Slow Processing of Applications for HEAP Benefits; OTDA Receiving Comments on Next Year's HEAP Program

The 2008 – 2009 heating season was supposed to be better than this.

The federal government increased funds for the LIHEAP program to assist families to keep their homes warm. New York will receive over $476 million in LIHEAP funding for this winter, about $120 million more than last year, but something else is afoot.

We previously reported on incidents regarding how the state’s Office of Temporary and Disability Assistance and some county Departments of Social Services allowed roadblocks in the way of applicants seeking HEAP benefits. See SNAFU in OTDA's Administration of the HEAP Program; State Tells Suffolk County to Handle Energy Emergencies; Unmanned HEAP Hotline Fails to Serve the Blind.

Because of recent job losses and high fuel prices, this year many people are seeking HEAP assistance for the first time. They are facing the daunting task of seeking assistance at local welfare offices and winding their way through the labyrinth known as state government without inside knowledge of how the system works.

We are hearing from numerous HEAP applicants that even when they find someone to watch their children and are able to make it through the cold and the snow down to the county DSS office, they are being turned away because the local office has already processed its “quota” for the day. In one county, we heard, the office quota is only one application a day.

Some applicants previously received Regular HEAP that was insufficient to meet their high bills, and they are now seeking Emergency HEAP benefits because they have received a disconnect notice or are dangerously low on heating fuel and have no alternative arrangements available. Applicants who qualify for the phone-in process for Emergency HEAP are turned away when they apply in person and told to call. But when they called, they did not get through, did not receive callbacks or any response at all, adding to further stress and near panic as exhaustion of fuel or deadlines for imminent termination of utility service approach. In some situations, persons who applied in November had received no action on their applications for Regular HEAP, and were facing emergency situations.

PULP’s intervention at OTDA and the PSC resulted in positive results for those who contacted us, but systematic changes which would assure timely acceptance of and decisions on HEAP applications continue to be lacking.

On paper, the HEAP process should have been so much better this year. . . .

First of all, the state has authorized a $100 regular benefit increase for households paying directly for heat. In addition, the income guidelines for the HEAP Emergency component have increased from 60 percent to 75 percent of the state median income or 150 percent of the federal poverty guideline, whichever is greater. Also, a second HEAP Emergency benefit is available for eligible low income households to assist in meeting their emergency heat or heat-related needs and the criteria for eligibility remain the same as for the first HEAP Emergency benefit. Applicants must be in an energy emergency situation, which is defined as having less than a quarter tank of fuel, less than a 10 day supply of wood, coal, pellets, or having heat-related utility service terminated or scheduled for termination. In addition, applicants must have available resources less than the benefit amount.

Here are the specific benefit and income thresholds from OTDA.

More must be done to improve administration of the HEAP program to ensure timely acceptance, processing of applications, and receipt of grants by all eligible applicants because, if anything, the need for HEAP and other public assistance benefits are likely to only increase in the coming years.

Under federal law, there should be no restriction or quota on the number of persons who can make applications for HEAP, applications for Regular HEAP must be decided within 30 days, and applications for Emergency HEAP must be acted upon within 18 or 48 hours, depending on severity of the crisis. Counties should not have the ability to limit the number of applications received and processed. Without administrative reforms, there is increased risk of more tragedies like what happened in Michigan earlier this week.

There is an opportunity for the public to have a say in the process. OTDA is seeking comments as it begins to develop the 2009 – 2010 New York State HEAP Plan now, but the comments must be submitted to them by February 13th.


Lou Manuta

Public Interest Coalition Urges Transparency in Selection Process for PSC Commissioners

A growing coalition of 45 non-profit organizations held a press conference at the State Capitol on January 29th, announcing their request to Governor David Paterson that he "Put the Public Back in Public Service Commission," by making more transparent the nomination and confirmation process for PSC Commissioners. A webcast of the coalition's press conference was created by the New York Media Alliance.

The group, New Yorkers for Fair and Affordable Utility Service, pointed out that the issue is timely because the terms of two Commissioners expire February 1st. See More New PSC Commissioners Coming Soon?

In 2006, former Governor Pataki seemingly put his stamp on the Public Service Commission for six years when he appointed three commissioners to six-year terms in the waning months of his term. As stated by Governor Paterson:

"It's what I call ruling beyond the grave," said Senator David A. Paterson of Manhattan, the minority leader and now the Democratic nominee for lieutenant governor on the ticket with Eliot Spitzer, who hopes to succeed Mr. Pataki. "In wills, trusts and estates law we have pretty much gotten rid of ways people could direct actions of other people in perpetuity. For some reason, in government we haven't addressed it."

"The Cuomo administration didn't do it," Mr. Paterson said, "but, to be fair, the Cuomo administration required the consent of the Senate."

* * * * Among other such recent appointees are Maureen Harris, whose brother is a lobbyist and was Mr. Pataki’s chief counsel, and Cheryl Buley, whose husband is counsel to the Republican State Committee, to six-year terms at $109,800 a year on the Public Service Commission, which oversees utilities.

See Appointments by Pataki Leave a Lasting Stamp, New York Times, September 16, 2006.

But one of the Pataki legacy picks unexpectedly resigned in 2008.

After last month's filling of that vacancy with his choice of Commissioner James Larocca, the two expiring terms now give the Governor and the State Senate, which must confirm all PSC appointments, a window of opportunity to select a majority of the PSC more attuned to consumer needs in the vastly changed economic circumstances of 2009. See Will Governor Paterson Repurpose the Public Service Commission?

Back in December, with no public announcement or press release before the appointment, Governor Paterson named Long Island Power Authority Board Chairman James Larocca to fill the vacant seat for a term which runs until February 2012. Larocca was immediately confirmed by the State Senate with no advance public notice. See In a New York Minute, Governor Paterson Appoints and Senate Confirms James Larocca as New PSC Commissioner.

Instead of a closed appointment and confirmation process - not uncommon in the past - the coalition seeks a more open process to provide the Legislature and the public an opportunity to learn more about prospective commissioners, their qualifications, and their policies before, not after, they take office to discharge their quasi-legislative role. See Another Paterson Appointment Brings More Concern About the Process; The coalition also suggested a list of proposed Commissioner qualifications.

