Data Discredits NYISO and PSC Defense of Spot Market Rate Demands; 12% of Bids Exceed $900

Background
The Federal Power Act, 12 U.S.C. section 824d stipulates

All rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful.

The Federal Energy regulatory Commission (FERC), the agency charged with enforcing the Federal Power Act and protecting customers, is, like the New York PSC, in the midst of a major deregulation effort which abandons traditional regulatory safeguards.

In its so-called "market-based rate" system, FERC allows wholesale electricity sellers to change their rate demands secretly, without publicly filing the rates and charges (or contracts) in advance. FERC allows sellers at the NYISO spot markets to demand up to $1,000 MWH -- even when the actual cost of operating power plants is only a small fraction of that. This stands in marked contrast to the traditional filed rate regulation system under the Federal Power Act in which (i) reasonableness of the price is tested by relationship of the price to some measure of the cost, and (ii) all rates and rate changes are publicly filed in advance with an opportunity for public scrutiny and revision by FERC prior to their taking effect.

Under FERC's practices, no review or refund is possible when unreasonable market rates are charged. In a decision last year, the Supreme Court pointedly refused to endorse the legality of FERC's "market-based rate" regime. See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered.

Legislative Hearings on NYISO Market Design
Two New York State Assembly Committees held hearings on the impact of NYISO markets on New York State's high electric rates earlier this month. See Assembly Committees Hold Hearing to Discuss NYISO Practices and High Electric Prices.

A topic of the hearings was a report of Robert McCullough, principal of McCullough Research, a Portland Oregon consultant who uncovered electricity market manipulation by Enron.

McCullough concluded that the sale by New York utilities of their power plants to new owners who can sell the output at the NYISO at federally allowed "market-based rates", and the resultant new role of the NYISO influencing wholesale rates has resulted in higher prices to consumers. See The NYISO's Market-Clearing Price Auction Is Too Expensive for New York- New Yorkers Lost $2.2 Billion Because of NYISO Practices.

McCullough criticized the lack of transparency in NYISO markets. NYISO secrecy rules, approved by FERC, prohibit release of the identity of the sellers whose bids clear the hourly market auctions and set the price for all sellers. Data on prices sellers demand at the NYISO is kept secret for six months, and then is released in "masked" form without identifying the sellers. As a result, the identity of sellers who may have gamed the market rules is never disclosed, as in the case of last year's episode of market gaming which may have cost consumers hundreds of millions or more. See FERC, NYISO and PSC Watched While NYISO Gamers Looted Consumers.

In his testimony, Robert McCullough discussed an anonymous seller who regularly offers the output of its power plant in ascending "hockey-stick" bids which reached $1,000/MWH. He urged further inquiry regarding the identity of the seller making such high rate demands and any reasons given to justify them.

The NYISO Defense
The NYISO, the New York PSC, and other spot market supporters responded last week with efforts to rebut the McCullough Research report and to explain away the anonymous $1,000 bidding. See NYISO submitted a paper from Susan Tierney of the Analysis Group. Tierney's prior papers defending NYISO markets has been criticized here. One thrust of the defense was to claim that the $1,000 bid was unusual, and perhaps related to unique characteristics of some generating plant, though it did not identify the plant.

Two PSC staffers submitted a response supporting the NYISO. The current Chairman of the PSC is a former NYISO official. See The PSC urged creation of the NYISO in its 1996 "vision order" that propelled the utilities in New York to divest their power plants and form holding companies. Although FERC has jurisdiction over the wholesale electric rates, the PSC still retains limited but possibly significant jurisdiction over the NYISO. For example, the PSC has jurisdiction to assure the NYISO operates in the public interest, and also has jurisdiction over other New York power companies participating in the NYISO market to prevent their exercise of market power.

The Response to the NYISO - Much More Evidence of Anomalous, "Possibly Criminal" Bidding
Yesterday, McCullough Research issued a response. See New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues. The response includes "A Short Review of Anomalous Bidding at the New York ISO from September 2007 through August 2008." A press release states

McCullough Research has now countered the objections of the NYISO and the Public Service Commission with "New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues" released on March 30. This surrebuttal also analyzes data on bidding in New York. "From September 2007 through August 2008, NYISO received 585,043 bids at $900/MWh or more. This appears to be a very large number of anomalous bids – 12% of the 4,859,186 bids entered into the NYISO markets during this period," says McCullough. "Markets that lack transparency are susceptible to many different forms of abuse. In California, market failure posed an extreme danger to the economy of the state. New York appears to be facing many of the same factors."

The March 30 Report defends the conclusion that New Yorkers are paying more for electricity due the the NYISO markets, debunks hypothetical justifications proffered by the PSC and Tierney for the $1,000 MWH bids by an anonymous bidder, and discusses its startling new finding of a broad pattern of anomalous bids:

Hockey stick bids are not simply the province of a single bidder in New York State. Bids higher than any plausible level of marginal cost are made continuously by a number of different bidders. Our database of NYISO bids, for example, has non-economic bids (over $900/MWh) made by 95 different bidders. On average, each bidder submitted non-economic bids for seven different generating units. Why would bidders make such irrational, non-economic bids? Given the opaque nature of New York’s markets, it is difficult to determine the rationale, but three reasons have been observed in other areas with administered markets:

Project Stanley: In Alberta, Enron and Powerex had a collusive agreement to divide the market. Powerex allowed Enron to purchase power from it at a lower rate in exchange for Enron setting the high price in the market. Proceeds were then divided on a share-and share-alike basis.

