Tuesday, March 04, 2008

PSC Should Investigate Village of Ilion Utility Deposit Requirement

Ilion Village Utility Demands A $300 Deposit to Obtain Electric Service
According to the March 4, 2008 Utica Observer Dispatch, the Village of Ilion municipal utility adopted a $300 deposit requirement as a condition of residential electric service, effective January 1, 2008. See Ilion's Utility Deposit Takes its Toll. It is not clear whether this new rule was filed with and approved by the Public Service Commission (PSC). It is not contained in the Ilion tariffs posted at the PSC website. Ordinarily, a utility cannot impose any requirement for service that is not contained in its tariffs filed with and approved by the PSC. In turn, the PSC is powerless to approve a requirement for utility service in violation of the statutes that govern it.

HEFPA Generally Prohibits Deposits
The Home Energy Fair Practices Act (HEFPA) is New York's utility consumer "bill of rights." It was adopted in 1981 by the Legislature, to establish and consolidate in Article 2 of the Public Service Law the basic rights and remedies of New York's residential energy consumers. Perhaps the strongest utility consumer protection statute in the nation, HEFPA has saved many lives, and implements much of New York State's universal service policy for electric and gas service.

Under HEFPA, residential service deposits for electricity, natural gas or steam such as the requirement adopted in 2008 by Ilion have been generally forbidden for 26 years:
On and after January first, nineteen hundred eighty-two, no utility corporation or municipality shall require any new residential customer, other than a seasonal or short term customer, to post a security deposit as a condition of receiving utility service....
Under other provisions of HEFPA, residential customer deposits are allowed in very limited circumstances, e.g., when a customer requests service for a short term or seasonal basis, or when a customer is deemed to be "delinquent" by reason of his payment history, or when the Public Service Commission (PSC), after a hearing, approves a different deposit requirement, which has never been done.

In the very narrow set of circumstances when a deposit is allowed under HEFPA, a deposit is limited to "not greater than twice the average monthly bill for a calendar year...." Where a customer uses electricity for space heating, the limit is twice the "average monthly bill for the heating season." According to PSC typical bill reports, the typical Ilion electric bill for 500 kwh is about $24. According to the news article, Ilion demands a flat $300 deposit from new customers, obviously excessive for those who do not heat with electricity.

The Village of Ilion is currently listed by the PSC as one of the utilities currently subject to PSC jurisdiction and regulation - including HEFPA. HEFPA protects all customers of municipal utilities like the Village of Ilion. (Some municipal utilities that receive the majority of their power at very low cost from the Power Authority of the State of New York (NYPA) are exempted from the jurisdiction of the Public Service Commission (PSC). Even those utilities, however, are subject to residential consumer deposit limitations similar to HEFPA, under NYPA regulations). Over the years, previously exempt municipal utilities have come under the PSC's jurisdiction - and the requirements of HEFPA - as they began to purchase more of their power from non NYPA sources.

The purpose of HEFPA is to protect the public interest by assuring the continuous provision of safe utility service without unreasonable qualifications or delay. Deposit requirements impede the prompt provision of service. Energy is a modern necessity. When utility service is not provided, less safe alternatives are likely to be used at higher risk and cost to society (see Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households ) and accidents are more likely, (see Cop Who Shot Kid has Light Excuse).

The Public Interest Outweighs the Utility Interest
The public policy of continuous service, adopted in HEFPA, overrides the legitimate, but secondary, concern of the Village of Ilion to collect its bills. Utilities must pursue strategies other than imposing deposit requirements and withholding of service in the absence of a deposit.
  • Customers who move owing arrears can be pursued through legal action.
  • Customers who default in payment because they cannot afford it may be eligible for assistance to satisfy unpaid utility bills through the Herkimer County Department of Social Services. The County administers the federally funded Home Energy Assistance Program and the county-and-state funded utility emergency assistance program under Section 131-s of the New York Social Services Law, which in certain circumstances requires counties to provide utility assistance grants in amounts up to the most recent four months' bills.
  • Many utilities assist customers in establishing eligibility for HEAP and other assistance
  • Utilities are allowed by the PSC to set their rates at a level which makes a reasonable allowance for uncollectibles, which can arise from simple bad debt or customer bankruptcies.
PSC Should Direct DPS to Investigate
The Public Service Commission should direct the Department of Public Service (DPS) -- the administrative arm of the PSC -- to investigate and determine if the new Ilion utility deposit rule was properly filed and adopted and if it complies with HEFPA.