According to the Albany Times Union (Input Sought on Picks for PSC - Coalition Urges Governor to Be More Open on Selection Process for Vacant Seats):

Marissa Shorenstein, a spokeswoman for Paterson, said the governor's appointments office considers all interested candidates and welcomes input from the public.

"The office then conducts a thorough vetting process for each appointment while simultaneously reviewing the statutory qualifications for each particular position," she said.

Shorenstein did not indicate what the governor's plans are or if the nominations will be made soon.

Contact information for the public to provide input to the Governor's Appointments Office is not apparent at the Governor's website but is in the OGS Directory for the Executive Chamber.

President Obama Names Michael J. Copps as Acting Chairman of the FCC

President Obama named Michael J. Copps, a sitting Federal Communications Commission (FCC) Commissioner, to be Acting Chairman on January 23. Commissioner Copps' statement to agency staff indicates a significant change in direction is coming at the FCC.

Fellow Commissioner Robert M. McDowell promptly wrote a letter to the new Acting Chairman indicating his support for the Acting Chairman, calling for a broad ethics audit and for a new strategic plan for the agency.

There are two vacancies on the five-member commission. The Wall Street Journal has reported that Julius Genachowski is rumored to be named soon by President Obama as the new Chairman.

Wellinghoff Named Acting FERC Chairman

President Barack Obama has named Jon Wellinghoff Acting Chairman of the Federal Energy Regulatory Commission. See Obama Names an Acting FERC Chief. According to today's FERC press release:

“Acting Chairman Wellinghoff responded that he looks forward to serving the President and the nation in this capacity.

I thank President Obama for the opportunity to lead FERC at a time when our nation faces the challenge of providing consumers with access to clean, renewable energy and ensuring that our nation can deliver that energy in the most efficient, smart and technologically sophisticated manner possible. I look forward to working with my FERC colleagues, FERC staff, the public and the energy industry to turn these energy challenges into a reality.

“Outgoing Chairman Joseph T. Kelliher offered his congratulations.

Jon has the intelligence, experience, judgment and independence to lead FERC as the agency discharges its historic responsibilities and confronts new challenges.”

Chairman Kelliher, whose term expires in 2012, previously indicated he will be seeking new employment, and announced he was stepping down on January 20, when the new President took office, and that he would recuse himself from FERC decisions. He has not yet left the Commission, and it later became clear he only stepped down as Chairman. See

• FERC Chairman Kelliher Resigns; Who Will President Obama Pick?
  
• FERC Chairman Reneges on Promise to Recuse Himself
  
• Still There, for Now.

While he remains a Commissioner, no new appointment to the Commission can be made by President Obama. (All sitting Commissioners were appointed by former President George W. Bush and for the moment they all are continuing in office). Thus, currently there is no vacancy for President Obama to fill with a new Chairman. President Obama's action today simply replaced Kelliher with Wellinghoff designated as Acting Chairman.

The designation of Commissioner Wellinghoff as "Acting" Chairman does seem to suggest that President Obama may have in mind appointment of a new Chairman after Commissioner Kelliher leaves. See Will President Obama Repurpose FERC?

Update Jan. 26, 2009
See, A New Energy Regulator Takes the Helm, NY Times Green Inc. Blog.

More New PSC Commissioners Coming Soon?

When Commissioners of the PSC are selected, the decisions affect all New Yorkers for years to come. On February 1, 2009, the current terms of New York PSC Chairman Garry Brown and Commissioner Patricia Acampora expire. Under the law, sitting Commissioners continue to serve after their terms expire, subject to replacement at a later time of the Governor's choosing, or, if not replaced, they could be reappointed to new six-year terms.

Governor Paterson has given no indication of what he will do, but he will be in a position to appoint the majority of the five-member commission. See Will Governor Paterson Repurpose the Public Service Commission to Protect Consumers?

Will there be a more transparent nomination and confirmation process that fosters public scrutiny of the qualifications of PSC nominees and their vision of how they will discharge their quasi legislative functions?

The Governor missed his first opportunity to open up the process when he appointed a PSC Commissioner to fill a position that had been empty for months. The appointment was a well kept secret until the day James Larocca was confirmed by the Senate. Indeed, it occurred so fast he was still Chairman of the Board of LIPA until the next day, when he resigned that utility post. There was no opportunity for public scrutiny and discussion of the qualities the Governor was seeking in his PSC pick, no opportunity for public input, and no discussion by the Senate of the candidate's policy preferences. See, In a New York Minute, Governor Paterson Appoints and Senate Confirms James Larocca as New PSC Commissioner.

Commissioner Larocca has an extensive background in government and the utility sector and may turn out to be an excellent choice, but his selection and the legislative confirmation process was anything but public and illustrates the problem a new coalition, New Yorkers for Fair and Affordable Utility Service seeks to change. "It's time to put the `public' back in the Public Service Commission" was the theme of an Op-Ed piece which appeared in the January 17, 2009 Albany Times Union, PSC, Tribune of the People. This coalition includes grass-roots, senior, environmental, good government, consumer, and media organizations and is focused on how the Governor and the senate will handle future PSC appointments.

The Governor must recognize how the state's energy and telecom policies affect the public and the environment and select applicants committed to the public interest and a fresh look at policy direction. In recent years the PSC and its staff seem to have been more interested in rolling out a deregulation agenda than in protecting consumers. A PSC responsive to consumer interests would, in contrast, exercise the fullest measure of its powers to oversee reasonableness of cell phone contracts and cable voice services, work for affordable natural gas and electric service, reduce the impacts of our energy infrastructure on the environment, challenge bloated NYISO budgets, and investigate market power abuses. It would stop its push to implement the failed Enron deregulation model that favors producers, traders, and middlemen which brought to New York gamed, manipulated, and expensive wholesale energy markets, phony retail competition based on tax subsidies and deception, and higher, unpredictably spiking prices. It would reduce utility reliance on shutoffs as a bill collection tactic, which affect nearly a quarter million customers each year, and take meaningful instead of token steps to make energy and telecom rates more affordable to the poor.