Market Allocation: In PJM, EMMT made maximum bids in order to avoid providing capacity in the day ahead market.

Load Shift: Enron frequently made anomalous bids in Northern California and Southern California in order to manipulate the California ISO’s computer algorithm to assume heavy traffic on a transmission line. Enron then received the congestion payments.

We believe that non-economic bidding is a problem with broad ramifications – perhaps even criminal ramifications – that should not be casually dismissed as the irrational behavior of an imaginary hospital or hydro generator.

PULP Launches Lifeline Discount Telephone Service Comparison Chart

A chart which compares the major providers of Lifeline discount telephone service in New York is now available on the PULP website. The chart includes data we have assembled from websites of Verizon, Frontier/Citizens, Windstream Communications (formerly ALLTEL), Sprint PCS, and TracFone SafeLink.

It compares the monthly cost of each provider’s service, how many minutes are included, applicable taxes and surcharges, whether there are activation fees, the cost of additional minutes (overages), whether a new phone must be purchased, and whether a contract is required. The chart also illustrates the eligibility criteria published by each company for its version of Lifeline service. In addition, the rates for a basic Verizon Wireless service contract are included for comparison with the Lifeline rates offered by other providers.

PULP plans to update this chart on a regular basis, as it is subject to change. We would appreciate any feedback as to the accuracy of the information we have gathered.

The number of Lifeline customers in New York has dropped by more than 440,000 over the past 12 years, since its 1996 peak of 756,000, even though the number of eligible customers has increased dramatically.

For example, in 2008, there are more than one million Supplemental Nutrition Assistance Program ("SNAP", formerly called Food Stamps) households in New York, an easily identifiable subset of the population eligible for Lifeline. While the New York Lifeline data for 2008 are not yet available, we estimate only about 300,000 customers currently receive Lifeline assistance.

In contrast, California has fewer SNAP households than New York. See SNAP Household Participation data by state. Yet the January 2009 California Public Utilities Commission Lifeline report Efforts to Improve California LifeLine Program Accessibility shows that California enrolls more than 2.1 million low income telephone customers in its Lifeline assistance program. In addition, 3.6 million low-income California energy customers have reduced rates under the California CARE program.

If New York Lifeline assistance simply reached the subset of SNAP recipients, their purchasing power would increase by at least $100 million per year.

Lou Manuta

PSC Asked to Rehear Decision Retroactively Approving Four Years of Submetering without an Order Waiving the Prohibition against Resale of Electricity

We previously wrote about a case where a landlord sold electricity to its tenants for several years without seeking a PSC order waiving the general prohibition of residential submetering contained in PSC regulations and Con Edison tariffs. See White Plains Landlord Submetering Electricity Without PSC Approval. An elderly blind tenant represented by PULP objected to the Landlord's petition seeking retroactive approval.

In a February, 2009 order, the PSC granted the landlord's request.

Today, a motion for rehearing was filed on behalf of the tenant, arguing that the decision to retroactively approve submetering was affected by errors of fact and law, and that new evidence supports revisiting the decision, including evidence that the grievance process approved by the Commission and implemented by the landlord clashes with utility consumer protection statutes.

The motion further argues that the Commission, by allowing the landlord to benefit from submetering without permission for 51 months, in violation of longstanding rules and tariffs, will foster disrespect for the Commission and its rules.

Wellinghoff Designated Chairman of FERC by President Obama

On March 19, President Obama announced the designation of Commissioner Jon Wellinghoff to be Chairman of FERC. For a brief period, since January, Commissioner Wellinghoff was Acting Chairman.

President Obama also renominated Commissioner Suedeen Kelly for another five-year term. This brings to an end speculation that the direction of FERC might be significantly changed in the Obama Administration. See FERC Chairman Kelliher Resigns; Who Will President Obama Pick?; Will President Obama Repurpose FERC?

All of the sitting Commissioners, including the new Chairman, were initially appointed by former President George W. Bush.

All of the current commissioners are from Western states:

• Chairman Wellinghoff is from Nevada, where he had been a state official involved in utility matters; in subsequent private practice he represented the interests of casinos and other large electricity users.

• Commissioner Kelly is from New Mexico; she previously represented the California ISO, which operates wholesale electricity spot markets.

• Commissioner Moeller is from Washington state, where he worked in the state legislature; subsequently he was a lobbyist in Washington DC for utility and merchant power interests.

• Commissioner Spitzer is a former Arizona state senator and former Chairman of the Arizona Corporations Commission who supported electricity deregulation.

The Commission has one vacancy due to the resignation of former Chairman Joseph Kelliher.

Under HEFPA, the New York PSC Must Decide Complaints of Submetered Customers

After its 1979 order expanding the scope of submetering from cooperatives and condominiums to rental housing, the New York Public Service Commission (PSC) over the years approved a variety of confusing complaint resolution procedures in its submetering orders, which waive the general ban on resale of electric service. The 1979 PSC order expanding submetering to rental housing predated the 1981 enactment of the Home Energy Fair Practices Act ("HEFPA").

HEFPA includes section 43 of the Public Service Law, which requires the PSC to adjudicate complaints of residential utility customers.

Official regulations of the PSC (Part 96) for many years required submetering landlords to provide consumer protections "consistent" with HEFPA. Inexplicably, many post-HEFPA submetering orders contain reference to complaint adjudication by entities other than the PSC.

