Friday, October 03, 2008

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.

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