In addition, the PSC should direct DPS to undertake a broader audit of HEFPA compliance by Ilion. For example, the Application for Service form attached to the Ilion tariffs contains the following language:
Customer understands that service will be furnished by the Utility in accordance with its rules, regulations, and general rates on file with the New York State Public Service Commission.... It is the policy of the Utility not to grant electric service to a past customer if said customer owes a balance from a previous account. Electric service will be granted only when past due amounts are paid in full.
HEFPA, however, mandates that applicants who owe a utility for past service to an account in their name must be offered a deferred payment plan that is fair, equitable, and negotiable, based on the applicant's financial circumstances. The maximum down payment to obtain service cannot exceed half the amount due or the amount of three months service, whichever is less. Thus, Ilion appears to be in violation of this requirement, too.

Apparently, compliance with HEFPA is not closely monitored and enforced by the DPS, which accepted the Ilion tariffs that do not recognize the right of an applicant who owes arrears for past service to a deferred payment agreement. Indeed, the news article indicates that Ilion copied a similar deposit rule adopted three years ago by the nearby Village of Frankfort, which is also listed by the PSC as a utility it regulates.

PSC "Hotline" and Complaint Remedies for Applicants and Customers
Applicants for residential utility service from Ilion can challenge a denial of service by calling the PSC Hotline, at 1-800 342-3355. The Hotline staff have the power to order a utility to provide service forthwith.

If the PSC Hotline does not solve the problem, persons required to make deposits can file complaints with the PSC and can challenge a demand for a deposit or seek a refund of any deposit that was paid in violation of HEFPA. The PSC complaint number is 1-800-342-3377. If the complaint is not resolved informally, an administrative hearing is available, and persons still aggrieved can obtain a written ruling from the five-member Public Service Commission.

Persons denied service due to an illegal condition for service may receive $25 per day for wrongfully denied service, under PSC regulations, 16 NYCRR § 11.3. Also, if denial of service in violation of HEFPA leads to death or serious injury, the utility is potentially liable in court for damages. See Lawsuit Involving Death of Velma Fordham Settled by National Fuel .

Example: The National Grid Deposit Case
In 2003, National Grid attempted to introduce onerous new deposit requirements. First, without filing new tariffs, Grid tried to classify all customers without written leases for more than one year as "short term" customers. With respect to this rule, the Commission later said
all deposits now held by the company under its lease-based policy and which have not been applied to delinquent accounts should be returned immediately with interest at the rate established for security deposits. . . .
When PULP petitioned the PSC to annul that rule, which had not been filed with the PSC, Grid abandoned it and asked the PSC for permission to adopt a different rule that would require customers to pay a deposit if their "credit score" is below a certain level. Hearings were held on that proposal, which was withdrawn after PULP's expert witnesses testified in opposition to the "credit score" requirement and showed how a deposit requirement places undue burdens on lower income households. Then, a third National Grid deposit proposal - this time contained in a proposed settlement that was agreed to by National Grid, DPS Staff and the Governor's CPB - was opposed by PULP, and ultimately was not adopted by the PSC in its decision.

In the National Grid deposit case, PULP argued for return of wrongfully required deposits and statutory penalties for wrongful service denials. The PSC rejected an argument that the utility had reasonably relied on informal approval or acquiescence of the DPS:
PULP continues to urge that all lease-based security deposits be immediately returned to customers and that a forfeiture be imposed for customers whose service was delayed as a result of the lease-based policy. PULP does not believe that Niagara Mohawk's mistaken belief that the lease-based policy was legal together with the silence of Staff on the subject should provide "good cause" for the company's delay in providing service to applicants.**** The record suggests that the company disclosed its plan for a lease-based policy to the Department and was never specifically told it could be illegal; the record also shows that the company never specifically asked the Department if the policy was legal. In arguing that the company had good cause to deny utility service to residential customers under the lease-based policy, Niagara Mohawk and Staff rely on the Department's silence, which, in our view, is not a strong position from which to argue good faith or due diligence.
The utility was required by the PSC to rectify wrongful denials of service and to return deposits to customers, with interest. The PSC indicated that individual customers whose service had been denied due to the deposit rule might be eligible for the $25/day statutory penalty on a case by case basis.

1 comment:

TM said...

The City of Jamestown, Chautauqua Co., has a deposit scheme as well. The $100 deposit is allegedly $30 water, $40 electric, etc., but I've never heard of anyone being excused from paying $100. Any new residential customer is required to pay.