Often the complaint procedures and information given by landlords to tenants will mention that HEFPA applies and that the customer can "contact" the PSC. The materials do not, however, clearly advise the customer that they have a right under the HEFPA statutes to have their complaint about electric service decided administratively by the PSC. Inexplicably, despite the applicability of the PSC complaint handling procedures, over the years the PSC has approved

• Binding arbitration by the American Arbitration Association, 2000 Hazel Towers Submetering Order ("Upon receipt of the protest, the matter shall be turned over to a grievance arbitrator. The arbitrator, to be selected from the American Arbitration Association or equivalent. . . ."); 1998 Ruppert/Yorkville Towers Submetering Order ("The arbitrator, to be selected from the American Arbitration Association or equivalent, is to take action within a reasonable period of time....and the decision of the arbitrator will be binding to all parties");
• Non-binding arbitration, 2001 Ebbetts Field Apartments Submetering Order ("the submetering plan does not provide for binding arbitration, only arbitration");
• Arbitration followed by PSC complaint process, 2008 1 Alexander Street, Yonkers Submetering Order ("The property manager will submit the grievance to an independent arbitrator selected from the American Arbitration Association or equivalent, at no cost to the tenant. The decision of the arbitrator w ill be provided to the tenant promptly with notice of the arbitration procedures. If the tenant is dissatisfied with the decision of the arbitrator, either party may file a complaint with the Commission pursuant to the Home Energy Fair Practices Act (HEFPA)).
• New York City Landlord-tenant court proceedings in the 2008 City of New York,Roosevelt Landings (Eastwood) Submetering Order, ("If a resident remains dissatisfied, the resident, within fifteen (15) days of management’s response, may request in writing that the grievance be submitted to the New York City Civil Court Housing, Landlord/Tenant Court");
• The New York City Department of Housing Development and Preservation, 1997 North Waterside Plaza Submetering Order ("If the complainant is dissatisfied with the managing agent’s response, he or she may request a review of said determination by filing a written protest within fourteen days from the date of the response to HPD").
  

The alternative venues for complaint adjudication mentioned in some submeterers' documents all involve time consuming formal proceedings that may also be expensive and risky, for example, if an eviction case is the forum for resolution. When all of the above orders - and many other similar orders -were issued, the PSC had on the books an official regulation saying that all submeterers must provide protections consistent with HEFPA. Even after the 2002 ECPA amendments clarified that the PSC cannot waive any HEFPA requirements for any providers of utility service, the PSC continues to grant submetering applications that refer complaints to third parties prior to or in lieu of the statutory PSC complaint procedure.

The cost, time, and formality of these alternative complaint resolution systems probably serves to intimidate and deter tenants from seeking redress from the PSC regarding common disputes over submetered electric service. The orders with alternative grievance procedures often refer, rather cryptically, to the applicabiilty of HEFPA (which includes PSl Section 43, the PSC complaint handling duties) or the to PSC complaint handling process. But when tenants with grievances over submetered service look at the actual information given them by their landlords or in their leases, the emphasis is on the alternative procedures, with little or no disclosure of the availability of the PSC complaint adjudication process. In some landlord-provided information, the only disclosure is that the tenant may "contact" the PSC.

The PSC has jurisdiction to decide complaints of submetered customers regarding electric service, including, without limitation, for example, when landlords or their submetering agents

• threaten or impose a charge to investigate and check a possibly malfunctioning meter,
  
• threaten or impose a charge to check and determine if one's meter measures service to a neighboring apartment or to common areas outside the tenant's apartment,
• threaten or impose late charges in excess of those allowed by the PSC,
  
• say nothing can be done about wide variations in monthly charges or usage that cannot be attributed to or explained by the tenant's actual use of electricty
• refuse to allow tenants questioning bills to review the landlord's electricity costs, the basis for charges, or the method of bill calculation,
• deem disputed charges for electric service not paid by the customer to be "additional rent" and threaten eviction if the disputed charge is not paid,
• fail to credit payments or make billing mistakes.

In a March 23, 2009 Memorandum, PSC Adjudication of Submetered Customer Complaints, PULP reviewed the alternative complaint resolution procedures adopted in the past by landlords with PSC approval. We concluded that the PSC is the body required by law to decide residential utility customer disputes, it has no authority to require submetered customers to have their disputes decided by other bodies, and cannot waive any requirements of utilities (submeterers) including the duty of the service provider to have a prompt complaint resolution process within the utility and to notify the customer of the availability of the PSC complaint handling procedures. None of the alternative, external venues often mentioned in leases or PSC submetering orders is appropriate for prompt resolution by the utility service provider itself of a dispute over electric bills or service.

Landlords who submeter are "utilities" within the meaning of the Home Energy Fair Practices Act that submetered service must be provided in accordand with HEFPA. In their role as utilities, they must obey consumer protection requirements placed upon utilities by the law. This was finally recognized by the PSC after the Legislature clarified the law in 2002role of submeterers is now embodied in PSC regulations. In a December 5, 2003 decision, the PSC acknowledged: "Those who submeter electricity for sale to residential end-users are utilities within the meaning of Article 2 of the PSL. Accordingly, those entities must provide all HEFPA protections."

Utilities (including submeterers) must have their own internal grievance procedures for residential customers. When that does not suffice to resolve the issue to the satisfaction of the customer, the customer must be notified of the availability of the PSC complaint handling and determination procedures. HEFPA requirements cannot be waived. Just telling customers they can "contact" the PSC, as some landlords do in their explanations to tenants of the complaint process, simply is not enough to satisfy their duty to inform the customer of the availability of the complaint handling procedures required by HEFPA.

