is not requiring utilities to enter into new affordable payment plans after receiving the Emergency HEAP grants, and apparently is allowing them to demand large sums, beyond the customers' ability to pay, and to again threaten to terminate service. Growing numbers of households without the means to provide a down payment on a new payment plan sufficient to satisfy the utility or the PSC Hotline staff are losing utility service.

This drives customers into financial distress and thence to local Departments of Social Services to seek assistance under the state and locally funded emergency utility assistance program created in 1981, along with HEFPA, by Section 131-s of the Social Services Law. That program will provide grants to restore service, but on terms much more restrictive than HEAP. For example, customers with incomes above the welfare payment level are required to sign draconian repayment agreements, and some counties insist that they provide a lien on their homes. Because the standard of need for welfare has not been adjusted for 18 years, many low income workers find that they are ineligible for utility assistance grants, and must sign the agreements to repay, even though they are on harsher terms than the payment agreements they could not afford to pay to the utility.

Inevitably, many people were unable to repay the local department of social services for past grants, and now, under an OTDA regulation, they are barred from receiving any further assistance. OTDA allowed local departments of social services to relax the harsh rule temporarily last winter, but it is again in force throughout the state. See OTDA Eases, but Continues, its Administrative Restriction on Assistance to Utility Customers with Incomes Above the Public Assistance Level.

Low-Income Telephone Lifeline Assistance Reaches Fewer than 300,000 New Yorkers, Lowest in 20 Years

[See Update at bottom regarding number of Lifeline assistance recipients in New York]

The latest FCC telephone Lifeline subscribership numbers are out, and the news is not good. For the first time since 1989, the number of low-income Lifeline customers in New York has dropped below 300,000. As of December 2008, the largest local exchange carriers in the state (Verizon-NY, Frontier Telephone of Rochester, and Citizens Communications) served a total of 290,283 Lifeline customers. This represents a drop of approximately 20,000 since December 2007 and over 60,000 since 2006. By way of comparison, Lifeline subscribership in New York peaked at 786,657 in 1996.

What is the reason for this loss? It certainly can not be a lack of low-income households, as the state Office of Temporary and Disability Assistance (“OTDA”) recently announced that a record number of families throughout New York State were served through the Home Energy Assistance Program (“HEAP”) this past winter:

OTDA Commissioner David A. Hansell said that the total number of HEAP benefits issued during the 2008-09 HEAP season, which officially concluded on May 15, grew by one-third over the previous year to nearly 1.5 million, bringing more than $400 million to New York families. That total, already a record high, will grow as applications submitted in the final week of the HEAP season are still being processed.

So, the number of New York households eligible for Lifeline discount telephone service is surging, yet provision of the benefit intended by Congress and the FCC to help them afford phone service without hardship is falling. For another example, a record number 1.2 million New York households now receive Supplemental Nutrition Assistance Program (SNAP) benefits (formerly Food Stamps), as of March 2009, according to the caseload statistics of New York Office of Temporary and Disability Assistance.

Food Stamps and HEAP are only two of several alternative criteria used under New York State Public Service Commission (“PSC”) standards for Lifeline eligibility. Telephone customers are eligible for Lifeline assistance if they also receive benefits in any of the following programs:

• SNAP
• HEAP
• Medicaid
• Safety Net Assistance
• Supplemental Security Income ("SSI")
• Temporary Assistance for Needy Families ("TANF")
• Veterans Disability Pension
• Veterans Surviving Spouse Pension
  

In addition, customers are eligible for Lifeline assistance if they earn up to 135 percent of the Federal Poverty Guidelines.

The New York PSC has not included other assistance categories permitted by the FCC (which include Section 8 housing assistance and families with children eligible for the federal school lunch program). This would further broaden the pool of eligible customers. Also, New York could expand eligibility beyond the list of federal programs is a state matching program through the Targeted Accessibility Fund (TAF).

With the ranks of the unemployed swelling and a growing number of families participating in need-based assistance programs – many for the first time – it is inexcusable that Lifeline subscribership continues to drop in New York. This is not an academic exercise – Lifeline means cash remains a little while longer in the pockets of low-income participants, available to be spent in the local economy on other needs. Not only is there is a reduction in the cost of the monthly service (ranging from charges of $1 a month for Basic Lifeline to about $15 a month for Flat Rate Lifeline), some taxes and surcharges that other telephone customers must pay are inapplicable, including the monthly $6.50 subscriber line charge. This results in about $20 in savings every month, which can be applied to other bills, medicine, rent, or food. For low-income families living from check to check, and often running out of funds for food and other needs before the end of the month, this can be a significant amount.