There are few specific statutory qualifications for commissioners, other than that they not have a position with or own securities of a utility regulated by the PSC. Also, under the Public Service Law, only three of the five Commissioners can be from the same political party. A recent Buffalo News editorial calls upon the Governor to nominate a person from Western New York. See
Give Upstate a Voice: Utilities Oversight Commission Needs a Western New Yorker.

Keeping the nomination and confirmation process transparent is key. If President Obama could expose his selections for cabinet posts weeks in advance, why can't Governor Paterson identify his proposed PSC nominees in advance?

Indeed, there is more reason to publicly vet PSC candidates than there is for ordinary executive branch appointees who serve at the Governor's pleasure, because PSC Commissioners have six-year terms -- longer than any Governor's four-year term -- designed for more independence and their quasi-legislative role. As then-Governor Franklin Roosevelt said in 1932:

When I became Governor, I found that the Public Service Commission of the State of New York had adopted the unwarranted and unsound view that its sole function was to act as an arbitrator or a court of some kind between the public on the one side and the utility corporations on the other. I thereupon laid down a principle which created horror and havoc among the Insulls and other magnates of that type.

I declared that the Public Service Commission is not a mere judicial body to act solely as umpire between complaining consumer or the complaining investor on the one hand, and the great public utility system on the other hand. I declared that, as the agent of the Legislature, the Public Service Commission had, and has, a definitely delegated authority and duty to act as the agent of the public themselves; that it is not a mere arbitrator as between the people and the public utilities, but was created for the purpose of seeing that the public utilities do two things: first, give adequate service; second, charge reasonable rates; that, in performing this function, it must act as agent of the public, upon its own initiative as well as upon petition, to investigate the acts of public utilities relative to service and rates, and to enforce adequate service and reasonable rates.

The regulating commission, my friends, must be a Tribune of the people, putting its engineering, its accounting and its legal resources into the breach for the purpose of getting the facts and doing justice to both the consumers and investors in public utilities.

Advance announcement by the Governor of his PSC candidates would provide the public an opportunity to help the Senate in its "vetting" process, prior to a vote, in selection of this very important "agent of the legislature" and "Tribune of the people."

Compare O&R Bills with PULP's Electric Bill Estimator

PULP's Electricity Bill Calculator now enables estimation of residential electric bills of Orange & Rockland Utilities, in addition to Con Edison bills. The New York PSC allows these utilities to change their rates monthly. The PSC only publishes its "typical average utility bill" reports twice a year, they do not take into account major rate changes in months other than January and July, and they do not account for Con Edison's rate changes which do not occur on the first of the month.

Figuring out what O&R would charge may be of interest to consumers in the following situations:

• checking to see if switching to an ESCO lowered one's bills. See PSC Makes ESCO Service Comparisons Difficult: How Can Customers Compare ESCO Prices?
• checking if a landlord is charging more than the utility for submetered service. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections,
• estimating charges in real estate transactions,
• Comparing bills of other utilities.
  

We are Beta testing the estimator, and welcome you to try it.

This is PULP's best effort to estimate O&R's electricity bills. We think the Calculator should closely approximate what the utility would charge for a given amount of usage over a specified period. Due to the complexity of each utility's rate structure, however, we can't guarantee 100% accuracy, and urge you not to make major life decisions based on the results.

We would welcome any feedback you may have, and please let us know if you have problems using the Estimator. You may contact PULP by email at info@pulp.tc.

PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants’ Rights

Background: The PSC-Imposed System Benefit Charge
In 1998, implementing its “vision” to restructure New York’s electric utilities, the Public Service Commission eliminated utility-funded demand side management programs and established a new third-party system for delivering energy efficiency measures funded at a reduced level by a “system benefits charge” (SBC). The SBC is an additional amount billed to each utility customer, “to ensure that certain public-benefit programs formerly provided by regulated monopoly utilities would continue in a partially deregulated environment.” See, Order Continuing the System Benefits Charge (SBC) And the SBC-Funded Benefit Programs, In the Matter of the System Benefits Charge III, Case 05-M-00090 (Issued and Effective December 21, 2005) at p. 5. .

When the SBC was established in 1998, the charge to ratepayers ranged from 0.85 mill to 1.0 mill per kWh. See, SBC History 1996-1999. A “mill” is 1/1000 of a dollar, or 1/10th of 1¢. Typical electric bills of the major utilities bills posted on the Commission’s website reflect a current monthly SBC charge for residential customers ranging from 31¢ to 90¢ per month, for customers consuming 500 kWh, depending on which utility serves the customer.

Between 1998 and 2005, the SBC raised $150 million dollars per year. The current SBC has and will raise $175 million dollars annually from 2006 through 2011.

PSC orders direct that revenue collected by utilities through the SBC be transferred to the New York State Energy Research & Development Authority (“NYSERDA”) on a quarterly basis. See, Order Continuing the System Benefits Charge (SBC) and the SBC-Funded Benefit Programs, In the Matter of the System Benefits Charge III, Case 05-M-00090 (Issued and Effective December 21, 2005) at p. 28, 30.

From the SBC’s inception through mid-2006, $1.87 billion dollars was funneled by the utilities to NYSERDA as required by the PSC orders. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group for the Year Ending December 31, 2007 (March 2008), at p. ES-1.

Where Does the SBC Money Go?
NYSERDA reports that 38% of the money is devoted to providing financial incentives to Commercial/Industrial utility consumers; 23% is used for Research & Development; 19% goes to financial incentives for Residential applications, and 19% to Low Income programs. Id., at p. ES-2.

Among the dollars earmarked for “residential” programs, are financial incentive bonanzas, handed out to private owners of multi-family, residential rental properties who seek to submeter electricity to tenants in their buildings. These private owners, including some of the state’s largest real estate moguls, are relieved from paying for electricity previously included in rent, by shifting the electricity costs directly to their tenants.

The Push to Submeter Multi-Family Buildings to Help Landlords Resell Electricity to Tenants
Under the Public Service Commission’s lead, and the terms and conditions of a Memorandum of Understanding between the PSC and NYSERDA executed in March 1998, NYSERDA’s submetering initiative began under a program named “Residential Comprehensive Energy Management (CEM).” New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, Final Report Volume 2 (May 2004), at p. 7-74 et seq. The goal of CEM was to “promote the acquisition and installation of sophisticated energy management and advanced metering systems in residential applications”; to submeter 15,000 multifamily dwellings; and to assist building owners to take advantage of “retail competition,” i.e., ESCO service. Id.