The PSC complaint handling procedure

• can be accessed by mail, telephone, or internet.
  
• Typically, the PSC will buck the issue back to the provider of electric service for a review and reconsideration of the issue, thus requiring the customer to complain again to the PSC if that does not satisfactorily resolve the problem. When the customer again complains to the PSC, the complaint is finally "escalated" to the point that PSC staff then investigates and issues an initial decision.
  
• If the initial decision does not provide a resolution satisfactory to the customer, an informal hearing or informal review can be requested.
  
• If the informal hearing or informal review does not resolve the problem, the decision of the reviewer or hearing officer can be reviewed in an appeal to the PSC for a final agency decision.
  
• If the final PSC decision does not resolve the problem, the complainant can file an Article 78 proceeding for judicial review of the decision in Albany County Supreme Court, within four months of the PSC decision.

In sum, submetered electric customers should not be deterred or misled by misleading or erroneous language in their leases or other materials provided by their landlords into thinking that they must pursue remedies in costly, overly formal, and time consuming proceedings in other forums.

For more information about the PSC complaint process, follow the links at the PSC webpage on Filing a Complaint with the PSC. Also, see PULP's webpage on the PSC complaint process. The PULP Law Manual chapter on PSC complaint procedures is under revision and is expected to be completed later this year.

TracFone Launches “Safelink” Wireless Lifeline Service in New York

Recently, TracFone Wireless, the largest pre-paid cellular service provider in the country, unveiled its Safelink Lifeline service in New York. The SafeLink service provides a 68 minute calling plan on a monthly basis at no cost to qualifying customers as well as a free SafeLink Wireless phone.

Additional minutes beyond the first 68 "free" minutes can be purchased directly from TracFone in various plans, which cost in the neighborhood of 20 cents/minute. Plans of other wireless providers may have significantly less cost per minute, so users will still need to shop if they anticipate using significantly more than 68 minutes.

Customers are eligible to receive Lifeline assistance if they receive benefits from one of the following programs: Family Assistance, Food Stamps, Home Energy Assistance Program (“HEAP”), Medicaid, Safety Net Assistance, Supplemental Security Income (“SSI”), Veteran's Disability Pension, and Veteran's Surviving Spouse Pension. Applicants must complete a form to indicate that they participate in one of these programs. (For Lifeline service through one of the landline providers, such as Verizon, eligibility for one of these programs -- even if the applicant does not participate -- is sufficient to qualify for Lifeline.) Also, as with other Lifeline providers, applicants may be eligible if their total household income is at or under 135 percent of the Federal Poverty Guidelines. Lifeline customers can only receive Lifeline discount telephone service from one company at a time. See PULP's webpage on Lifeline service.

SafeLink joins Sprint/Nextel as the only authorized wireless Lifeline providers in New York. See Reduced Rate Wireless Lifeline Service Now Available in New York.
The application to apply for SafeLink’s Lifeline service in New York is available here:

Lou Manuta

PULP Submits More Evidence to PSC Showing that a New Area Code in 315 Region is Unnecessary

Following up on a Recommended Decision issued by Judge Howard Jack on November 26th recommending an additional overlay area code for the 315 region of upstate New York, PULP submitted a Brief on Exceptions in December outlining the reasons why area code “relief” is not necessary. We previously uncovered evidence that multiple 10,000 telephone number exchange codes had been assigned to over 50 rural communities in the 315 area code in recent years, which created a perceived impending “shortage” signaling the need for a new area code. See

• ALJ Recommends "Overlay" Telephone Area Code Requiring 11-Digit Dialing, Despite Plentiful Numbers and Exchange Codes in Central New York's 315 Area;
• 315 Area Code Number Exhaust Pushed Back Another Year: No Need to Add New Area Code Now;
• PSC Halts 315 Area Code Changes For Now, But Denies PULP Petition for More Aggressive Telephone Number Conservation and Reclamation;
• PULP Provides Further Proof That Area Code Changes Are Not Needed Now in the 315 Area;
• Bill Would Require PSC to More Closely Scrutinize Telephone Area Code Changes;
• PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315;
• PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes;
• PSC Puts 315 Area Code Changes on Hold Pending Investigation;
• PULP Asks PSC to Investigate Need for New Telephone Area Codes in the 315 Region;
• PSC Considering "Area Code Relief" For 315 -- Where Did All The Numbers Go?

In our Brief on Exceptions, we pointed out that the rush of requests for exchange codes had abated and that there is no need to inconvenience the public and businesses with a new area code, which, among other things, would require everyone to use 10 or 11 digit dialing -- even to call across the street. The Brief also cited to the November 2008 North American Numbering Plan Administrator (“NANPA”) monthly Code Assignment Report stating that the number of exchange codes requested in the 315 area code for the first 11 months of 2008 stood at four (eight requested and four returned) with 97 exchange codes remaining available for use.

On March 16th, 2009, PULP filed a Supplement to its Brief with new information indicating that since that time, according to the December 2008, January 2009, and February 2009 NANPA monthly Code Assignment Reports, a total of zero new exchange codes were assigned in the 315 area code. In addition, during January 2009, one exchange code was returned. As a result, since the time PULP’s Brief was submitted, there has been a total of negative one exchange codes assigned in the 315 area code, and 98 exchange codes still remain available.