If all of New York's HEAP households received Lifeline assistance to which they are entitled, their purchasing power would increase by more than than $280 million. Instead, universal service surcharges collected from New Yorkers under FCC orders exceed the benefits received in New York by approximately $200 million per year. See All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies.

PULP attributes much of the responsibility for New York’s backsliding on Lifeline enrollment to the PSC's laissez faire approach to regulation and inaction on affordability of utility service. In addition, while the landline telephone companies can always do more to facilitate fuller Lifeline enrollment, their overall subscribership ranks are shrinking. Last month, the PSC found in a Verizon service quality order that the company is losing about 63,700 access lines a month in New York alone. Verizon’s total subscribership (as of December 2008) stood at 5.9 million, a drop from over 11 million as recently as 2002. Other local exchange carriers around the state are seeing similar, but not as stark, drops in recent years.

Wireless companies are offering Lifeline discounts today in New York, including Verizon Wireless, Sprint/Nextel, and TracFone, but these new Lifeline providers do not have enough Lifeline customers yet to make an impact on the totals. That said, the latest figures from the Universal Service Administrative Company – the entity charged with managing the Universal Service Fund (“USF”) – indicate that TracFone is anticipated to be the second largest recipient of low income support in New York, after Verizon. Since TracFone’s Lifeline customer base is proprietary, there is no way to know exactly how many Lifeline subscribers they have enrolled, but simple math (the total amount received divided by the $10 per month federal reimbursement from USAC) indicates the company will have over 21,000 Lifeline customers in New York during the third quarter 2009. While the time will come when the wireless Lifeline offerings will become major players, we do not anticipate that happening in the next year or two, primarily because, with the possible exception of TracFone, they do not significantly promote the discount.

On top of that, the largest competitive telephone service providers in the state – the cable companies – currently do not offer Lifeline. PULP believes that the cable providers should contribute to the state Targeted Accessibility Fund. See The Time Is Now - New York Should Begin Requiring VoIP Providers to Support State Universal Service. Cable providers currently are required by the FCC to contribute to the federal USF – which provides support for Lifeline – and begin to offer Lifeline themselves.

These number do not lie – New York’s Lifeline subscribership has plummeted in recent years and far too many low-income households are paying more for the telephone service than necessary. Much more can be done to ensure that all eligible customers know about Lifeline and can easily participate. Lifeline subscribership numbers are stable or up in other states, such as Texas, so what’s wrong in New York, whose customers and telephone companies are sending universal service surcharge funds to the Universal Service Administrative Company in Washington exceed by hundreds of millions of dollars the funds received.

Lou Manuta

Update July 7, 2009
We have learned that the latest available data indicate that there were 309,000 customers receiving telephone Lifeline assistance in 2008, not 300,000. The difference is due to smaller companies that were not included in the 300,000 count. Nevertheless, the falloff of enrollment since 1996, when it reached 757,000, is remarkable, and is reflective of the lack of attention given by the Commission to this issue. See PULP's Chart of Lifeline Enrollment, 1988 - 2007.

Federal Court Invalidates AT&T “Class Action Waiver” in Wireless Contract Boilerplate

Several people joined together to bring a class action suit against AT&T Wireless following its merger with Cingular in 2004. The complainants, AT&T Wireless customers, alleged that after Cingular merged with AT&T Wireless in October of 2004, Cingular deliberately degraded AT&T Wireless’ network in order to induce AT&T Wireless customers to transfer their plans to Cingular plans, which they alleged are generally more expensive and less favorable to customers. AT&T, in defense, alleged that the sole relief available would be for the customers to pursue their dispute in either individual arbitration cases or small claims court. In other words, AT&T maintained that class action suits are prohibited by a purported waiver of the right to bring a class action suit that was contained in the "boilerplate" of the standard customer agreements. The US District Court for the Western District of Washington found in favor of the complainants on May 22nd in Coneff v. AT&T Corp. (Case No. C06-944).