Elusive Energy Savings?
The energy savings from submetering under the CEM program are unclear. The cumulative savings of electricity from the program’s inception through the end of 2003 was estimated to be 2.1 GWh. Id. at p. 7.77. Estimates for the ensuing years brought even more meager savings raised the cumulative total to 3.0 GWh by the end of 2004; Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, May 2005, at p. 6-5, available at and to 3.5 GWh at the end of 2005. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, May 2006, at p. 5-6.

NYSERDA has since stopped reporting estimated CEM program electricity savings. In the subsequent annual report, energy savings from two other programs The Low-income Assisted Home Performance Program and the Assisted Multi-Family Program.were added to the CEM estimates, which allowed NYSERDA to report a more than ten-fold increase in savings – 38.2 GWh – as of the end of 2006. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, March 2007, at p. 4-5. (That cumulative figure somehow declined to 37.4 as of the end of 2007.) Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group for the Year Ending December 31, 2007 (March 2008), at p. 4.5.

Ultimately, the CEM program was phased out, and replaced with a new, PSC-sanctioned program called the “Multifamily Building Performance Program for Existing Buildings.” NYSERDA’s most recent annual report showed that the new Multifamily Building program has reached only 3% of its electricity savings goal. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group for the Year Ending December 31, 2007 (March 2008), at p. ES-13, available at: A more stunning admission, particularly in view of the PSC’s headlong rush to submeter multifamily dwellings, see PULP Network article on the upcoming PSC Technical Conference on Submetering, is that NYSERDA has achieved 0% of its goal to save market rate tenants in submetered buildings $250 per year and it has achieved only 6% of its goal to save low-income tenants $195 per year. Id. at p. ES-14

Added Costs and Little Benefits to Tenants
The PSC-sponsored, ratepayer funded, NYSERDA-administered submetering initiative amounts to a sugar plum for real estate developers, building owners, property managers, submetering companies, electrical apparatus sellers, consulting engineers and energy management service companies. Tenants do not fare nearly as well.

Typically, a New York City landlord who submeters to tenants in rent stabilized apartments provides a small rent reduction in accordance with DHCR schedules, and bills the tenants separately for electricity, charging in excess of the rent reduction. For example, a New York City tenant in a rent stabilized three-room apartment would see a rent reduction of $38.99 when the landlord begins to submeter. But the electricity charges of the landlords are typically much higher. There is no requirement for landlords of unregulated premises to reduce rents when the burden of paying electric bills is shifted to tenants under a PSC order.

Owners may have had little incentive to install efficient appliances even when they paid the electric bills. They could recover the cost of appliance upgrades over time by seeking larger rent increases for rent stabilized apartments, but they may have preferred to make other capital investments with greater returns, for example, by buying another building.

The PSC and NYSERDA apparently imagine that submetered tenants will conserve electricity by responding to higher prices, and will make long term conservation investments by purchasing new appliances or reducing their usage. See NYSERDA Residential Electric Submetering Manual, Oct. 2001, p. 7.

As newly submetered tenants attempt to cool poorly insulated apartments with turn-of-the-last century windows and decades-old appliances, in an environment of rising electric rates, their energy costs escalate well beyond the offsetting rent reduction. In many cases owner-supplied appliances such as obsolete through-the-wall air conditioners or refrigerators cannot be replaced without landlord permission and without paying additional rent increases for the landlord's investment. Many tenants could not afford to replace these appliances even if the landlord allowed them to do it. And, tenants have no control over their buildings’ structural energy efficiency, e.g., insulation, windows or over common areas.

Typically, PSC orders permitting landlords to sell electricity require them to charge actual costs and that in no instance can their charges exceed the charges that would be paid if the customer obtained service as direct customer of the utility. The PSC submetering orders also require notification to tenants of Home Energy Fair Practices Act (“HEFPA”) rights and remedies, including the right to have the PSC decide a bill dispute.

Legislation enacted in 2002 clarified that building owners who submeter are indeed “utilities” under Article 2 of the Public Service Law. Despite the law, the PSC regulations and the PSC orders, however, some landlords appear to be routinely denying submetered tenants the safeguards of HEFPA. For example, some submetering building owners overcharge tenants and fail to give tenants timely and adequate notice of the basic HEFPA protections. The PSC ignores these violations and has consistently refused to act in a timely fashion upon complaints brought to its attention months ago. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections.

Millions of dollars of money raised from customer surcharges are being doled out by NYSERDA to pay landlords for the substantial cost of converting from master metered service with electricity included in rent to submetered service separately billed to the tenants. Even though they have accepted NYSERDA financial incentives, sometimes up to 100% of their cost to submeter, landlords are overcharging tenants and violating HEFPA.

Allowing landlords to sell electricity to residential tenants with no meaningful price regulation and without consumer protection is another piece of the PSC’s deregulation agenda. The Commission’s tolerance for submeterers’ disregard of their obligations sends the message to other submeterers that once the PSC has given its approval to submeter and the NYSERDA money has been doled out, the PSC will ignore submeterers’ obligations to customers.

The Public Service Law does not specifically address submetering. Indeed, many years ago, the PSC banned it altogether, calling it "parasitic," but the practice has gradually re-emerged. Submetering is achieved through PSC regulations and orders, which are far too discretionary, provide no enforcement mechanism, and, as experience has shown, are prone to abuse.

In addition, tenants are getting a raw deal in the PSC/NYSERDA programs. At a minimum, when a building is submetered with NYSERDA grants there should be a comprehensive assessment of the impact on tenants. Many tenants in low and moderate income buildings live on fixed incomes and are unable to absorb the higher costs, or to invest in energy saving measures to cope with the new electricity charges. In addition to (or instead of) giveaways for landlords that pay for the installation of the new meters, NYSERDA should protect tenants, by replacement of inefficient appliances and requiring the landlord to improve thermal efficiency of the building envelope. Given the direction of the current PSC and NYSERDA, their tilt toward landlords and disregard of consumer interests, legislation may be needed to adequately address the growing problems in this field.