This new evidence confirms that the rapid rate of exchange code depletion prior to reform of the exchange code allocation methodology has ended, and the usage of the remaining exchange codes has slowed dramatically. At this time, we believe that there is no need to burden all telephone customers in the 315 area with a new overlay code, 10-digit (or 11-digit) dialing, and the attendant cost and inconvenience. Further, when NANPA updates its nationwide area code exhaust dates in April 2009, the exhaust date for the 315 area code may be pushed back for a fourth time since the PSC proceeding was initiated.

Accordingly, PULP reiterated its position that there is no need to implement any new area codes in the 315 area.

Lou Manuta

PULP Urges PSC to Require Submetering Landlords to Accept HEAP and Utility Assistance

The PSC is considering whether to relax its submetering regulations and “streamline” its procedures for allowing landlords to provide electric service to their tenants. Under current rules and tariffs, resale of residential electric service is prohibited without a specific PSC order. Among other things, the PSC is proposing to abolish all tariff prohibitions on submetering, which have existed since 1951, and also to eliminate the need for PSC orders allowing submetering. The approval process would be delegated to staff. PULP previously filed comments in February 2009 urging the PSC not to relax its regulations but instead to enforce existing requirements and existing orders, and to take additional steps needed to protect captive customers who now must pay for monopoly electric service from their landlords. See PULP Files Comments on PSC Proposal to Relax Submetering Rules; Submetering Landlords Clamor for More PSC Deregulation of Electric Service.

On March 13, 2009, PULP filed supplemental comments which tell the story of low-income tenants in a recently submetered 343-unit building with electric heat in Westchester County. As seems typical in these situations, the downward rent adjustments made when the landlord shifted electricity costs to the tenants did not come close to offsetting the high electric bills received by the tenants. As a result, low-income tenants were unable to pay their electric bills. When they sought assistance from the local department of social services, they were denied Home Energy Assistance Program (“HEAP”) benefits to help defray their high heating bills -- some were $500 or more -- because the bills are rendered by a Long Island submetering company that is the landlord’s agent.

PULP contacted the New York State Office of Temporary and Disability Assistance (“OTDA”), which advised that a vendor agreement must be in place in order to issue HEAP payments. Neither the landlord nor his submetering agent is a HEAP vendor.

To assure that HEAP-eligible tenants in electrically heated submetered buildings have access to the same energy assistance benefits as customers of a distribution utility, PULP urged the PSC to require, as a condition of submetering approval, that the applicant provide a copy of a currently effective vendor agreement, demonstrating that it has agreed to accept regular and emergency HEAP payments.

PULP also urged the PSC to require landlords, in their function as utility service providers, to have in place the necessary arrangements and authorization to enable them to accept voucher payments of energy assistance benefits from local department of social services for for HEA, SHEA, FFH and § 131-s emergency utility assistance.

PSC regulations currently in force do not require submetering landlords to have these arrangements in place. Indeed, in practice, the PSC allows landlords simply to evict tenants who have difficulty in paying their utility bills, circumventing HEFPA protections and utility assistance programs. For example, the lease tenants are required to sign by a PSC-approved submetering landlord provides:

The electricity charges will be billed to the Tenant as additional rent and will be payable on a monthly basis by the Tenant as additional rent. Tenant specifically understands that if the electricity charges are not paid in full on a monthly basis by the Tenant, that the Landlord may commence a summary proceeding to recover a money judgment and a judgment for possession against the Tenant and that the Tenant can be evicted from the apartment for failure to pay electricity charges.

The PSC order that applies to the landlord using the above lease requirement gives only lip service to the applicability of HEFPA protections, such as deferred payment agreements, when a tenant is behind in payments and termination of electric service is threatened. The landlord is allowed to skirt the HEFPA requirements by terminating the tenancy instead of the electric service.

This is an illustration of the practice urged in a NYSERDA-funded submetering manual co-authored by a submetering industry consultant. See PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights. The NYSERDA Submetering Manual contains this advice to submeterers regarding avoidance of the intended consumer protections contained in the PSC orders granted in connection with each authorization for submetering.

New York State has extensive regulations in place to protect residents against their electric service being shut off. An owner seeking to continue the tenancy while discontinuing the service will most likely be required to comply with all tenant-protection regulations applicable to utilities for discontinuing the service. These include various notice and payout [Deferred Payment Agreement] requirements and protections for the elderly and disabled, which are time-consuming, burdensome to the owner, and inconsistent with continuation of the rental tenancy. Moreover, special arrangements with respect to electric charges are likely to cause confusion in billing and collection procedures. As a result, owners may want to consider legal action for eviction of the resident or recovery of unpaid amounts as the primary enforcement mechanism for nonpayment of submetered electric charges.

Thus, the NYSERDA manual suggests to landlords that HEFPA consumer protections, such as the duty to offer negotiated repayment agreements to customers in arrears, can be finessed simply by evicting tenants for unpaid utility charges. As a result, the panoply of protections and utility assistance benefits ordinarily available to a utility customer are abrogated under the PSC and NYSERDA’s submetering regime.

Putting it all together, the submetering system

• is engineered to require tenants to pay significantly more for electricity and rent combined than they paid before for rent including electricity;
  
• low-income tenants cannot access utility assistance to defray these higher costs; and
  
• the PSC allows landlords to deem the electric charges to be rent.

This is an engine for displacing low-income tenants that may be attractive to some landlords who can charge higher market rents if the low-income tenants can be evicted. This seems to be occurring particularly in former Mitchell-Lama housing projects where the mortgage obligation to provide housing affordable to low and moderate income tenants has ended, and landlords are able to rent at market rates when a low-income tenant leaves.

