PSC Votes to Continue Retail Access Programs Promoting ESCO Service

Over the past decade the New York State Public Service Commission caused well over $100 million to be spent to implement and promote its "retail access" regime. The money aids "competitive" ESCO providers of natural gas and electricity through a combination of direct PSC advertising and promotion expenditures and orders directing the distribution utilities to spend money on the ESCO regime. In contrast, most states rejected the "retail access" model, and California eliminated "retail access" to its residential customers.

In a proceeding commenced to review its "retail access" policies, the Commission issued an Order on October 27 in which it adheres to its retail access regime, with some reduction in public and utility subsidies. Rather than acknowledge a change of direction the Commission essentially proclaimed its mission was accomplished, stating: "We now determine that retail access markets are sufficiently well-established in New York to warrant discontinuance or modification of some retail access policies and practices. Other policies and practices should remain in place to facilitate the further maturation of those markets."

On the same day the same Commission released a companion decision regarding egregious ESCO marketing practices. "ESCOs" are the "retail access" marketers. It is hard to believe that retail access is truly "sufficiently well-established" when it was established through lack of transparency, deception, manipulation and subsidy.

Statistics show that the number of electric customer accounts no longer taking service from the distribution utility grew by 27.7 percent over the past year. For the same period, the number of gas customer accounts taking service from non-utility suppliers rose by 20.6 percent. These figures include all service classes. The "statewide" residential electric customer penetration rate is now 15.6 percent, which represents a 32.5 percent increase in customer migration over a year ago. For gas customers, the "statewide" residential penetration rate is 15.1 percent, a 22.1 percent increase over a year ago. This "statewide" data is somewhat inflated,however, because a considerable segment of New York's customers are spared exposure to PSC and ESCO marketing blitzes because they receive service from LIPA and municipal utilities without "retail access."

How many of the residential customers who switched know if they are saving money, or are they paying more and stuck in a long-term contract with an ESCO? They really can't know because the PSC makes it nearly impossible to compare ESCO bills with what a customer would pay for the same service from the traditional utility. See PSC Makes ESCO Service Comparisons Difficult. And there is no valid study showing that ESCO customers save any money over time due to switching from the utility. See Think Twice Before Switching Utilities. There are many indications that they do worse and can pay far more for ESCO service. See Where Are the PSC's ESCO Marketing Rules?

Continuing its promotion of the ESCO regime, the PSC ruled that "retail access programs" will continue. It also was decided that it is appropriate for utilities to provide information about competitive service to their customers through utility outreach and education programs. In addition, utilities were directed to continue or implement ESCO referral programs and purchase of accounts receivables programs so long as the costs of such programs are not borne by ratepayers. Accordingly, the obligation for funding promotional programs was shifted to the ESCOs, which must assume the financial responsibility of promoting their competitive offerings. PULP has long urged a cessation of subsidies and ratepayer funded promotion of "competitive" ESCOs.

Going forward, then, utilities are authorized, but not required, to continue market match programs, market expos, and energy fairs if ratepayers do not bear the costs of these programs. If utilities choose to continue these programs, at ESCO expense, then utilities are expected to work with the ESCOs on the design and implementation of these programs and to obtain from the ESCOs funding for the programs and approval of the program's content and structure. Continuation or implementation of an utility's ESCO Referral Program, however, was conditioned on ESCO funding for the program, with only those ESCOs that fund the program eligible for participation. Utilities that currently offer ESCO referral programs have recovered their costs in rates paid by their customers, not by ESCOs. Cost responsibility for those utility programs will be transferred to ESCOs as new rates for these utilities are adopted.

Even if the ESCOs offer to take over financial responsibility for the "referral programs," PULP questions whether utilities should participate in them. Typically they offer a tiny savings for two months and hand the customer over to an ESCO at an unknown rate, often significantly higher. The ESCO, however, can truthfully tout that the PSC and the utility are approving the program and that it is a way for customers to "save money" (due to the minimal teaser rate discount) when in fact customers may pay much more over time. The ESCOs thus can continue to hijack the authority of the state utility regulator and the brand of the traditional utility in aid of their deceptive marketing, if the utilities go along.

Two programs in particular were identified by the PSC as being essential and must be continued: utility consolidated billing and the purchase of accounts receivable ("POR") programs. These programs were deemed to be needed to enable ESCOs to bill and/or receive payments from customers on an equal footing with the utility service providers. Customers were also found to benefit from POR programs and consolidated billing because these programs facilitate implementation of the Home Energy Fair Practices Act ("HEFPA") which, among other things, protects customers upon disconnection of service for non-payment, while consolidated billing provides a service that customers prefer because it enables the customer to receive a single bill for distribution and commodity service, thus minimizing customer confusion.

Of course, customers would be protected by HEFPA whether or not the utility did the billing, under the Energy Consumer Protection Act of 2002. Through consolidated billing and POR, ESCOs can hand off to the utility the burden of collection, which may be substantial, considering the problems with high ESCO bills and the inability of ESCOs to collect any amount for their services in court because their charges have not been fixed by the PSC.

Additionally, some utilities had been required to conduct surveys of customers to test their awareness of competitive markets. Once sufficient levels of customer awareness have been achieved, as the Commission believes has occurred, repeating surveys yields little additional information and is of little benefit. Moreover, because the agency collects migration statistics, it can estimate customer awareness of the competitive markets through those statistics. Therefore, utilities were relieved of the obligation to perform these surveys in the future. Similarly, surveys of ESCO satisfaction will no longer be necessary.

While the Commission may believe that retail access has reached a critical mass in New York and that some requirements can be thrown out, problems with ESCOs remain. As the companion order found, enhanced oversight of ESCO marketing is a necessity. With a disproportionate percentage of PSC complaints involving ESCOs, the agency will now consider assessing regulatory fees on ESCOs, something these entities have escaped all these years, and something that is long overdue.

The number of residential ESCO customers may actually go down in the coming years. ESCOs have not demonstrated economic value to residential customers over time and the new marketing rules may reveal that many of the ESCO contracts that purport to save the customer money or fix rates are utter shams. Also, although large customers have switched to ESCO service, the driving force may be a slight tax break on delivery rates due to a loophole which, if eliminated, could reduce large customer switching.


More needs to be done to protect ESCO customers as well, since the marketing order does not go far enough on topics such as early termination fees, full price disclosure, and slamming. As Major League Baseball experienced in the past year when the advent of steroid testing eliminated most of the over 40 sluggers from team lineups, the renewed oversight of ESCOs (as limited as it may be) will likely show that the retail access markets are less robust than they may appear.

So it seems that PSC policy regarding ESCOs is now drifting toward neutrality. PULP suggests that the PSC look at a perhaps unintended consequence of its "retail access" experiment. The Federal Energy Regulatory Commission (FERC), in a decision opposed by consumer groups, held that a utility can buy wholesale energy from its affiliates without federal scrutiny if it has no "captive customers." It then held that customers who have "retail access" are not "captive." This means that the PSC must increase its vigilance to make sure that New York utilities do not purchase electricity or natural gas at high prices from affiliates, taking an unregulated profit at the affiliate level, and then pass that high cost through to customers in little-noticed monthly rate adjustments designed to pass through wholesale costs without profit. Also, the PSC must take further steps to provide more transparent pricing information to facilitate price comparisons between traditional utility service and ESCOs, and among ESCOs.

Lou Manuta

315 Area Code Number Exhaust Pushed Back Another Year: No Need to Add New Area Code Now

In its semi-annual update on the projected number exhaust date of every area code in North America, the North American Numbering Plan Administrator (“NANPA”) reported this week that as of October 2008, the exhaust rate for the 315 area code has slowed significantly since its April report. In April, the exhaust date was forecasted at the first quarter of 2011 and it has now been pushed back to the first quarter of 2012. In its notes, NANPA explained that this major change is due to a “reduced historical and projected demand.” Translation: Many fewer telephone providers are requesting numbering resources in that area, especially when considered against a recent high demand for numbers.