Niagara Mohawk's "Self-Imposed Moratorium" on Winter and Cold Weather Terminations of Service

On December 5, 2008, at evidentiary hearings in the current Niagara Mohawk natural gas rate case, National Grid witnesses testified that Niagara Mohawk has a "self-imposed winter moratorium for our elderly, blind and disabled customers." The company relies on its records to check if the customer is "coded" as elderly, blind or disabled. Persons over age 62 are considered to be "elderly." This means that the company is refraining from shutoffs of these customers for nonpayment during the cold weather period ending April 15.

Also, the witnesses testified regarding a new policy not to cut off service to any category of customer for nonpayment when the outdoor temperature is below 32 degrees.

According to the recent NARUC 2008 Individual State Report by the NARUC Consumer Affairs Subcommittee On Collections Data Gathering, combination gas and electric utilities in New York State terminated service in 2007 to more than 193,000 customers as a bill collection action, and standalone natural gas companies terminated service to more than 66,000 New York customers.

Nationally, combination gas and electric companies terminated service to 1,000,354 customers, so New York state contributed more than 19% of the total.

While forbearance by National Grid in cold weather and during the cold weather season for more vulnerable customers is commendable, it is not sufficient merely to postpone service disconnection until warmer weather. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households. New York State policy, articulated in HEFPA, is to protect the public interest with continuous service, 24/7, twelve months a year.

The New York PSC has no performance standards for measuring and disincenting utility use of service interruption as a collection measure.

The "moratorium" apparently has not affected National Grid's issuance of termination notices. Callers to PULP's hotline have been receiving service termination notices, and we have been referring persons unable to afford payment arrangements to their local HEAP offices. The state income eligibility guidelines for Emergency HEAP grants to resolve heat-related emergencies were increased on January1, 2009.

ESCO Tax Subsidies: A Hidden Cost of the New York PSC's "Retail Access" Scheme

Tax Revenues Reduced Due to PSC "Retail Access" Regime
Stories in the press in the last few days remind us of the high social cost being paid to indulge the PSC's "vision" of retail natural gas and electricity competition. The Syracuse Post Standard broke a story on January 7 mentioning tax breaks favoring alternative energy service company (ESCO) service. Niagara Mohawk d/b/a National Grid wrote to municipalities in its service territory demanding a tax refund of $13 million the utility says was erroneously paid:

National Grid's letters offered only a cryptic explanation for the mistake. The utility said that in calculating its tax payments to each municipality, it had included revenues "which did not originate within the geographic boundaries" of the city or village.

By state law, cities and villages are allowed to assess a "utility tax on gross income," or gross receipts tax, on the utility bills of customers within their municipal limits. Towns and counties can't collect the tax. * * * * The exception to local gross receipts taxes is for customers who buy their electricity or natural gas from a supplier other than National Grid, Brady said. National Grid delivers the energy to those customers and bills them, but does not collect gross receipts taxes from them.

In calculating its GRT payments, however, National Grid mistakenly included revenues collected from the customers of other suppliers, Brady said. Legally, those revenues are considered to have originated outside municipal boundaries, he said.

National Grid collected the right amount of gross receipts tax from customers, but paid too much to the cities and villages, Brady said. * * * * The utility offset its overpayments to municipalities by underpaying the GRT it owes the state, Brady said.

See National Grid Demands Syracuse, Other Upstate Municipalities Return Tax Overpayments. See also:

• Utility Wants $13 Million: National Grid Stuns Cities in Seeking Refund of What it Says Were Tax Overpayments;
• Utility Tax Error - Don't Hold Ratepayer Responsible;
• National Grid Wants its Money Back;
• National Grid Requests $400,000 from City: Says Taxes Were Overpaid to Utica;
  
• National Grid seeks refunds from Malone, Saranac Lake

The mistake apparently made by National Grid appears to be that it paid some gross receipts taxes (GRT) to municipalities that were not due or collectible from customers who switched their commodity service to an "energy services company" (ESCO) provider. Some municipalities reportedly are refusing to pay and have asked the Public Service Commission (PSC) to review National Grid's demands. According to the Plattsburgh Press-Republican article:

State law allows only villages and cities to charge a gross-receipts tax, which is usually 1 percent. It is passed on to customers through a line item on National Grid bills.
National Grid began overpaying the tax in December 2005, by mistakenly including customers who get their power from other sources in with those who get it from National Grid.
Only National Grid power customers were subject to the local tax. The state should have gotten the tax for the other customers.
The correct amount was collected, but when it was time to remit the amounts owed to municipalities and the state, the state's share went to local governments, according to National Grid. The utility says it underpaid the state for the gross-receipts tax by the same amount it's asking municipalities to refund. * * * * The tax shows up on consumer bills on the line "Tariff Surcharge."

Sales Tax Breaks Favor ESCOs and Distort the Marketplace
There is another major tax break involving the sales tax (not the same as the GRT). In addition to the 1% GRT tax break on local delivery service tax mentioned in the stories above, a major selling point for ESCOs is that business customers who switch to ESCO service enjoy a state and local sales tax exemption for the delivery portion of service still provided by the traditional utility. This service is necessarily provided whether or not the customer buys gas or electricity from the utility or an ESCO.

For example, Con Edison Solutions touts its services saying:

One reason nearly one-third of New York utility customers have alreadyu switched to energy service companies like Con Edison Solutions is that, to encourage switching, the state enacted sales tax incentives amounting to 7.5% - 8.625% of the delivery portion of the bill. Using Energy Deregulation to Control Your Electricity Budget.

Con Edison Solutions' more regulated holding company sibling, Consolidated Edison of New York, Inc., hypes the tax break for businesses considering switching to its ESCO affiliate or other ESCOs:

Tax relief. When you buy your electricity from an ESCO, the Con Edison delivery charges are not subject to sales tax. When purchasing natural gas from an ESCO, the sales tax on the delivery charges will be lowered significantly." PowerYourWay Benefits.

Energetix, an ESCO affiliate of Rochester Gas & Electric, advertises to business customers:

Don't forget tax savings! As a customer of Energetix, New York State Sales tax is not applied to your local delivery charges. In most areas, if you are a taxable customer, that means significant savings on what is often half of your monthly bill!