Complainants alleged that Cingular’s goal was to encourage AT&T Wireless customers to “upgrade” to Cingular’s network. These “upgrades” required customers to do one or more of the following: (1) pay an $18 transfer fee to Cingular; (2) purchase one or more new phones from Cingular; (3) pay $18 for a SIM chip to operate their current phone; and/or (4) enter into a new service contract with Cingular. They alleged that AT&T Wireless customers who did not agree to such an “upgrade” were left with a choice to either fulfill their contract term with a “degraded” AT&T Wireless service, or pay a $175 early termination fee to cancel service.

As a condition for approval of the merger, the FCC required Cingular to keep AT&T Wireless’ network in place until February of 2008. It was alleged that in July 2006, Cingular began imposing a mandatory $4.99 monthly fee to any AT&T Wireless customer still using the old AT&T network. Complainants also noted that major publications reported that Cingular had “been spending next to nothing to maintain the AT&T Wireless network, leaving customers who don’t upgrade to the Cingular network in the lurch.” As a result of this conduct, Complainants initiated the class action against AT&T Wireless in July 2006, requesting a declaratory judgment that an arbitration provision contained in their contracts with AT&T was unconscionable and therefore unenforceable.

Judge Ricardo Martinez found that Washington State law “has a strong public policy of refusing to enforce exculpatory class action bans,” and prohibiting the right of a plaintiff to initiate a class action suit violates the state’s consumer protection laws. Further, the Court noted that “the Washington Supreme Court has recently held that a class action waiver provision in an arbitration agreement is substantively unconscionable.” Accordingly, while there is no absolute ban on a class action waiver provision, where, as here, the damages are relatively small (generally between $4.99 and $175) and the “the cost of pursuit outweighs the potential amount of recovery,” the clause can be found unconscionable.

As a result, the Court determined that the

class waiver provisions in the instant case are unconscionable. Defendants are effectively exculpated from any liability as a result of the provisions contained in their [Wireless Service Agreements]. This conduct contravenes Washington’s fundamental public policy favoring the availability of class actions as a mechanism for enforcing a consumer’s rights.

While this decision has no direct bearing on New York wireless consumers and PULP is unaware of any New York decisions regarding arbitration clauses in telecommunications contracts, mandatory arbitration clauses in credit agreements have been invalidated in New York State as being unconscionable.

Lou Manuta

PULP Analyzes DHCR Submetering Rent Adjustments

The New York State Department of Housing and Community Renewal ("DHCR") oversees rent regulated residential housing. When a rent-regulated landlord is allowed by the PSC to submeter electricity, and begins to charge tenants separately for the electric service based on usage measured by a submeter, the landlord must simultaneously lower the rent, which previously included electricity as a service included without extra charge in the rental agreement ("rent inclusion" of electricity).

When tenants are notified that submetering permission is being sought by the landlord, the standard information given them typically suggests that only a tenant who wastes electricity will pay more than before. But in reality, the rent reductions in the DHCR schedules are far less than typical bills for reasonable electricity usage. See Top Ten Submetering Myths.

As a result of the too-small rent reductions, when electric service is unbundled from rent, tenants are likely to pay significantly more for total rent and electric charges than they did with rent inclusion of the electricity. Only after the submetering is implemented do tenants realize that the amount of rent saved by the rent reduction will not come close to covering the new cost of electric service provided by the landlord.

For many tenants living living on fixed incomes this comes as more than a rude surprise - it may cause financial hardship or even lead to their displacement or eviction. See Submetering Challenged at Claremont Gardens in Ossining.

The current DHCR schedule of rent reductions for submetered tenants in New York City lowers the rent by $29.81 for a one room apartment, and up $60.20 for a six-room apartment. Schedules for other locations around the state are lower. The current schedules are in a 2008 Update Number 1 to DHCR Operational Bulletin No. 2003-1.

PULP prepared a review of the history and methodology underlying the DHCR schedules for rent reductions when rent stabilized apartments are submetered, basically finding that the critical assumptions regarding electric usage and price used to generate the low rent reduction schedule understate normal usage and actual prices, are highly unreliable, and were made to defend a predetermined low schedule that favors landlords.