This news is not surprising to PULP. We have gone to the Public Service Commission on numerous occasions since it announced the need for numbering relief in the 315 area code, arguing that the agency’s wasteful policies of giving out multiple 10,000 telephone number NXX codes to small, rural exchanges had to stop. They were creating an artificial shortage of telephone NXX codes throughout the entire 315 region by stranding literally thousands of telephone numbers where they could never be lawfully used. This artificial shortage was also manifesting itself in other area codes around the state, especially in 518, where the same policies were being applied. See

• 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.

Also, the legislature began to review the PSC's number utilization practices. See Bill Would Require PSC to More Closely Scrutinize Telephone Area Code Changes.

When the PSC began its proceeding to consider adding a new area code in the current 315 area, it was projected that a new code would be needed by the third quarter of 2010. In the past year, the exhaust date has been pushed back one and one half years. With the advent of different policies for issuing new numbers, the demand for telephone numbers in 315 has become merely a trickle, with only 4 NXX codes being used up in 315 during the first nine months of the year, and with 98 NXX codes remaining. At this rate, it would take more than twenty years to exhaust the numbers. A similar slowing has occurred elsewhere in the state, with the exhaust date, for example, being pushed back a full year in 518 as well. We fully anticipate that should the Commission continue to use diligence and common sense in doling out telephone numbers, that when the next report comes out in April 2009, the 315 number exhaust date will have been pushed back even further. That would be good news to residents, businesses, and the carriers that serve central New York.

Lou Manuta

Testimony in National Grid Natural Gas Rate Case Urges Low Income Rates and Reform of Utility Termination Practices

On October 27th, PULP submitted expert testimony from Jerrold Oppenheim in the Public Service Commission proceeding examining National Grid’s request to raise natural gas rates in its Niagara Mohawk service territory. Oppenheim stated that the utility’s proposed increase in the delivery charge would prove devastating to low income gas consumers who already are struggling to pay their bills in the current economic environment. Even with a proposed $5 monthly discount to low income customers, Oppenheim estimates that gas bills will increase 22 percent, not including the cost of the gas itself. He included facts from studies showing that more families are having to choose between keeping their homes warm and providing sufficient healthy food for their children.

The low income rate proposal has three elements: (1) to further reduce the low income heating rate through a rate reduction larger than that proposed by the company, from the proposed $5 to the 26 percent reduction employed by National Grid in Massachusetts, the cost of which would be spread across all service classifications; (2) to modify the list of programs which define eligibility for the low income rate and to incorporate automatic enrollment procedures (as employed for Lifeline discount telephone service) into that aspect of program implementation; and (3) to provide a further rate reduction (up to 35 percent) to the low income heating rate for those customers who have the lowest household incomes.

Oppenheim also testified against increases to the minimum charge. The company is requesting to increase its minimum charge for delivery service by 35.96 percent, from $14.71 per month to $20 per month. By raising the minimum charge, the company would make more of the total bill insensitive to consumption, as everyone would need to pay $20 regardless of usage, thus stimulating sales and reducing the cost effectiveness of energy efficiency measures.

The testimony further asks the PSC to conduct proceedings to set performance goals that would measure National Grid's use of service termination as a collection tactic and reduce it. Currently the PSC measures service interruptions due to equipment malfunction and storms, and sets performance goals, but the PSC has no system of performance measurement to address deliberate termination of service, and thus is not measuring whether utilities are meeting the Legislature's goal, established in Section 30 of the Public Service Law, of continued residential service. Information obtained by PULP in the rate case discovery process indicates that National Grid is resorting to service termination more often.

As part of the rate case, the Commission scheduled public statement hearings in Syracuse, Schenectady, and Schodack to hear from interested members of the public.

Syracuse United Neighbors testified on October 28 that the proposed increases will make it impossible for many low income customers to pay their bills, even with the $5 discount, as the proposed increase does not include the increases in the price of the fuel. They added that the increases will result in a jump in terminations, leading to homelessness, candle fires, and possibly people freezing to death. Also, they testified that National Grid’s proposals will do nothing to reduce consumption as funding for energy efficiency measures has been removed from the proceeding by the PSC.

Lou Manuta

PSC Issues ESCO Marketing Order

Background: Long-Awaited Action
On October 27, 2008 The Public Service Commission (PSC) issued an Order Adopting Amendments to the Uniform Business Practices, Granting in Part Petition on Behalf of Customers and Rejecting National Fuel Gas Distribution Corporation’s Tariff Filing in the ESCO (energy service company) marketing proceedings commenced in December 2007 by the City of New York Office of Consumer Affairs and the New York Consumer Protection Board (CPB). The petitioners alleged that ESCOs (energy service companies) engaged in deceptive and overly aggressive door to door marketing tactics to switch customers from traditional full utility service to take the "commodity" portion of service (as distinguished from "delivery" service) from ESCOs. Common complaints are that the door to door ESCO marketers promise savings that are not realized, "teaser" discounts are offered for a short period with no disclosure of future rates, customers are induced to switch without having seen the contract, prices cannot readily be compared with publicy filed utility rates, and contracts have onerous early termination provisions. See

• ESCO Marketing Practices Subject of New PSC Proceeding;
• PULP Files Comments on Regulation of ESCO Sales Practices;
• PULP Files Reply Comments on the PSC's Proposed ESCO Marketing Standards;
• Early Termination Fees;
• PSC Makes ESCO Service Comparisons Difficult;
• While the PSC Deliberates, Consumers Continue to be Hurt by ESCOs;
• Where Are the PSC's ESCO Marketing Rules?

National Fuel Gas Distribution Company (NFG) also sought PSC approval of new tariffs designed to safeguard customers from ESCO marketing activities.

Instead of issuing certificates or licenses to ESCOs, and promulgating regulations governing ESCO services, the PSC has issued a long set of governmentally endorsed unofficial "Uniform Business Practices" (UBP), intended primarily govern the business relationship between ESCOs and distribution utilities. The UBP generally did not provide for meaningful customer protections, and do not provide for remedies to customers if they are broken. The UBP were last revised in November 2006 and provided only a single, remedial step to curb ESCO customer abuses: revocation by the PSC of the ESCO's eligibility to market in New York. This, of course, only stops further customer abuse by an ESCO; it provides for no remedy to injured customers.

The October 27 Order
In its October 27,2008 Order, the Commission said it would retain the revocation sanction, and add a range of enforcement measures, including:

• early release of customers from their contracts without termination fees;
• a requirement that ESCOs who violate the UBP record all telephone marketing calls; and
  
• reimbursing customers who did not receive the savings promised by an ESCO.
  

The Commission said its decision to adopt revised UBP “is a further signal that all provisions of the Public Service Law necessary to protect consumers will be enforced with regard to ESCOs.”
This phrasing suggests that the Commission claims power to disregard or not enforce provisions of the Public Service Law, enacted by the Legislature, which the agency deems not to be "necessary" to protect customers. Even this hedged recognition of responsibility for reasonable terms and conditions of all utility service, whether provided by full service utilities or ESCOs, however, stands in sharp contrast to the PSC's initial vision, in which ESCOs were to have been almost completely unregulated. See Retail Choice, A Race to the Bottom. For a decade ESCOs have run roughshod over consumers in the contract formation process, and since the 2002 legislative enactment that rebuked the PSC and clarified ESCO service is subject to HEFPA, the PSC still has yet to issue a complaint determination against an ESCO. Now, at long last, the PSC says it will “take a more active regulatory role in the more mature ESCO retail markets. . . ,” noting that it always has had “well-understood jurisdiction over ESCOs and their marketing practices” -- even if it failed to exercise that jurisdiction and looked the other way while ESCOs abused customers.