Similarly, NYSEG Solutions touts the tax break for business customers:

Another important reason to choose NYSEG Solutions for your business is for the tax savings. By purchasing supply service from an ESCO, you are no longer required to pay sales tax on your electric and gas delivery charges. Local tax benefits may apply to your supply charges too!

For business customers that use large amounts of energy, tax breaks on the delivery portion of service might be enough to justify switching to an ESCO for commodity service, even if the ESCO commodity price is higher than the price of the traditional utility. Large industrial customers, for example, typically must pay wholesale NYISO prices with no long term contract hedging from the traditional utility. An ESCO might simply make virtual contract arrangements to sell the commodity portion at the NYISO price, with a markup higher than the price the utility would charge for the same service that will be more than offset by the delivery service tax break.

Thus, the tax break can reward a less efficient ESCO "competitor" who charges more for the identical service. According to Lindsey Audin, a consultant who evaluated ESCO service for large business customers, the combined state and local sales tax break on delivery service is about 8% in New York City. He has said that the availability of this tax break, not available in other states, has a "dramatic" impact on customer interest in taking service from ESCOs.

History of the State Sales Tax Break
In general, there has been no state sales tax on natural gas or electricity used by residential customers since 1980. Business use, however, is still taxed. Also, localities like New York City are allowed to tax residential electric and natural gas service.

In the late 1990's when the PSC was rolling out the restructuring regime pushed by Enron, the State Department of Taxation and Finance informally interpreted the sales tax laws in a way that favored ESCOs: When natural gas or electricity was sold together with delivery service, 100% of the utility's bill was subject to sales tax, but the policy was different when the gas or electricity was sold separately, with only the commodity portion taxed (not the delivery portion still provided by the traditional utility).

This made about as much sense as giving a sales tax break on Buicks if buyers purchase their oil changes at Jiffylube instead of the Buick dealership.

In a January, 1999 ruling of the New York State Department of Taxation and Finance, the informal support of the PSC's "retail access" regime by allowing the sales tax break for ESCO customers was reversed and potentially disrupted. Subsequent rulings extended the effective date of the first ruling, and then legislation was passed in 2000 which continued the sales tax break under a new Section 1105(C) of the State Tax Law.

The bill including the tax break favoring ESCO service, Chapter 63 of the Laws of 2000, was an omnibus end of session tax bill dealing with numerous other tax issues. In general, the law eliminated the 4% sales tax on electricity and gas but then replaced it with a 4% "compensating use" tax under Tax Law Section 1110. Had that been all, it would have been a wash. But a new provision, Tax Law Section 1105C, eliminated the compensating use tax on utility delivery service when the customer buys electricity or gas commodity separately from an ESCO. Also, the “notwithstanding” language covers Article 28 of the Tax Law, so localities cannot tax the delivery portion of utility service to ESCO customers. There appears to be no memo explaining the reason for the break.

A decision of the PSC summarizing the 2000 amendments to the Tax Law states:

This tax law change, while complex and far reaching, provides New Yorkers with two significant benefits. When fully implemented it will reduce utility bills by about $330 million annually. In addition, it levels the playing field for competition to develop by imposing like liabilities for utility and non-utility service providers. One remaining imbalance is that sales tax on transmission and distribution is being phased out for retail access customers, while it will continue to be collected for customers purchasing their commodity from a utility. While such continuing imbalance is not ideal, it does serve our competitive goals at least in the short run.

In 2001, an effort was made to give an additional rate bread to tax exempt customers who switch to ESCO service but receive no tax benefit because they are tax exempt nonprofit entities. The PSC refused the request, stating in its decision:

The State has authorized a separate incentive to encourage development of a retail access market. The Tax Law, effective August 31, 2001, phases out state and local sales taxes on charges for the transmission and distribution of electricity purchased from an entity other than the local distribution company. This incentive is not available to not for profit and other tax exempt entities.

Annual Sales Tax Revenue Losses Grow from $7 Million in 2002 to More than $128 Million in 2008
Since enactment of the tax break, the lost tax revenue has grown as more and more large industrial and commercial customers switched to ESCO middlemen, whose main function may be tax avoidance:

• The 2005 Division of the Budget/Department of Taxation and Finance Report on Tax Expenditures indicates that the State'srevenue loss due to the ESCO sales tax break rose from just $7 million in 2002 to more than $55 million by 2005.
• The 2007 Division of the Budget/Department of Taxation and Finance Report on Tax Expenditures estimates the State sales tax revenue lost due to the ESCO break was $107 million.
  
• The 2008 Division of the Budget.Department of Taxation and Finance Report on Tax Expenditures estimates a loss of $128 million in 2008 State sales tax revenue due to the delivery tax break for ESCO customers.

Bear in mind that the annual State Tax Expenditure Reports only assess the loss of State revenue due to tax exemptions -- they do not measure the lost revenue to localities that must also give ESCO customers tax breaks on utility delivery service. The State rate equals 4 percent. Local sales tax rates range from 3.0 percent to 5.0 percent.

Thus, the total lost tax revenue due to the exemption of delivery service sales taxes for ESCO customers probably is much more than the $128 million of foregone State revenue estimated in the 2008 state report, perhaps $200 million per year when the revenue loss to localities is considered.

Other States
Fifteen states "restructured" under the model pushed by Enron, to functionally deregulate prices of wholesale and retail power supply. We know of no other restructured state that tilts the playing field for utility competition with a similar tax break favoring ESCO service. For example, according to Pennsylvania Consumer Advocate Sonny Popowsky,

When electric restructuring was passed in 1996, Governor Ridge made a special point to make sure that state tax revenues would be preserved. The relevant taxes are charged to customers of all retail electric suppliers, both regulated and unregulated. In PA's electric restructuring act we also had a provision called the RNR (revenue neutral reconciliation) to be sure we maintained at least the same tax revenue.

New York Cannot Afford to Continue the $128+ Million ESCO Tax Subsidy
New York State is now struggling to make ends meet. The Governor is advocating harsh measures to limit expenditures on education ($700 million cut proposed by Governor), health, public assistance, and many worthy programs, including a proposal to eliminate all funding for PULP. See, for example,

• A Safety Net for Those Facing Eviction Is Itself in Peril,
  
• Governor Paterson's 2009 Message to New York's Poorest: Let them Eat Pheasant;
• Civil Legal Services Advocates Respond to Gov. Paterson's State of the State Address: Complete Elimination of Civil Legal Services Hurts Low-Income New Yorkers and New York's Economy.
  