Submetering Summit

On Saturday, May 16 tenant leaders, legislators, state agency representatives (from the PSC, DHCR, and NYSERDA) and PULP met for nearly five hours to discuss electricity submetering issues and problems. Present at the Submetering Summit were tenant association leaders from buildings with a total of more than 25,000 tenants.

Elected officials who attended and spoke included New York State Assemblymen Micah Kellner, Brian Kavanagh, New York State senator Thomas Duane, Manhattan Borough President Scott Stringer, and New York City Council representatives Daniel Garodnik, Jessica Lappin, and David Yassky.

PULP presented an overview of submetering, and reviewed ten common "submetering myths" fostered by submetering proponents, landlords and state agencies.

The Waterside Plaza Tenants Association presented infrared photographs which illustrate the poor thermal efficiency of the windows, walls, roofs and vents in their buildings where the PSC allowed submetering of electric heat, and related the difficulties of tenants who find it hard to heat their apartments due to drafts or who must pay hundreds of dollars a month in winter to run their heat pumps to keep warm.

During the meeting, tenants from other buildings related their experience in receiving DHCR rent reductions of only $39 while their electric bills were multiples of that, and their experience in not getting action from the PSC on their complaints for more than a year.

Assembly members Kellner and Kavanagh participated as a panel discussing pending state legislation that has been introduced to address submetering issues. An online audio recording of their presentation is available.

Representatives of the PSC discussed the process for landlords to obtain PSC submetering orders and the opportunities for tenants to comment to the PSC when it considers a submetering application from a landlord. Tenants criticized the comment process, stating that the information given tenants when submetering is proposed is often incomplete or untimely, and the real impact of submetering is not known until too late, after the PSC order is issued, when the landlord's electric bills are issued.

The PSC representatives also discussed HEFPA rights and the HEFPA complaint process for handling disputes over submetered electric service when they arise after submetering is implemented. A PSC representative indicated that complaints can take a year to decide, that the PSC has only one person in its New York City office who checks meters for accuracy, and that when overcharges are discovered, they are remedied only for individual customers who complain, and not for all tenants in a building. Tenants indicated they had never been notified of their HEFPA rights and had not been aware that the PSC decides disputes over the submetered electric service.

A DHCR representative indicated that once a building is submetered, and when rents are reduced according to its schedule for rent reductions in rent stabilized housing, DHCR has no further involvement. (Thus, an overcharge of electricity is not an overcharge of rent, which is subject to treble damages under the rent regulation laws). He indicated that DHCR would never allow submetering of electric heat in rent stablized housing. In contrast, the PSC has issued numerous orders allowing submetering of electric heat in situations involving subsidized housing projects for low and middle income households, e.g., former Mitchell-Lama projects. See PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants; Submetering Slowed at Roosevelt Island.

A NYSERDA representative indicated that NYSERDA now assumes submetering saves 8% of the electricity used in a building, rather than the 18% - 26% stated in its submetering publications. (The higher figures were relied upon by DHCR when it lowered its rent reduction formula and by PSC staff in its proposal to submeter every master metered building). The representative indicated that NYSERDA provides financial assistance to landlords to enable them to submeter as part of a package of energy reduction measures in the NYSERDA "Multifamily Building Performance Program" but that its role is that of a grant maker, and it does not affect buildings submetered without NYSERDA assistance. NYSERDA does not assist tenants or tenant associations in buildings previously submetered with NYSERDA assistance who are now burdened with inefficient appliances, fixtures, controls, and leaky windows and poorly insulated walls.

Residential submetering, generally prohibited since 1951, was allowed on a case-by-case basis by the PSC for coops and condos in 1978, and for rental housing in 1979. The growth of submetering in rental housing was slow, and did not accellerate until after 2002. when DHCR changed its rules for reducing rents to make submetering more financially attractive to landlords. NYSERDA also boosted submetering with cash grants and incentives to landlords to encourage them to convert to submeters, and the PSC liberally granted landlords' applications to submeter.

Approximately 28,000 tenants now have electric service provided by their landlords. Permission has been granted for additional buildings where submetering has not yet been implemented. PSC staff, in testimony in the last Con Edison rate case, proposed to require all master-metered buildings, where electric service is included in rent and not individually metered, to convert to submetering. This would affect an additional 600,000 tenants in Con Edison territory.

For further information, see PULP's web page on submetering.