Among the revisions to the UBP are:

• A requirement that a Customer Disclosure Statement be displayed on the first page of all ESCO sales agreement. The statement must include:

• the price, terms and conditions of the sales agreement;
• the duration of the agreement;
• the terms for renewal of the agreement;
• the process for canceling or terminating the agreement;
• the amount of any termination fee;
• the amount of any late payment fees;
• a clear description of any guaranteed savings and what the customer must do to achieve such savings.
  

• ESCO market representatives must receive training on the Home Energy Fair Practices Act;
• ESCO market representatives must carry identification showing their full name, photograph, the trade name of the company and its logo and telephone number, and they may not represent themselves as being an employee or affiliated with a distribution utility;
• Customers must be provided, upon request, with written information regarding the ESCO’s products and services, including the ESCO’s name and telephone number for inquiries, verifications and complaints;
• ESCOs must investigate customer inquiries and complaints about marketing practices within 10 business days.
  

Early Termination Fees
The Commission will continue to allow ESCOs to charge early termination fees in “sky-is-the-limit” amounts, provided they are disclosed in the boilerplate Customer Disclosure Statement. Similarly, ESCO customers will not be given a 30-day grace period on early termination fees, allowing them to receive and review their first bill and decide to terminate their agreement without early termination fees. The Commission opined, rather unrealistically, that the Customer Disclosure Statement will fully inform customers and no further protections are necessary.

Slamming
With respect to customer “slamming,” the PSC ruled that anyone in the household will be able to switch your account to an ESCO, regardless of the accountholder’s name on the utility bill. So don't let your barmy uncle answer the door when those attractive young ESCO representatives come around to sign up new customers for a high priced contract with a costly early termination fee. ESCOs must verify that every enrollment is requested by an authorized person. Records of these verifications must be retained by the ESCO for two years or the length of the sales agreement, whichever is longer.

Regulatory Assessment of ESCOs
The Commission will undertake a second phase of this proceeding, to deal with implementing PSL § 18-a assessments upon ESCOs. Under § 18-a, utilities receive an assessment on their gross operating revenues, which is used to fund the costs and expenses of the PSC and the epartment of Public Service. PULP raised this issue in its initial comments and supported the assessment of ESCOs, who are incurring huge regulatory costs without paying for them.

Conclusion
PSC assertion of jurisdiction over ESCO issues is, of course, long overdue and welcome. However, despite the heft of the 270 page document, there is not much new in the way of real teeth to enforce customer protection. Those with a cynical view might wonder if the PSC's new disclosure requirements will simply provide ESCOs with court defenses in cases where it is alleged they engaged in deceptive practices. For example, court cases are likely to fail if the ESCO can claim that the company practice is subject to PSC jurisdiction, or was disclosed in writing prior to sale, or is a matter of public record at the PSC. See Using the 'Reasonable Consumer' Rule in Deceptive Practices Litigation. Thus, high pressure telephone and door to door sales people may still be free to "puff" their services through oral misrepresentations, taking advantage of customers who are yearning for reduced energy burdens.

State Mum on Use of Additional HEAP Funds

We recently reported that New York will receive approximately $120 million more than last year for the Home Energy Assistance Program (HEAP). Bush Signs LIHEAP Funding Increase; Public Input Needed on How it Will be Allocated in New York. When the State HEAP plan for 2008-09 was developed, it assumed that the funding level would be substantially lower, i.e., at the Bush Administration's initially proposed national funding level of $1.7 billion, which would have reduced funds. Congress raised the national level to $5.1 billion. The State OTDA has not sought additional public input on how the new $120 million for New York will be used, and has announced no programmatic changes.

The New York HEAP program is scheduled to open November 3, 2008.

Lehman Bankruptcy Affects NYISO Markets and Constellation Nuclear Plants

The larger story of the meltdown of the unregulated mortgage-based derivatives market has overshadowed impacts on the NYISO spot markets and the ownership of nuclear plants in New York state. In addition to energy and ancillary services spot markets for the sale of electricity by those who produce it, the NYISO also runs "virtual" electricity trading markets, which total more than $10 billion per year in transactions between parties that neither make nor take electricity. The "virtual" market involves the sale and purchase of derivative instruments based on NYISO electricity spot market prices. Perhaps the size of the virtual market and the interest of its players aids in explaining why the "organized" markets continue, in the absence of consumer support. States with organized markets have higher electricity prices than the states that did not unleash their state-regulatedutilities, and the difference is growing.

Participants in the functionally deregulated NYISO "virtual" markets are required by the NYISO to maintain non-junk credit ratings and to post some, but perhaps not enough, collateral against possible default in paying off on their contracts. As stated by the NYISO in its newsletter

the NYISO establishes credit requirements applicable to market participants and the basis for allocating payment default amounts to market participants. If a participant defaults on its payment obligations to the NYISO, other market participants are liable for a portion of the default.

Apparently the NYISO "virtual" market casino had to pay off on some bets that were not covered when Lehman Brothers Commodity Services' (LBCS) parent company went bankrupt. In a cryptically worded announcement last Friday, the NYISO listed several participants in its markets who have defaulted in paying off their commitments. One of the participants is LBCS.

Lehman Brothers Commodity Services, Inc. ("LBCS") is in default under the NYISO tariffs. The NYISO is in possession of collateral and is in the process of evaluating the extent to which that collateral will cover LBCS's obligations due to the NYISO.

Pro-Energy Development LLC ("PED") is in default under the NYISO tariffs. The NYISO is in possession of collateral and is in the process of evaluating the extent to which that collateral will cover PED's obligations due to the NYISO.

Quark Power LLC is in default under the NYISO tariffs. The NYISO does not consider Quark to be a material source of default exposure and continues to evaluate legal strategies to collect this default.

The different wording of the last paragraph involving Quark Power, to the effect that it is not deemed to be a "material source of default exposure", suggests that the LBCS and Pro-Energy defaults may be material and significant. According to Platts Power Market Week 1/20/08 (PMW),

When LBCS filed for Chapter 11 bankruptcy protection, it did not list its total debts and assets, but rather simply marked a box declaring its liabilities at “more than $1 billion."

The NYISO either does not know or will not say how much of the $1 billion is owed by LBCS and Pro-Energy to the NYISO, ultimately to be paid by New York's electricity customers.

According to PMW, 10/20/08, "[t]he board of directors of PJM on Thursday authorized the grid operator to spread among its members about $12.5 million of losses resulting from the default of Lehman BrothersCommodity Services." In contrast, again according to Platts PMW, another wholesale electricity market operator, MISO, apparently was not stung when LBCS went down:

Bankrupt Lehman Brothers Commodity Services has defaulted on a payment obligation, the Midwest Independent Transmission System Operator said Tuesday. The ISO did not disclose the amount of the default, but CFO Michael Holstein said the entire amount is covered by collateral and there will be no impact on market participants.

The NYISO Business Issues Committee will be meeting tomorrow to recommend to tighten credit requirements in the NYISO "virtual" markets and its markets for transmission congestion contracts (TCCs):

The Business Issues Committee (BIC) hereby recommends that the Management Committee (MC) approve revisions to the NYISO’s tariffs to enhance the credit requirements for TCCs and Virtual Transactions in conjunction with the implementation of the automated Credit Management System, as more fully described in the presentation made to the BIC at the October 22, 2008
meeting.

The NYISO, alone among similar private electricity markets, had been settling accounts with traders monthly, rather than weekly, and so on September 29 it was proposed to move to more frequent settling of the traders accounts, to "[a]ccelerate cash clearing to reduce credit requirements, default exposure and the risk of socializing bad debt losses among all remaining Market Participants."