The Governor is also proposing increased fees and taxes, including a 2% assessment on utility bills, but he has not proposed ending the state tax breaks favoring ESCOs, who for a decade have also been excused by the PSC from paying any assessments for PSC regulatory costs.

New York cannot afford the continued high cost of subsidizing the PSC's flawed restructuring regime with tax breaks. Indeed, if the ESCO regime were really as successful as the PSC recently announced, there should be no reason to prop it up with tax subsidies. The PSC recently assessed the growth of ESCO markets and observed in an October 2008 order:

if barriers to entry and other obstacles to the growth of competitive markets have been successfully removed, those markets should develop without ratepayer subsidization. With the markets maturing, competitive providers should succeed or fail based on whether they offer energy supply products on terms that consumers find preferable to purchasing commodity from a regulated utility.

Now that the PSC is finally beginning to trim the direct subsidies it created for ESCOs, funded at the expense of utility ratepayers, it is now time for the Legislature to end unnecessary taxpayer subsidization of ESCOs and ESCO customers. It is time to stop encouraging a sham "competition" where virtual middlemen can merely resell commodity at a higher price without providing any real value, simply by arbitraging tax subsidies with customers. See Close the Energy Sales Tax Loophole Favoring ESCOs.

New York State's subsidy of the so-called "competitive" utility service providers should be ended, by levelizing the tax system so that utility customers who switch to ESCOs do not get a tax break on T&D service provided by the utility. This would generate needed revenue -- at least $128 million for the state, plus more for localities -- and at the same time promote a more level playing field where utilities might actually compete to provide better and cheaper service.

Obama Team, Citing ‘Major Problems for Consumers’, Calls for Delay in DTV Transition

The Co-Chair of President-Elect Obama’s Transition Team has sent a letter to Congressional leaders urging them to postpone the date for the nation’s transition from analog to digital television (“DTV”). In the letter , John Podesta wrote:

During the Transition, we have discovered major difficulties in the preparation for the February 17 conversion from analog to digital broadcasting. These weaknesses mean major problems for consumers. Because Congress mandated the conversion date and other components of the switch, congressional action is the first step towards addressing the problems awaiting Americans.

With a shortage of federal government issued coupons to purchase converter boxes, possible degradation of service (see Switch to Digital TV Still Fuzzy for Some) and the impact on the most vulnerable members of the population not using newer digital TVs and not having cable TV service, the Obama team’s concerns are well-founded.

For more on the DTV transition issues, see Static! More Stumbles in DTV Transition May Leave Many New Yorkers Without Service.

Lou Manuta

Governor Paterson Announces Energy Agenda in "State of the State" Message: More Efficiency, More Renewables

In his first State of the State Message on January 7 Governor Paterson announced his goal that "45 percent of New York State's electricity needs will be met through improved energy efficiency and greater use of clean renewable energy by 2015." The supporting factsheet summary of his "45 by 15" proposal explains that the state’s mix of renewable electric energy resources – now about 20% -- would go up to 30% , and recites the "goal of decreasing electricity usage by 15 percent." The Governor also called on the PSC to aid in implementation of these goals and to adopt an “on bill” financing program for household energy efficiency improvements.

Efficiency
The Governor's energy efficiency goal is not altogether new: Then-Gov. Spitzer announced a similar “15 by 15” electric energy efficiency plan in 2007. Electricity load had been growing about 2% a year, so Spitzer's 2007 plan would essentially have offset new load growth, i.e., total usage would level off by 2015. Inasmuch as load still grew in the first two years of the original “15 by 15" plan, and was not offset by expanded efficiency programs, reducing total electricty usage 15% by 2015 would seem to require far more robust efforts.

On-Bill Financing
The Governor also mentioned “on bill financing” of energy efficiency. This is proposed as a means to encourage homeowners to reduce their energy usage. They would borrow money from the utility or a third party lender to insulate, replace inefficient furnaces, etc. Then they would repay the loan for the home improvements in installments, added to their monthly utility bills. The cost of the home improvement loan repayments, it is assumed, would be offset by savings due to the successful reduction in energy usage. A "working group" report on this topic was issued December 19, 2008 in the PSC’s “Energy Efficiency Portfolio Standard” (EEPS) proceeding.

Renewables
About 20% of NY electricity is already from renewable sources (Niagara, St. Lawrence and small hydro are about 18%), the rest is mainly wind, which has been growing rapidly. See NYSERDA fast facts for 2006.

A number of questions come to mind:

• How would additional renewable resources be obtained? Wind? Where?
  
• Are there sufficient transmission resources to enable wind power to displace other generation?
  
• Would existing power plants be shut down or used less? Would those power plants still be needed in hours when the wind dies down or for other reliability purposes?
  
• Will the cost of getting 10% more from renewable energy sources be more expensive than power produced by the fleet of power plants now running? If so, how much, and how will the increased cost affect New Yorker residents and businesses struggling now to pay their current bills?

The trade association for utilities, the Energy Association of New York State, issued an enthusiastic press release endorsing the Governor's proposals, as did IPPNY, the merchant power group, the NYISO, and the environmental group NRDC.

In addition to the Governor's proposals, there is a State Energy Plan process underway, after years of having no formal energy plan. It is likely that the Governor's "State of the State" proposals will be incorporated into the eventual plan by the State Energy Planning Board, which is comprised of Governor's' appointees.

A new state energy plan is scheduled to be issued for public comment March 31, 2008.

FERC Chairman Kelliher Resigns; Who Will President Obama Pick?

Decisions by FERC on wholesale electricity rates have an enormous impact on New York consumers because of the Public Service Commission’s decisions in recent years, which led most New York utilities to sell their power plants, with the result that now more power must be bought in federally (de)regulated wholesale markets at flawed "market-based rates" for resale to retail customers. We have previously written about the possibility of reshaping the Federal Energy Regulatory Commission (FERC) in the new Obama administration to achieve the consumer protection role originally intended when the agency was created. See

• Will President Obama Repurpose FERC? and
  
• Obama Picks Transition Team for DOE, FERC.