Governor's Proposed 2% PSC “Assessment” on Utility Bills Favors Some Energy and Telecom Service Providers

Back in December, PULP reported on Governor David Paterson’s budget proposal to increase the Public Service Law section 18-a assessments on utilities from one-third of one percent of intrastate revenues to one percent. In addition, the Governor proposed a “temporary state energy and utility service conservation assessment” of an additional one percent through Fiscal Year 2011 - 2012. That is equivalent to a two percent tax, or six times the current assessment rate, for the next two years. Governor's Budget Raises Utility "Assessments," Hurting Low Income Customers, but Gives Break to Cable Telephone Service Providers. If the Governor is trying to get the utility industry’s attention, he has been successful. See Verizon's anti-assessment website campaign, Stop the NY Phone Tax.

The assessment increase would raise far more than the Public Service Commission actually requires for its operations, which have traditionally been funded by an assessment of up to 1/3 of 1% of in-state revenues of the utilities it regulates. The extra revenue from the proposed 2% "assessment" would be placed into the state’s general fund, and commingled with general tax revenue. The proposed six-fold increase in the PSC assessment would undoubtedly be passed through by the utilities to customers, and eventually would make its way onto electric, natural gas, and telephone customer bills. The utility will merely be a conduit for collecting the increased "assessment." It would be functionally indistinguishable from a gross receipts tax, and probably would be identified by utilities as a separate line item on their bills.

The original concept of the PSC assessment was to pass the cost of utility regulation back to users of the utility service, collected through the utility rate-setting process rather than through general state taxes. It was designed to ensure revenue for regulatory expenses is received from all utility customers, large and small, based on what they actually spend on utility service.

The problem is that the proposed increased "assessment" will not be evenly applied to providers of equivalent utility services. In recent years, the PSC has been in a deregulatory mode, allowing some newer utility service providers to escape its assessments and all or most state regulation. For example, the PSC has not exercised its power to regulate terms and conditions of wireless phone service, telephone service provided by cable companies, and has barely begun to supervise the alternative electric and gas companies, called “Energy Service Companies” (“ESCOs”) spawned by its energy deregulation efforts. The Governor’s proposal would assess ESCOs for the first time, which would help level the playing field for these competitors to the electric and natural gas utilities. We anticipate ESCOs will claim that they can't set regulated rates to recover the assessment like the utilities, but if they are really providing value to customers through lower rates than the traditional utility, an even 2% assessment would widen any gap between the price of their service and the utility's, and slightly help their competitive position.

The Governor’s proposal, however, ignores the largest local telephone company competitors – the cable television companies. That’s right – Time Warner Cable and Cablevision, the second and third largest local telephone service providers in the state would not have to pay any assessment! Such tax or "assessment" differentials are the wrong way to promote economic efficiency and competition, and actually can promote inefficiency. On this point, the utilities' criticism of the Governor's proposal has force. See Utilities Criticize Paterson Tax Proposal. Also, the added cost of the assessment will tend to encourage customers to switch to unassessed providers because their total bills for similarly priced services can be lower. If more customers switch to unassessed service providers, the state may not receive all of the projected revenue.

There is no reason not to assess all providers of telephone service. The FCC has recognized (in a Brief filed in the Eighth Circuit in April 2008) that requiring Voice over Internet Protocol providers, such as cable companies, to contribute to state universal service funds does not frustrate federal policy. Assessing cable companies for the PSC's regulatory assessments would not frustrate federal policy either. Verizon and all of the other local exchange carriers are also subject to the state’s gross receipts tax and Targeted Accessibility Fund (which supports Lifeline, E-911, and the relay service for the deaf) assessments which the cable telephony providers are not. How can competition flourish and bring all of its expected benefits – lower prices and innovation – if one provider is hobbled by a regulatory regime which completely ignores its largest competitors?

The solution is to level the playing field for taxes and "assessments." The state could raise as much or more than currently projected from the increased "assessment" – $651.6 million in revenue for the state, in addition to the Commission’s $83 million requirement for its expenses – by assessing all utility providers offering similar services at a rate substantially less than the proposed 2%. The time has come to treat all voice telephone service providers equally. This is not only the correct answer based on fairness, but it could actually reduce the proposed new "assessment" burden on incumbent providers – including their customers – and still increase the amount of money received by the state.

Taxes or "assessments" on utility services will be a larger percentage of the low income customer’s total income. They can be harmful to low income consumers living on fixed incomes such as social security, who even without the added burden of the proposed increased "assessment" often run out of money before their next check, and who now will have even fewer dollars to make ends meet.

On the other hand, a utility service tax or “assessment” is efficient to administer and is hard to escape. Thus, the proposed “assessment” also would be shouldered by business users of utility service who might otherwise escape state corporate income taxation through a myriad of loopholes. The Business Council is opposing the proposal, invoking the plight of residential customers facing higher bills. Business Council Says More Tax Relief Is Necessary in State Budget ("With New York's energy prices already 60 percent higher than the national average for residential customers, New Yorkers cannot afford any more energy taxes").

There are other ways to protect vulnerable residential customers without eliminating taxes or "assessments" on those who can afford it.