The NYISO is a private utility, ostensibly under FERC regulation, whose market rules are not backed up with the force of law, other than private contract enforcement, which typically does not protect ultimate consumers and which can be avoided in bankruptcy. The NYISO is set up as a non profit organization, and thus it has no shareholders. We rather doubt it will change its tariffs and assess the other virtual market sellers, who enjoy its lax market rules and who dominate its governance structures, or step forward to pay off any LBCS defaults by reducing NYISO costs, executive perks, salaries or consultant budgets, or taking other measures to control NYISO costs. See NYISO Costs Skyrocket, Benefits Questioned.

Rather, any cost of private marketeers' defaults will be "socialized" by the NYISO simply assessing a charge to utilities who buy energy there for their customers (instead of making it at utility owned power plants, most of which have been divested under prodding from the PSC). Any assessment for market players' credit defaults, in turn, will be flowed through by the utilities to New York's retail electricity consumers. NYISO rates are subject to FERC review, but FERC does not seriously scrutinize them. See NYISO Governance.

Perhaps an incidental impact of the Lehman bankruptcy may have weakened Constellation, the large utility that owns and operates two nuclear power plants near Oswego, NY. According to the trade press, there were "mark to market" accounting issues and possible losses of Constellation's holding company affiliates, who in turn may have been involved with energy trading and were affected by the Lehman Brothers bankruptcy. The value of Constellation plummeted this year, and it became the recent takeover target of Warren Buffet's Mid American. LIPA owns a share of one of the Constellation nuclear plants, so perhaps it will be able to obtain power at reasonable rates in long term rates unaffected by NYISO prices from the plant under new ownership, assuming the PSC and FERC approve the transfer. A FERC proceeding has been commenced and there is a brief public comment period on the proposed takeover. Mid American has also filed a merger petition with the New York PSC.

Update
10/22/08 -- According to Platts, the NYISO released some information today regarding the impact of the LBCS default.

LBCS' charges are just under $2.50 million at this point but are expected to rise to about $4 million by the end of the next billing period. NYISO holds about $10 million in cash collateral from LBCS but the money was frozen by the bankruptcy court and the operator does not have access to the fund right now.

New York ISO sees no major losses from three recent defaults. It is not clear whether the relatively small potential NYISO charges discussed above -- $2.5 million now and $4 million by the end of the next billing period -- is the end of the story regarding NYISO losses. If the ISOs and RTOs had only minor losses, that is some comfort to consumers. It remains to be seen who lost when LBCS went bankrupt with $1 billion in net liabilities.

PSC Halts 315 Area Code Changes For Now, But Denies PULP Petition for More Aggressive Telephone Number Conservation and Reclamation

At its October 15th Agenda Meeting, the PSC decided PULP's Petition in the 315 Area Code Proceeding. See PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315.

Late last year, the Commission requested public input on how it should resolve the telephone exchange “shortage” in the 315 Numbering Plan Area (“NPA”); that is, the perceived lack of "NXXs" as in "315-NXX-XXXX." The NXX is the exchange code portion of a telephone number and identifies to which community the NXX and its corresponding 10,000 telephone numbers have been assigned.

In response, PULP provided several filings over the ensuing months -- not addressing the narrow question posed by the PSC, whether a split or an overlay area code was the best way to ensure that the central part of the state doesn't run out of telephone numbers, but rather, stepping back to look at the larger picture -- whether any area code relief was necessary at all for a mostly rural area with about 1.4 million residents:

• 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.

Also, the legislature began to review the PSC's number utilization practices. See Bill Would Require PSC to More Closely Scrutinize Telephone Area Code Changes.

We remain convinced the impending "shortage" was due to the numbering allocation practices of the Commission and that if it altered these procedures, and reclaimed improvidently issued numbers to localities that did not need them, area code changes could be staved off for the foreseeable future, not just in 315, but all across upstate New York.

In the not-too-distant past, telephone numbers were given out to telephone companies 10,000 at a time (as in NXX-0000 through NXX-9999) in each exchange area, such as Syracuse or Star Lake, and could only be used in that rate center. Once local telephone competition arrived, allocating telephone numbers this way to multiple smaller competitive phone companies resulted in numerous numbers being stranded; that is, they were stuck in one rate center that didn't need them. Fortunately, "thousands block pooling" was implemented so that up to 10 different companies could share the same 10,000 number NXX code. This proved to be an inexpensive way to get the most out of existing numbering resources and reduces (and very nearly eliminates) stranded telephone numbers.

With this background, it is easy to understand why PULP was concerned that the PSC in the past five years had intentionally allocated upwards of five full NXX codes with 10,000 numbers each to over 50 rural exchanges in the 315 NPA with populations under 5,000 that had historically been served by a single NXX code. This artificially raised the rate of depletion of NXX codes in the 315 NPA, which eventually triggered the area code relief proceeding. Since only a handful of actual customers could possibly be using any of the scores of thousands of new telephone numbers in these small, rural areas, PULP suggested that inconvenience to more than a million customers in the 315 could be avoided if these NXX codes could be emptied, returned and be reallocated into other exchanges as needed. Not only is this a sensible, rational suggestion, PULP believes it is supported by the FCC's regulations.

So, what did the Commission do at its October Agenda Meeting?

The Commission denied PULP's Petition because it believes it lacks legal authority to empty and reclaim slightly used NXX codes for reuse in areas where they are really needed and, even if it could, it believes it could not save enough telephone numbers to make a difference. The Chairman stated PULP’s proposal would “take the telephone numbers from people that may have had them for 15 or 20 years and say you can’t have that number anymore.” This mischaracterizes PULP’s proposal.

The carriers which have obtained these numbering resources in recent years are CLECs, many of whom then provide the numbers to VoIP providers, including the cable companies, through private agreements. As a result, they can show that their NXX code has been sufficiently used up (they make the VoIP providers look like they are the CLEC's customers). Well, since it is mathematically impossible for five carriers to allocate their 50,000 telephone numbers within an exchange with 1,000 people (remember, there is that stringent requirement on telephone companies that numbering resources must be used in the designated rate center), something else must be afoot. Is it possible that the CLECs are either not using all of the telephone numbers or are using them outside the rate center? You betcha.

Under PULP's proposal, Grandma and Grandpa, who have lived in Syracuse for 50 years, would not be asked to give up their telephone number. Neither would the local hospital or pizzeria. If there are any actual users on the NXX codes or thousands blocks in question in the designated rate centers, they might be ordered to take a new number, but this may total maybe 100 or fewer -- throughout all of 315.

On top of that, we only suggested that a small number of customers be forced to switch telephone numbers only as needed. For example, if it would take only a few NXX codes to be freed up for reallocation in order to hold off area code relief for another year, only a relative handful of customers would need to make the switch -- a minor action not affecting everyone in the 315 NPA at the same time. That may actually be all that it would take since only four new NXX codes have been assigned through the first nine months of this year and 98 NXX codes remain available in 315. Under PULP's proposal, should the amount of available NXX codes dip below 75, for example, only a few assigned NXX codes would need to be reclaimed and reallocated to keep 315 afloat. This would certainly be far less of an inconvenience than requiring all or most of the 1.4 million residents of the 315 NPA to change their numbers all at once, or convert to ten-digit dialing, which has been PULP’s concern all along. In short, the Commission grossly mischaracterized PULP’s proposal and ignored the far greater cost and disruption of the staff proposal to split the area code or create a new overlay area code.

PULP’s petitions required the Commission to reexamine the entire allocation process in 315, and to consider new evidence submitted by PULP showing that NXX code requests have slowed to a virtual stop. Only four new NXX codes were used through the first nine months of the year with 98 remaining. This is hardly a gold rush forcing immediate action – indeed, at this rate, it would be nearly 25 years before all the available NXX codes in 315 are used. Commission Staff acknowledged that there is no need to actually implement any area code relief in the 315 NPA anytime soon, and the Commission did not state whether, when that time comes, it would do a split or overlay.

