Protection of Customers of Cooperative Utilities Under Power Authority Regulations

Co-op Utilities Are Exempt from Public Service Law Requirements and PSC Oversight
Yesterday we received a question about the rights of customers of Steuben Rural Electric Cooperative. The day before, the utility turned off service to approximately 35 of its customer-members due to unpaid bills. Customers said there had been a printed warning message on a recent bill, but they say they received no separate notice of the actual shutoff. The utility demanded 100% of the amount owed as a condition of restoring service. When customers who could not afford that sought assistance from the local department of social services, a HEAP grant was proffered, but was rejected by the utility, which insisted upon full payment of all arrears.

For most New York utility customers, the Home Energy Fair Practice Act (HEFPA) provides strong procedural and substantive remedies for consumers to protect against abrupt termination of services and harsh collection practices. These protections include advance notice, the right to pay arrears over time under a deferred payment agreement (DPA), the right to contest the correctness of charges through a complaint to the Public Service Commission (PSC), and recourse to the PSC Hotline (800-342-3355), whose staff are empowered to resolve controversies involving termination or denial of service and can direct a utility to provide service or refrain from termination of service.

HEFPA is contained in Article 2 of the Public Service Law. Section 67 of the New York Rural Electric Cooperatives Law provides

Cooperatives . . . . shall be exempt in all respects from the jurisdiction and control of the public service commission of this state and shall not be subject to the provisions of the public service law.

Therefore, HEFPA does not apply to co-op utilities and so PSC complaint and Hotline remedies are not available to co-op utility customers.

Limited Customer Protection Under Regulations of the Power Authority of the State of New York
Are customers of co-op utilities then without any protection from arbitrary shutoffs and harsh practices?

In a word, no.

Cooperatives and small municipal utilities that receive most of their power from the Power Authority of the State of New York (NYPA) are required, under NYPA regulations having the force of law, to provide somewhat weaker protections that resemble those of HEFPA. See 21 NYCRR Parts 451, 452, 457, 459. See also, Lathrop v. Village of Bath, 112 A.D.2d 769 (4th Dept. 1983) (HEFPA deposit limits do not apply to municipal utility receiving its power from the State Power Authority).

The NYPA regulations address termination of service in Part 459:

Any municipality or rural electric cooperative purchasing essentially all of its power requirements from the Power Authority f the State of New York shall incorporate into its service rules and enforce the procedures governing discontinuance of electric service as set forth in sections 459.2 through 459.14 of this Part.

According to NYPA, Steuben Rural Electric Cooperative is one of 47 municipalities and coops that receive a low cost hydropower allocation from NYPA, and has a long term "partnership" arrangement with NYPA for NYPA to provide all its energy requirements. Thus, it appears that the Steuben Rural Electric Cooperative is subject to the NYPA rules and must incorporate them into its own rules.

NYPA Requirements
What do the NYPA rules require regarding the disconnection of service for nonpayment by utilities subject to its rules?

One would never know from searching the NYPA website, which appears to have no ready information regarding protection of residential consumers.

Here are salient features of the NYPA regulations, which are published in volume 21 of the Official Compilation of New York Codes, Rules, and Regulations:

• Section 459.3 requires a separate termination notice and forbids termination “until at least 35 days have elapsed from date payment was due. Additionally, such termination cannot occur until: (1) at least 15 days after written notice has been served personally upon a customer or resident 18 years of age or older; or (2) at least 15 days after the utility mails written notice by a registered or certified letter to the customer at the address at which service is received...."

• Section 459.14 requires the utility to offer DPAs: "Installment plan. No utility shall terminate service unless the utility has first offered a monthly installment plan that is just and equitable. Each utility must offer a just and equitable monthly plan to all customers whose service has been disconnected for nonpayment. To the extent practicable, the monthly installment plan should be based on the customer's ability to pay, past payment history, the amount of indebtedness, and the availability of other resources. The monthly installment plan should require a customer to pay current bills and a portion of past indebtedness and may include a provision for payment of interest on the arrears. Such agreement may provide for a downpayment of the arrears provided that no such downpayment shall exceed one-half of the amount of the arrears or three months average billing, whichever is less. Such agreement may be renegotiated and amended where the customer can demonstrate that there have been significant changes in his or her financial circumstances which have arisen due to conditions beyond the customer's control.