In these times when more revenue may be needed, and when more taxes or “assessments” on utility service are a possible revenue source, it is even more imperative for the PSC to protect low income residential customers through affordable telephone Lifeline and reduced rates for electricity and natural gas service. And, the burden upon customers of any new tax or increased "assessment" on utility service can be significantly reduced if the Legislature and the PSC spread it more equitably to all utility providers and in turn, to all users of utility service.

Lou Manuta

ESCOs Cost More -- A Familiar Experience

We have previously commented on the lack of transparency in the retail energy markets spawned by the PSC effort to deregulate the sale of natural gas and electricity. See PSC Makes ESCO Service Comparisons Difficult - How Can Customers Compare ESCO Prices?

A recent guest editorial at the Empire Page illustrates the continuing frustration of consumers who were gulled into trying ESCO electric or natural gas service. Typically, they decided to try ESCO service on the basis of advertisements (funded by utility ratepayers) from the PSC and utilities, and short term "teaser" discounts in PSC-encouraged "ESCO Referral Programs," only to discover, over time, they now pay more, not less.

[S]ince the ONLY reason I made this switch was to save on electricity costs, I decided to investigate exactly how much I had saved in 2008.

After carefully looking over each of my bills I came to a simply stunning conclusion: EVERY month I was paying a HIGHER electricity rate than I would have if I had stayed with National Grid. And it wasn't a small amount, as the monthly increase ranged from 20% to over 40%!
****
1 - [The ESCO] initially assured me that their rates would be lower than National Grid's. That proved to be false for all 12 months of 2008.
2 - [The ESCO] said that they would guarantee me a 7% lower rate than National Grid's for the first two months of my service. That did not happen.
3 - [The ESCO] said that I would save due to not to have to pay sales tax on their supplied electricity. Turns out that I didn't have to pay it on National Grid's either, so this was a misleading, phantom benefit.
4 - The state sponsored website shows [The ESCO's] rate as being 6.75¢/ KWH. for my area. The actual LOWEST monthly rate I paid for the last year was 9.75¢/KWH, roughly 50% higher than their proclaimed rate. Again, that was the lowest, so this 6.75¢ is totally inaccurate.
5 - [The ESCO] said I would get an annual 1% rebate. That came through.
****
In the meantime I had called the PSC Helpline (1-800-342-3377), and spoke to a competent and sympathetic manager (!). She did acknowledge that the data they have (e.g. rate info) is provided from the companies themselves, that they don't have the manpower to check into whether ESCO companies deliver what they promise, etc.

Notwithstanding this one good person, the bottom line here is that NYS has repeatedly shown in many areas that it has very little real interest in benefiting its citizens. Their posturing on energy issues instead amounts to promoting a bureaucratic agenda and the interests of lobbyists.

NYS and Energy: a Case Study, Empire Page Guest Editorial, Jan. 8, 2009.

Price comparison between full utility service and ESCO service is not easy

• The PSC allows some utilities to change their rates monthly
• Utilities do not post their full rate, including all adjustments and surcharges
• Utility meter reading cycles vary, so a one month comparison period may involve parts of two months and thus two different rates of the utility
• ESCO price reports at the PSC website are voluntary and unverified
• ESCO price reports at the PSC website are on a single day report which can change the next day

PULP is developing a utility bill estimator to enable residential customers who receive utility service from other providers such as ESCOs or landlords who submeter electricity to quickly check whether their bills are higher or lower than they would be if they were direct full service customers of the utility. The estimator currently calculates bills of Con Edison, Orange & Rockland, and Central Hudson.

Submetering Landlords Clamor for More PSC Deregulation of Electric Service

The PSC is considering new regulations proposed by its Department of Public Service Staff to "streamline" the process for waiving the longstanding prohibition against resale of residential utility service. These orders allow landlords to become, in effect, monopoly providers of utility service to their tenants. PULP and tenants oppose the "streamlining" and have urged the PSC instead to improve its enforcement of the now hollow customer and tenant protections routinely included in PSC submetering orders, which appear to be routinely ignored with impunity by landlords. See PULP Files Comments on PSC Proposal to Relax Submetering Rules; Bronx Tenant Association Objects to PSC Staff Proposal to "Streamline" Electric Submetering Rules.

Landlords, in their comments, are asking the PSC for even further deregulation of their charges for electric service.

Appealing to the PSC's deregulation ideology, Starrett Corporation's comments ask the PSC to eliminate the longstanding requirement that a landlord cannot charge more for electricity than Con Edison would charge to its directly metered residential (SC1) customers:

Moreover, and most important, the rate cap regulation, which mandates that charges to residents not exceed the utility's residential rate for direct metered service (SC 1), is a deterrent to the purchase of deregulated electricity. It is virtually impossible to buy electricity from the market and ensure that the purchased rate, be it at a monthly rate or a yearly average rate, is at or below the SC 1 rate. ...In effect, the PSC, in attempting to protect residents from higher electricity costs is . . . thereby defeating another of its stated objectives - electricity deregulation and the promotion of a competitive marketplace.

This issue first arose in early 2008 when Con Edison's SC8 rate exceeded that of the residential SC1 rate, placing some submetered properties, (depending upon their load factor) in the position of having passed along to residents charges that exceeded the SC 1 rate. In the past, the SC8 rate was lower than the SC 1 rate.

There we have it. In the past, landlords who submetered got electricity from Con Edison at a low bulk rate that, at least on paper, prevented tenants from being charged more than they would be charged as a direct customer of the utility. In theory, tenants would not suffer economic injury, would have no reason to challenge the submetering regime in court and would not seek service directly from the utility.