Essentially this was a victory for all telephone customers in 315. Area code changes will not be required in the 315 NPA for at least several years, if ever. It may also slow down any possible area code changes in other parts of the state as well if the Commission re-examines its number allocation and reclamation processes. We all realize that the unnecessary changing of area codes is an undue burden on all citizens, businesses, and the telephone companies. Let's be glad that after holding extensive community hearings on whether to do a split or overlay, the Commission came to its senses just in time and did nothing. The PSC Order issued October 17 does say that the Commission will adopt a plan, in future proceedings in the case, probably choosing either a split or overlay solution, but acknowledges that "[i]f code demand stays low, we will not have to begin implementation of a new area code until the 315 code is closer to depletion." With 98 codes left and using only four so far this year, the residents of 315 should not face implementation for years.

PULP will consider filing a petition with the FCC requesting a declaratory ruling that the New York PSC does have power to reclaim numbers and NXX codes improvidently stranded by mistaken PSC allocation of multiple NXXs to small localities that did not really need them. With this power, the need for area code relief elsewhere – such as the 518 area, where small localities were also given multiple NXX codes in recent years – might be avoided or postponed . We would encourage the PSC to support such an effort to clarify the powers delegated to the state by the FCC.

Lou Manuta

PSC-Approved Utility Collection Practices Render Family Homeless

A customer of an upstate utility recently contacted PULP with a story illustrating how utility collection practices allowed by the Public Service Commission can result in loss of service and drive a family from their home.

The customer is a divorced mother of two young children who at the time of divorce moved to a place with utilities included. Her former husband, who had customarily paid the utility bill, apparently did not, and arrears of several thousand dollars accrued. The utility bill had been in her name at the former residence. When she again moved to new premises and needed utility service, she signed a payment agreement and made monthly installments to reduce the large arrears balance each month, along with payment of her regular bill.

Last winter she lost her employment and due to a delay in receiving an unemployment check, she called the utility and asked for a few more days to get the regular payment in. The utility refused. When the customer sent in the late payment, the utility considered the payment plan to have been broken by the customer. When a payment plan is broken, PSC rules allow the utility to demand the full balance. In the next bill the utility demanded full payment of all arrears -- several thousand dollars which the customer did not have. The customer could not afford to pay that, and she was referred by the utility to the local department of social services, as it must do in its notice of termination.

The customer received a Regular HEAP payment of $240, which, under vendor agreements negotiated by OTDA with the utilities, obliged the utility to provide service for 30 days.

The utility billed the customer again for payment of all the arrears, which she could not pay. The utility would not enter into a new payment plan based on her financial circumstances. The PSC does not require utilities to offer new plans if a plan has been broken in the past. The utility again referred her to social services, where she received an Emergency HEAP grant of $375.

Under the vendor agreement between OTDA and the utility, the Emergency HEAP payment only obliged the utility to provide service for 30 days, which appears to be at odds with the federal requirement that a state's plan for Emergency HEAP must "resolve" the home energy crisis. The 30 day service commitment only postpones the crisis, particularly in the context of PSC greenlighting of harsh collection practices.

Under past PSC practices, an Emergency HEAP payment was deemed to be a basis for a new deferrred payment agreement, tailored to the customer's financial circumstances, notwithstanding a prior broken agreement. Under the PSC's current laissez faire style of regulation, however, the PSC apparently leaves it up to the utility whether to offer a new DPA based on the customer's financial situation, and instead allows the utility to demand full payment again, or to insist on very large down payments to start a new DPA, without regard to the customer's financial situation.

After the Emergency HEAP grant, the utility again demanded payment of an amount the customer could not afford. Instead of negotiating a new DPA with the customer based on her financial circumstances, the utility customer was again threatened with termination, and again referred to DSS.

This time, the HEAP program was closed for the season. The DSS made a state and locally funded emergency utility assistance payment of over $900 under Section 131-s of the Social Services Law, equal to the bills for the most recent four months service. The customer was required to sign a repayment agreement with DSS.

Next, instead of offering a DPA negotiated based on the customer's financial circumstances, the utility demanded half the amount due, which the customer simply could not pay.

The customer sought the assistance of the PSC Hotline [1-800-342-3355] and Complaint line [1-800-342-3377]. The PSC supported the utility's demand, and said the customer needed to pay more than $1,500, which she did not have, to start a new DPA.

Service was terminated.

The customer and her young children cannot stay safely in the cold and dark house. See No Electricity: Middletown Residents in Critical Condition from Lantern Fire; Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households.

The family moved out of their home due to the lack of electricity and heat, and is temporarily staying with friends.

The utility is getting nothing for current service, for which the customer could pay. The meter is not turning. The utility is not getting even an installment payment on the arrears. The family is constructively evicted from their home due to the lack of essential service. The state policy of continued utility service has been completely frustrated.

Utility terminations are on the rise all across New York State, due not onlyto harder economic times, but also due to misguided utility practices supported or tolerated by the PSC. See PSC Policies Foster Increase in Utility Service Terminations as a Collection Tactic.

PSC Expresses Concern for Utility Welfare

At its October 15 meeting, the Public Service Commission expressed concern that the economic downturn could affect the finances of New York's utilities. According to the Times Union,

Utilities are coping with a rising number of delinquent bills, and the state Public Service Commission said Wednesday it is seeking ways to make sure the delinquencies don't affect the companies' credit ratings and ability to raise capital. "This is very important for us to get in front of this issue," said PSC Chairman Garry Brown.

Senior advisory staff said during the agency's monthly meeting in Albany that rising electricity and natural gas costs, combined with the economic deep-freeze, are making it more difficult than normal for people to pay their utility bills.That means the utilities are bringing in less revenue than usual, which could hurt their credit ratings and make it more difficult to access the capital markets.

National Grid, the dominant utility in the Capital Region, had a 23 percent jump in the number of accounts at least 60 days in arrears during the first six months of the year, said company spokesman Patrick Stella. "We have seen a rise in people that are falling behind," he said.
Stella could not say how the delinquencies were affecting the company's balance sheet.

Unpaid Bills Chill Utilities: PSC Seeks Ways to Ensure Delinquent Accounts Don't Sink Credit Ratings.

In today's environment of very low interest rates, even if a bond rating were to slip, and thus raising the cost of new capital, utilities would only pay a higher rate with respect to new bonds, it would not affect the cost of previously is sued bonds. In the current financial climate, few new bonds are being issued, and interest rates may be low when they are. Indeed, bonds issued years ago at even higher rates may be callable, that the utility may be able to issue new bonds at lower interest rates, despite a slightly lower bond rating.

New York's distribution utilities are not at serious financial risk.

Utilities have the opportunity to file for a change in rates if their revenues are deemed too low, and the Commission has the power to set temporary rates, which are required to be cufficient provide a return on invested capital of at least 5% , under section 114 of the Public Service Law.

It is conceivable that utility bond ratings could slip if their uncollectible accounts balloon. Distribution utilities are still reliable cash cows, however, because they provide essential services to the public, and their bonds should remain solid investments even in hard times, provided they have not squandered too much of their revenue streams and capital in unfruitful holding company affiliates.

New York utility customers are at heightened risk of loss of service because they cannot afford to pay what the utility demands.

• See PSC Policies Foster Increase in Utility Service Terminations as a Collection Tactic
• See No Electricity: Middletown Residents in Critical Condition from Lantern Fire
• See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households.