• Section 459.13 requires prompt reconnection of service when the customer pays the bill in full, enters into a DPA, receives a payment from a social services official, or when there is a "direction by the Power Authority of the State of New York.... The direction to reconnect service . . . . will only occur when it reasonably appears, in exceptional circumstances, that there is legitimate dispute about an unpaid portion of the arrears claimed by a utility; where an apparent error in the disconnection of service has occurred, or where a serious impairment to human health or safety seems to exist. . . .

Advance notice alerts the customer of future utility action and the claimed basis for it, which is of constitutional due process significance when a governmentally owned utility, such as the municipal utilities under NYPA regulations. In addition to preparing a defense in the case of error, the notice gives the customer who does owe the utility money time to find resources to pay the bill, negotiate a payment plan, or, if that is not possible, to seek public assistance or HEAP when HEAP is available.

As stated by the Supreme Court in a case requiring notification to customers of their right to appeal decisions to terminate service, “Utility service is a necessity of modern life; indeed, the discontinuance of water or heating for even short periods of time may threaten health and safety. And the risk of an erroneous deprivation, given the necessary reliance on computers, is not insubstantial.”There is no information at the NYPA website regarding how a customer can request intervention by NYPA to correct "an apparent error in the disconnection of service."

Customers of utilities subject to NYPA regulations apparently are not notified of possible recourse with NYPA in the event their utility makes an "apparent error in the disconnection of service...." In at least one instance, it appears that a Steuben co-op customer became homeless as a result of a disconnection without the advance notice required by the NYPA regulations.

There is a strong public interest in minimizing wrongful denials or terminations of utility service, which can have severe repercussions and costs for individuals, families, communities and the general public. Unsafe situations frequently flow from a lack of utility service or use of less safe alternatives. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households In at least one instance a utility's refusal to accept a HEAP payment may have contributed to the death of a customer. See Lawsuit Involving Death of Velma Fordham Settled by National Fuel.

Rejection of HEAP
In the absence of a statutory obligation, the duty of a utility to accept a HEAP payment as sufficient to reinstate service when it does not cover all arrears, for example, by treating it as a downpayment on a new DPA, is governed by a HEAP vendor agreement between the utility and the state agency that oversees HEAP, the Office of Temporary and Disability Assistance (OTDA). OTDA has been allowing utilities not to "acknowledge" a HEAP payment and to refuse to restore service at the utility's option.

PULP has questioned whether the stance of OTDA, which essentially allows utilities to decide which eligible HEAP households will have their crisis resolved, violates the requirement in federal law that a state's crisis assistance plan must actually provide for prompt resolution of emergencies of households eligible for Emergency HEAP. See PULP Urges HEAP Program Reforms.

In addition a utility subject to NYPA regulations may be obligated to restore service or abstain from termination of service when a local social services office proffers a four-month emergency utility assistance grant under Social Services Law 131-s. Section 131-s by its terms applies to "gas corporation, electric corporation or municipality," and does not espressly mention a cooperative. When this law creating the state utility assistance program was enacted as Chapter 895 of the Laws of 1981, it contained a dovetailing provision added to the Public Service Law, PSL § 65-b, which requires utilities (under PSC jurisdiction) to provide service "if the utility corporation or municipality receives, or is entitled to receive, a direct payment or receives a guarantee of payment from a social services district." These payments referred to in PSL § 65-b include those made under Social Services Law § 131-s.

The NYPA regulations, 21 NYCRR Part 459.13 essentially borrow the language of PSL § 65-b, requiring a municipal or cooperative utility to provide service upon "receipt of a commitment of a direct payment or a written guarantee of payment from the local social services commissioner...." So, although there is no explicit reference to Social Services Law 131-s in the NYPA rules, just as there is none in PSL § 65-b, it could be argued that the duty to restore service upon receiving a proffer of a four-month 131-s payment from a social services official should also adheres to utilities subject to the NYPA regulation.

PS, 5/20/08. The Power Authority directed Steuben co-op to restore service to the customer terminated without proper notice, and a court case brought by the customer was settled.