FERC Chairman Kelliher yesterday announced he will step down effective inauguration day, January 20, 2009. See

• FERC chief Kelliher to step down;
• Energy Regulator Resigns;
• Top Energy Regulator's Exit Is Chance for Obama to Reverse Deregulation Fiasco, Put Families Over Power Company Profits.

Will we see a new FERC more committed to just and reasonable rates or will we see more of the same?

Update January 14, 2008
Blumenthal Applauds FERC Commissioner's Resignation
"This resignation starts dismantling a fatally flawed FERC -- leadership that is deservedly doomed as we welcome a new and promising administration," Blumenthal, a Democrat, said in a statement.

Under Kelliher's leadership, FERC has been "on a lawless and mindless mission to nearly obliterate state rights, and approve virtually all energy projects at any cost to the environment and ordinary citizens," Blumenthal said.

Kelliher, a Republican, will initially remain as one of five commissioners of the agency, which oversees power grid reliability and wholesale natural gas markets."
******
"This resignation marks a moment that enables President-elect Obama's administration to restore FERC's true mission: protecting consumers from exploitation by energy companies that provide a basic necessity of modern life," Blumenthal said. "FERC must finally defend consumers from unwise and unjust energy policies that favor industry interests over public interests."

Update January 20, 2008

KELLIHER TO REMAIN AS FERC CHAIRMAN UNTIL OBAMA NAMES SUCCESSOR

SNL EXTRA 1/21/2009 1:56 PM ET

Although he announced his intent two weeks ago to step down as chairman of FERC on Jan. 20, Chairman Joseph Kelliher said Jan. 21 that he plans to stay on in his post until President Barack Obama names a successor.

Static! More Stumbles in DTV Transition May Leave Many New Yorkers Without Service

If digital clocks could tick, they would be ticking loudly now.
In a little over a month, history will be made. For on that day, February 18th to be exact, we will know who has made it across the digital divide and can continue to watch television as they did the day before. Unfortunately, many will be left behind in the virtual dust, unable to watch television as every American has a God-given right to do.

Background
There are several choices that households can make in order to continue to receive television signals on February 18th. If they already subscribe to a cable television or satellite service, no changes are necessary. If they have a digital television set (one that has been purchased new in the past year or two, even if it is not an "HDTV"), they should be able to continue to receive television programming, even without cable or satellite. If a family has an older television not connected to a pay service like cable or satellite, unless they want to subscribe to one of these services or purchase a new television, they will need to obtain a converter box to continue to receive over-the-air television signals.

The National Telecommunications and Information Administration ("NTIA"), the federal agency tasked with overseeing the transition and the coupon program to reduce the cost of the converter boxes, permits households to request up to two coupons -- each worth $40 -- toward the purchase of certified converter boxes. Only one coupon can be used to purchase each coupon-eligible converter box. Consumers will receive a list of eligible converter boxes and participating retailers with their coupons. Converter boxes generally cost between $40 and $80 and coupons expire 90 days from the date they are mailed.

Hurdle #1 - Missing the Deadline
While there is no indication that the deadline will be extended, the federal government has awoken to realize that not everyone will be ready for the digital television ("DTV") transition and has stepped up its efforts to provide a safety net. As reported in the PULP Newsletter on December 19th, the "Analog Flash and Emergency Readiness Act" was approved by Congress on December 10th. The bill, which requires the FCC to implement a program to permit the continued transmitting of public safety information and digital television transition information to analog television sets for 30 days after the transition, was signed into law on December 23rd as Public Law No. 110-459 and the FCC has already begun implementing it. What this will do is provide an extra month of reminders for people who did not make the switch (as well as offer emergency safety information), but it will not get them Oprah, CSI, or any March Madness basketball games. Getting the word out about the DTV transition should be priority one.

Hurdle #2 - Waiting List for Converter Coupons
The problems with the transition are much worse than that. NTIA issued a dire announcement on January 5th that its converter box coupon program has run out of money . Starting January 4th, consumers requesting coupons from its TV Converter Box Coupon Program have been placed on a waiting list. Coupons will be mailed on a first-come, first-served basis, as funds from expired coupons become available. Because of the high demand for coupons, the program apparently reached its $1.34 billion ceiling, which consists of ordered and redeemed coupons. Now, when consumers contact the Coupon Program to request coupons, they will receive a message they have been placed on the waiting list. Consumers will receive a reference number to use to check the status of their order at the Coupon Program's Web site.

According to NTIA, more than 24 million households have requested more than 46 million coupons and more than 18 million coupons have been redeemed. Consumers holding coupons are advised to redeem them before the coupon expires within 90 days from the date it is mailed. To date, 52.5 percent of coupons requested have been redeemed and more than 13 million coupons have expired.

Hurdle #3 - The Process and the Need for an Antenna
So, what happens if you are one of the lucky ones and receive a converter box coupon - what is the process like? Once the converter box is purchased and properly installed, are your problems over? Have you successfully crossed the digital divide? Not so fast.

Digital is a completely different animal from analog, especially when it comes to television signals. If you are familiar with adjusting your antenna (either a roof-top model or rabbit ears attached directly to the television set) in order to tune in a station and eliminate the static, you may be in for a rude awakening. The process of tuning in a digital station is completely different - the signal is either received or not received.

Some channels that were previously received with a little "snow" may not be viewable at all, come February 17th. A more powerful roof top antenna may now be required and there is no coupon program to help cover the cost of the antenna or the installation. Up until now, no one has talked about this aspect of the DTV transition.

A recently story in the New York Times and follow-up letters addressed the issue of the "cliff effect," where the viewer feels as if a favorite television station has fallen off a cliff because the signal can no longer be received.

The article author also correctly notes that it will be the most vulnerable Americans, such as the poor, the elderly, and the non-English speaking, who will be most affected. Those are the members of our population who are the least likely to be able to afford a new digital TV antenna or a converter box without a coupon.

The digital clock is indeed ticking, but can these serious hurdles be resolved in time to help those left on the wrong bank of the digital divide?

Lou Manuta