To reverse the trend of increased deliberate service terminations, the PSC needs to

• reform utility gas and electricity purchasing practices to lessen reliance on short term markets
  
• stop its deliberate policy to introduce price volatility that many family budgets cannot withstand
  
• adopt low-income rates that are affordable to the poor
• reform harsh and unreasonable collection practices that make it impossible for customers with real economic vulnerability to obtain or keep service
• create performance metrics and disincentives to the use of service termination as a utility collection tactic.
  

The PSC needs to devote more concern to its obligations to fulfill the legislative objective of reasonable rates and continued service for all residential customers, and to the growing number of customers facing real financial hardship and real loss of service due to unaffordable bills and harsh utility practices, rather than wringing its hands over hypothetical concerns about utility bond ratings whose impact on future rates is speculative at best. See Will Governor Paterson Repurpose the Public Service Commission to Protect Consumers?

Auburn Restores Water Service After PULP Files Federal Lawsuit and Seeks Preliminary Injunction for Tenant in Property Subject to Foreclosure

On October 3 we reported that a municipality refused to open a water account for a tenant who used city water in her residence, insisted she pay the landlord's debt for past water and sewer service, and terminated service on September 30. The landlord stopped paying utility bills and the mortgage, and the property is in pre-foreclosure proceedings. See Municipal Water Companies Exempt from HEFPA Must Still Provide Due Process and Equal Protection to Tenant Users, PULP Network October 3, 2008.

On October 7, PULP filed a federal action against the City of Auburn on behalf of the tenant seeking declaratory and injunctive relief and damages under 42 U.S.C. § 1983, alleging that the city ordinances and practices violate the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the United States Constitution.

On October 8, we sought a temporary restraining order from the court, pending resolution of an emergency motion filed that day for a preliminary injunction.

On October 9, water service was restored by the City.

Based on this change of circumstances, the motion for a preliminary injunction was withdrawn.

No Electricity: Middletown Residents in Critical Condition from Lantern Fire

Three people in Middletown, NY were severely burned when their kerosene lantern exploded as they were filling it with Coleman liquid gas Wednesday evening. According to the Middletown Times Herald Record, the family was using a kerosene lantern for light because they couldn’t afford to pay their utility bill. The power had been turned off earlier that day by Orange & Rockland.

According to the story, the family purchased a kerosene lamp for light and heat but mistakenly filled it with a liquid gas intended for outdoor cooking appliances, officials said. This ignited an explosion similar to a bomb. “Hopefully, this is not a precursor to other tragedies that are going to happen because people are not able to afford heat and electricity,” Lt. Paul Rickard said. “When they turn to these alternatives, they don’t understand the risks.” The family, which also didn’t have a telephone in the home, remains hospitalized in critical condition.

A story in the New York Times on October 11 quickly chalks the tragedy up as an inevitable tragedy. When the Lights Go Out, Consequences Are Worse Than Darkness.

Perhaps.

Perhaps not.

The Times has published the utility spin:

The utility spokesman said this was the third time the Pedro family had had its electricity shut off for nonpayment.

OTDA policies in last winter's HEAP program, which closed in June, required customers to have stopped payment to access the emergency benefits. See Needy Households Must Stop Paying Energy Providers to Obtain Supplemental HEAP Benefits.

Did the utility receive HEAP benefits but not provide a new deferred payment plan, demand full payment of all arrears, and continue to shut service off over the summer? What steps were taken to help the household access state-funded utility emergency assistance benefits? We do not know what happened, and the utility will likely claim that its customer records are confidential (except when smearing the customer bolsters company spin)

The utility must provide opportunities to avoid service termination through repayment plans and other HEFPA protections. Customers also have the opportunity to obtain review of a proposed or recent service termination by calling the PSC Hotline, 1-800-342-3355. The Hotline staff have the power in appropriate cases to reverse a utility decision to terminate service and if service has been terminated, to direct prompt restoration. For example, if the customer has not broken a written, signed deferred payment agreement, the Hotline can require the utility to offer one. See Utilities Must Offer Written, Negotiable Payment Agreements Before Terminating Electric or Natural Gas Service.

Customers who are about to be terminated, but who lack the financial means to avoid a valid termination should be able to receive emergency assistance from the local department of social services. Utilities are required, in their termination notices, to advise customers of the availability of this aid. There are increased notification duties in the cold weather period beginning in November.

The Times article mentions the federal low income home energy assistance program and increased benefits this year. That program has been closed since June and will not reopen to new applicants until Nov. 3, 2008. There is, however, another program funded year-round, by the state and localities, with benefits available to prevent termination of utility service when alternative payment arrangements cannot be made with the utility. While in some respects more stringent in its standards than HEAP, it is also available to customers who are not eligible for HEAP due to their income or seasonal closing of the HEAP program. See State Utility Assistance is Not a "One-Shot Deal."

In recent years, utilities have been allowed by the PSC to downsize their customer assistance operations to assist customers in securing public benefits to prevent terminations. Providing aid to customers at risk of service termination is not do-goodism, but is an essential part of fulfilling the public interest in continued provision of safe residential utility service. See The Gas Company as Social Worker; Brooklyn Utility Tries Softer Approach to Pursue Unpaid Bills.

Also, lack of a telephone to communicate with utility, social services, or at the end, emergency help may have played a role in the tragedy. According to the Middletown story, the family had no telephone. In recent years, utilities have closed or attempted to close all walk-in customer service offices, requiring all customers to interact with the utility by telephone. See PULP's Motion to Preserve NYSEG Walk-In Customer Services Offices. In the past decade, the PSC has quietly watched as low cost telephone lifeline service to New York State’s low income residents declined by more than 400,000, and a growing number of New Yorkers lack home phone service needed to communicate with service providers and emergency services. See Household Telephone Penetration and Lifeline Enrollment.

PULP believes there should be a thorough, independent investigation of this matter to identify any weaknesses in utility, PSC, or social services practices. Were restrictive utility policies on reinstatement of deferred payment plans, greenlighted by the PSC's Office of Consumer Services a factor? An independent investigation by an out of state consultant with expertise in utility customer service and delegated subpoena power, or by the Attorney General, or by the Legislature is desirable, because it is possible that policies and practices of the PSC and OTDA might have played a role in the household losing its electric service. See PSC Policies Foster Increase in Utility Service Terminations as a Collection Tactic and OTDA Must Relax Its Administrative Restriction on Utility Assistance Loans for Persons with Incomes Above the Public Assistance Level.

PSC Typical Electric Bills Show Trend of Higher Prices and Volatility

The New York Public Service Commission (PSC) publishes a snapshot report of typical electric and gas bills of the major investor owned utilities twice a year, in January and July. Click on chart to enlarge:


Because the PSC reports only provide a belated snapshot of prices in two months, they mask other price spikes in other months. For example, Con Edison typical bills for August 2008, based on PULP's Con Edison bill calculator, went up even higher than they were in July, to $164 . See Con Ed Summer of $lam.

The chart dramatically shows the effect of the advent of the NYISO in November 1999. Prices began to spike by the summer of 2000 for the utilities that did not have fixed rate plans, which the PSC staff is still trying to stamp out. National Grid's residential bills remain relatively stable, but that is due to its long term rate plan that protected small customers. That plan will expire in 2011. National Grid's large customers are exposed to NYISO prices, to their detriment. NYSEG continues to offer a residential fixed rate plan which protects customers from price volatility.

PSC policies adopted during the deregulation fad of the late 1990's encouraged utilities to form holding companies, sell their power plants, and then buy electricity back for their customers at the NYISO spot market or through contracts indexed to the NYISO spot market prices. Still under influence of discredited Enronian deregulation doctrines today, the New York PSC continues in its efforts to introduce the effects of volatile and manipulated NYISO wholesale spot market prices into retail rates, often with results devastating to residential consumers living on fixed incomes. See Disconnected Policymakers.

As a result of this system, New York's electric rates and bills are increasing faster than the bills of customers in the 35 states that did not fall for deregulation. States that had not "restructured" when Enron went bankrupt in 2001 pulled back from the brink in time to keep state jurisdiction over the price of electricity generation, instead of ceding it to FERC. FERC, still under sway of the merchant power and energy trading interests, essentially is trying to deregulate wholesale energy under a so-called "market-regulated" regime of dubious legality.

The chart shows that typical bills of Central Hudson, which once had steady rates that were lowest in the state, are looking more like Con Edison and Orange & Rockland. Those utilities cooperated earlier with the PSC, while Central Hudson delayed the sale of its power plants and then had long term buyback contracts with the new owners for awhile, delaying reliance on the NYISO markets for purchased power, but now the buyback contracts have ended, more purchases are made at the spot market prices, and the Central Hudson prices have spiked dramatically.

RG&E now has the lowest rates in the state. That, we believe, is because RG&E did not sell all its power plants and so is less dependent on wholesale rates influenced by NYISO spot market prices. In the recent Iberdrola case, the PSC, at the insistence of the merchant power and energy trading interests who dominate its policies, required RG&E to sell its non-hydro plants (which account for only a small portion of its generation) and so, eventually, we are likely to see RG&E customers begin to suffer the same pain as others. Perhaps the example of a small, well-run local utility owning its own power plants serving the public at low cost with stable rates was simply too embarrasing for the PSC not to destroy when it had the chance in the merger case.

In the days when the Commission actually fixed utility rates and when fuel costs were predicted, rates and bills tended to change glacially. An eleven month rate case was required for "major" changes of 2.5%. Now customers face abrupt monthly rate increases in excess of that with no notice.

Research shows the obvious, that energy cost unpredictability creates serious difficulties for customers trying to manage their household budgets. Social Security checks are not adjusted to accommodate the price spikes fostered by the PSC.

Many households in New York live in or near poverty, without savings, from check to check, and they often run out of money and Food Stamps before the end of the month. They find it difficult to absorb the sudden and unreasonable utility price changes that flow from the PSC's mistaken deregulation policies.

Municipal Water Companies Exempt from HEFPA Must Still Provide Due Process and Equal Protection to Tenant Users

This week we received a call from an upstate city resident whose water service had been shut off with no notice. She is a working mother who rents a single family house and lives with her two year old daughter. Water service was included in the rent. The owner failed to pay City bills for water and sewer service, and also had not paid the mortgage on the house, which is in pre-foreclosure proceedings. In July, the City shut off service, and the tenant asked to open an account in her name, and she would pay the bills going forward. The City ordinances only provide for service to property owners, not tenants, and her application for service was refused, without notice and without an opportunity for a review. The City offered to turned the water back on only if she would pay the landlord's bill. She agreed to do so in installments, but could not keep up with the payments. Although she paid the City more than the cost of the service provided since she asked for service in her name, her payments were credited to the landlord's bill. Service was again shut off this week, on Tuesday.

The very next day, the City Code Enforcement office put a sign on the building saying it is unfit for habitation. The house is in decent condition, however, and the only reason for posting it as uninhabitable was the lack of water service, a condition created by the City. When the tenant called City Code Enforcement she was told she had 24 hours to leave. The local legal aid office could not provide assistance.

The tenant called PULP's Hotline and we are now representing her in an effort to restore service.

When the protections of the Home Energy Fair Practices Act (HEFPA) were initially adopted in 1981 to protect residential gas, electric and steam utility consumers, the law applied to both investor owned utilities and to municipally owned utilities. When HEFPA was amended to protect residential water consumers, however, opposition by the City of New York led to excluding municipal water utilities, and so it applies only to privately owned water companies above a threshold size.

One of the basic principles codified in Section 31 of HEFPA is the duty of the utility to provide service to an applicant without regard to debts of third parties who had arrears on accounts in their names. HEFPA allows tenants in a situation where the landlord has defaulted in paying bills either to open an account in the tenant's name, or, alternatively, to pay for current charges on the landlord's bill -- without being required to pay the landlord's debts for past service.

Although the state HEFPA statutes do not apply to municipal water utilities, consumers are not without some protection. The Supreme Court has held that a city, because it is a public entity, must act in accordance with the United States Constitution when it operates a utility. Memphis Light, Gas & Water Div. v. Craft. Several federal circuit court precedents hold that in circumstances such as this, denial of service by a publicly owned utility to a tenant user because of the landlord's default in payment is a violation of the Equal Protection Clause. Also, circuit court cases have held that a municipal utility's termination of service to a tenant user without timely and adequate notice which provides a fair opportunity for review of the factual and legal basis for the action violates the Due Process Clause.

PULP's demand for restoration of service and for a hearing was not honored by the City. The tenant remains without water service. The matter will shortly be in federal court. Stay tuned.

Bush Signs LIHEAP Funding Increase; Public Input Needed on How it Will be Allocated in New York

$120 Million Added to New York HEAP Program
President Bush earlier this year proposed a steep funding cut for the Low Income Home Energy Assistance Program (“LIHEAP”) funding in the budget he sent to Congress. See Bush Proposes LIHEAP Cuts in 2009. In light of the increase in home energy costs, however, Congress had other ideas, and last week legislation was passed to increase funding for LIHEAP to $5.1 Billion, the level that was authorized in 2005 but never before fully appropriated. See House Bill Would Increase LIHEAP Funds: Will New York Use them to Reform its HEAP Program?

On September 30th, President Bush signed into law HR 2638, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, which provides funding for the Departments of Veterans Affairs, Homeland Security, and Defense as well as funding authority to keep the rest of the government operating through March 6, 2009. Of the $5.1 billion for LIHEAP, $4.509 billion flows through the regular block grant program and $590 million will be released at the direction of the President as emergency contingency funds. The legislation allows states to increase eligibility requirements up to 150 percent of poverty or 75 percent of state median income (the current eligibility ceiling is 150 percent of poverty or 60 percent of state median income).

Of the $5.1 billion, New York State is slated to receive $476,376,332. New York received a total of $357.8M in federal LIHEAP funding for the 2007-08 HEAP season, including "formula" funding and discretionary funding releases. New York's share of the $1.98 billion in federal formula funds was $248 million. In planning only for a federal allocation of $1.7 billion, OTDA's Plan for 2008-09 only assumed receipt of approximately $212 million, or $145.8 million less than received last year.

Public Participation and Comment Needed on Plan for Allocating New HEAP Funds
The federal LIHEAP statute, 42 U.S.C. § 8624(c)(2), requires public participation and an opportunity to comment on any substantial revision of the state HEAP plan. The infusion of increased funds this year -- well over $100 million -- necessarily will lead to a substantial revision of the plan originally submitted, which was designed to distribute a much lower total level of benefits. The recently approved New York State HEAP Plan for 2008-09 includes some language addressing what will happen if additional funding is made available during the heating season. The Office of Temporary and Disability Assistance (“OTDA”) may:

• Issue additional regular and/or emergency benefits;
• increase the regular and/or emergency benefit amounts;
• Provide a supplemental benefit to any household receiving a regular HEAP benefit during the most recent/current program year; and/or
• Implement additional outreach and referral activities.
  

Unfortunately, there is no indication how the vague options listed in the plan would be prioritized.

• How much more money, for example, will be poured into regular or emergency HEAPbenefits?
  
• Will benefit amounts be changed?
  
• Will the HEAP program remain open longer?
• Will the state adopt the new, higher income eligibility levels, which could make households of four making up to $56,600/year eligible?
  

These decisions should not be made in the dark, as happened last year, without an opportunity for any public input and participation. See PULP Comments on HEAP Plan for 2008 - 09.

The New YorkHEAP program opens on November 3rd.
Lou Manuta

Conflicting Data on Natural Gas Price Trends

In two separate articles in the October 2, 2008 Albany Times Union, the price of natural gas is either going to hold steady this winter or increase by 20 percent. I guess we could flip a coin, but that would be too accurate a prediction.

In the first piece, the paper cites the Natural Gas Supply Association, which expects gas production to be about eight percent higher this winter than last winter, with more wells operating. The group expects the slowing economy to reduce industry demand for gas and that an expected milder-than-normal winter also should put downward pressure on prices.

Separately, the Times Union reports that a call on October 1st between the head of policy analysis for the American Gas Association and reporters revealed that natural gas for heating homes is expected to increase between 19 and 20 percent from last year. The paper estimates that the typical household using 867 therms will see their bills increase by $200 for the natural gas alone, to $1,239. During the summer, some, including PULP predicted increases of 50 percent or more. See Niagara Mohawk Residential Gas Bills Heading Toward 58% Increase in January 2009. The spokesman noted that the price peaked in June at over $14 per million BTUs, but had dropped below $9 in August. Last winter, the spokesman said that prices hovered around $7.

According to National Grid's forecast of monthly gas supply rates, the current prediction is that rates may increase to $1.09865 per therm in February 2009 for Service Classification 1 from $0.93363 per therm in February 2008, approximately an 18 percent increase since last winter. If we have cold or even normal temperatures in the winter, customer bills could exceed those of the winter of 2005-06, which were the highest in memory.

The difference in prices may be due to timing differences. The NGSA appears to be referring to current and projected wellhead prices for the winter months. Gas companies, however, buy natural gas for their customers and store it, or enter into long term contracts for future delivery, and so the bills for next winter will reflect some the higher cost gas purchased earlier this year. In the past, utilities had more diversified portfolios of gas supply, buying part of their requirements several years in advance. Today, New York's gas utilities, at the urging of the PSC, do not buy ahead more than a year or so, and thus prices faced by consumers are more volatile than they used to be. This causes hardship to customers, especially those living from check to check on fixed incomes.

The recently announced increase in HEAP funding and income eligibility will be a necessity for thousands of New York families -- regardless of which prediction is accurate.
Lou Manuta

Governor Paterson Vetoes Utility Call Center Bill

In the process of vetoing 39 bills on September 25th, Governor David Paterson took the unusual step of vetoing a bill which would have had no impact whatsoever on the state budget and could protect service for customers of every electric and natural gas utility in the state. The bill (A. 606/S. 2007) would have required utilities to provide customer call center service assistance "using services located within this state and within the utility's service area" to:

• take requests for new or additional services
• determine customer financial responsibility
  
• determine deposit required or billing rate
• prepare meter and service orders and obtain access to meters
• explain company rates, regulations, policies, procedures, equipment, and common practices
• investigate trouble order forms and initiate high bill investigations
• handle payment and other credit arrangements such as obtaining deposits, financial statements, and negotiate deferred payment plans
• refer customers to social services agencies and other assistance programs.

The veto invites utility customer service centers to be outsourced and located outside of New York. It follows on the heels of utility closure of many in-person utility customer service centers, where people could apply for service, negotiate payment plans, and discuss directly with the utility their service problems. Indeed, National Grid has closed all of its walk-in customer service centers. Some utility walk-in service offices remain open only because PULP petitioned the PSC to halt the closure of eleven NYSEG offices and to preserve six Con Edison walk-in service offices. For many customers this eliminated their ability to pay, question or negotiate bills without using a call center service. A growing number of people can’t even call the utility with questions because they lack a telephone in their home due, in large part, to the inadequate efforts of the PSC to improve the sagging Lifeline enrollment numbers in the state, which have declined by 400,000 in the past few years. Other people have difficulty communicating by telephone due to hearing, speech, or language difficulties.

The vetoed bill at least would have required the call center to be in the utility service territory, staffed by utility employees who would be more attuned to customer needs, and not in another distant state or country. The sponsors’ concern was that utilities using distant out-of-state (and perhaps out-of-country) call centers may put New Yorkers at risk of customer service deterioration. They believed

• call center employees located within a utility's service area will have a better understanding of local conditions than employees located elsewhere
• employees located within a service area will be more responsive to customer needs, and
  
• the bill will preserve New York call center jobs.

Each of these justifications was rejected by the Governor in his veto message. The Governor argued that

• the justification that call centers within a utility's service territory would have more local concern was invalid because utility service areas do not neatly fall into local neighborhoods or communities
• there was no evidence that local employees are more responsive to customer needs
• jobs would be not preserved because existing employees could be replaced by automation
• the legislation might encourage other states to retaliate and establish similar laws of their own, potentially costing New York jobs and hurting the state’s economy
• the law would run afoul of the commerce clause of the Constitution.
  

A previously enacted state law already requires that the telecommunications relay service call center be located in Syracuse (Public Service Law sec. 92-a(2)(a)), so there is precedent for requiring utility call centers to be located in the state. While a call center which assists deaf people in making telephone calls is certainly different from customer call centers for customers of electric and gas utilities, no constitutional questions barred legislation requiring location of the relay center in-state.

The Governor stated that prohibiting out-of-state call centers could prove devastating if some emergency shut down the in-state call centers. It could be argued with equal force that an emergency in another state or country could shut down customer service to New York’s customers if the call center was out of state. Also, while the legislation required the creation of in-state customer call centers, it did not totally prohibit the use of out-of-state call centers for the same reason cited by the Governor -- diversity. It makes no sense to allow a utility to put an entire company’s call centers into out of state locations for the same safety and emergency reasons cited by the Governor in his veto message.

The Governor’s rationales for rejecting the bill gave short shrift to New York consumer and worker constituencies, and reflected the position of the utilities who opposed the measure.
The Governor argued that the bill was not needed because the PSC will require utilities to provide good service by imposing penalties if service standards are not met. This amounts to wishful thinking in light of New York's experience with lightened utility regulation by the PSC.

The PSC’s so-called “performance regulation” is really a euphemism for functional deregulation. As pointed out in the 2006 Assembly Task Force Report on the Con Edison Long Island City outage, utility budgets for customer service functions are no longer scrutinized closely, and only a few performance criteria are measured by the PSC, such as outages or the time to answer a call. The monetary cost of failing to meet the criteria is often not sufficient to incent utilities to improve service to meet the standards. Also, because so few elements of service are quantified, utilities under PSC "performance regulation" can shift resources from non-measured services to those which are measured, with a resultant decline in the quality of the non-measured service elements. If utilities fail to meet a PSC performance standard standard they may simply absorb the cost of breach - to which they have previously agreed - because taking the "hit" for poor performance on a standard may be considerably less expensive than the cost of actually achieving compliance.

The PSC has no express legislative authority to assess direct penalties against utilities for poor service: the monetary service quality sanctions occasionally assessed, with PSC backpatting and fanfare, are modest adjustments to which the utilities themselves have agreed in their rate case settlement agreements. If the PSC were to create a binding standard by a regulation or order, and if a utility were to violate it, the PSC would need to take the utility to court to collect a penalty, a process requiring years of litigation, under a statute that predates the evolution of modern administrative law.

The Legislature traditionally has overseen the utilities as one of its functions to assure protection of the public in the provision of essential services. Indeed, before creation of the PSC, the Legislature approved utility rates and tariffs directly. For more than one hundred years the Legislature has delegated limited powers to the PSC, and it always has the prerogative to rechannel the PSC when it strays from the legislatively determined direction. The Legislature obviously determined that the benefits of the call center bill to utility customers and to the public interest of the State far outweighed any net costs, which would be recoverable by the utilities through their rates. Improvements to utility customer service desired and deemed by the Legislature to be in the public interest, and which do not directly affect the state budget, should not be stopped by a Governor’s veto pen.