Those days when submetered tenants could be promised that they would pay less than Con Edison customers are now over. Now landlords want no limit on what they charge as monopoly providers of service to their captive tenants, and no review of the prudence of their purchases if they buy electricity from the "ESCO's" at unregulated prices. Essentially they seek complete exemption from the traditional requirement in the Public Service Law that charges for electric service must be "in all respects just and reasonable."

Starrett Corporation is also asking the PSC to allow landlords to implement residential time of use rates without individual customer consent, requesting that the Commission:

Clarify that consent required for real time pricing is not from individually submetered unit tenants, but rather from the entity that pays the mastermeter charge to the utility or power providers. At the Technical Conference, staff advised that it was not the PSC's intent to require the consent of every rental tenant to real time pricing, but rather the intent was to obtain consent of the building owner.

This comment reveals the plans of both landlords and the PSC staff to mandate real time pricing without tenant consent. Such pricing could be very harmful to customers. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers. This would be done under the ruse that the "customer" is the landlord and the landlord can consent to real time pricing for all his tenants. The landlord, however, is not a residential customer, and lacks power to consent for all its tenants to time of use or real time pricing.

The Public Service Law was amended in the past to take away the power the PSC previously asserted to require residential time of use rates. By granting to submetering landlords a power that the PSC itself lacks, the PSC would be evading the intent of the law. See New York Residential Real Time Pricing Experiments Must be Voluntary.

Landlords are also asking for waiver of requirements for meters that meet utility standards, and for restriction of the right of a customer under current laws and regulations to have a meter tested at least once. Starrett Corporation is asking to amend PSC rules to allow a submetering landlord to charge the tenant if the meter is found to be correct.

Groups Reply to PSC and Niagara Mohawk Defense of Gas Rate Case Settlement Proposal

In the NYS Public Service Commission proceeding examining National Grid’s request to raise natural gas rates in its Niagara Mohawk service territory, parties filed their responsive statements on March 10th to the February 13th Joint Proposal for settlement of the case. PULP and several community organizations are opposing the Joint Proposal. See Niagara Mohawk Gas Rate Proposal Fails to Address Low Income Customer Energy Burdens and Terminations.

Their March 10 reply comments refuted claims of the utility and Department of Public Service Staff that the Joint Proposal provides “much needed aid for low income customers,” when it only offers a $7.50 per month discount for Home Energy Assistance Plan (“HEAP”) recipients and HEAP-eligible customers. See Responsive Statement in Opposition to the Joint Proposal submitted by the Public Utility Law Project of New York, Inc. on behalf of itself and on behalf of intervenors the New York State Community Action Association, the Albany Community Action Partnership, United Tenants of Albany, and Syracuse United Neighbors.

Even with the $7.50 break, the minimum charge for low income customers would still amount to $9.95 a month. When compared to the minimum charges negotiated in 2007 for low income customers in National Grid’s Long Island and Brooklyn service territories – $1.88 and $3.53, respectively – the $9.95 is excessive. Stated another way, low-income residential gas customers in Long Island saw a 83.5 percent reduction and residential gas customers in Brooklyn saw a 73 percent reduction, while residential gas customers in National Grid’s upstate territories would see only a 32.36 percent reduction.

Moreover, low-income customers of the downstate National Grid affiliates receive a reduction in their volumetric delivery charges, while there is no break in the usage based part of the rates for Niagara Mohawk’s low-income customers. The proposed settlement rates also pale in comparison to the rates of National Grid affiliates in other states, such as Massachusetts, where state regulators have approved much more substantial rate reductions for low-income customers.

In 2008, more than 300,000 New York residential utility customers lost gas or electric service due to termination for unpaid bills, including approximately 24,000 Niagara Mohawk natural gas customers. In the context of more termination of service as a bill collection tactic, and in light of the PSC’s lightened approach known as “performance” regulation, PULP and the community groups sought performance standards that would work to reduce reliance on service termination as a means to boost collections. The settling parties, however, did not include any measure to do that in their Joint Proposal.

In their statements supporting the Joint Proposal, both Department of Public Service Staff and Niagara Mohawk avoided these concerns over affordability and disruption of service. Department of Public Service Staff stated that Niagara Mohawk’s proposed program “represents a well thought out and fair balance of the issues brought to the table by many of the interested parties, is sound and should be adopted in the context of the full JP.” In their reply, Staff adhered to this position.

Apparently the settling parties are confident that the New York Commission will tolerate continued harsh treatment of the poor.

A hearing on the Joint Proposal is scheduled for March 18th, after which the administrative law judge assigned to this case is expected to issue a recommendation to the Commission whether to approve, reject, or modify its provisions. A final order from the Commission would follow that.

Lou Manuta

President Obama Gets His First FERC Pick to Replace Kelliher

Commissioner Joseph T. Kelliher is resigning from FERC effective today, according to the FERC website.

All of the current commissioners were selected by former President George W. Bush.

The vacancy created by Kelliher's resignation gives President Obama his first opportunity to pick a member and possibly a new Chairman to replace Acting Chairman Jon Wellinghoff. See Will President Obama Repurpose FERC, and Obama Picks Transition Team for DOE, FERC.

CO2 Cap and Trade Programs Inflate Electric Rates in Restructured States

Pennsylvania's Consumer Advocate Sonny Popowsky testified to the U.S. House of Representatives Committee on Energy and Commerce on March 12, 2009 that a national CO2 cap and trade system being proposed, analogous to the RGGI cap and trade program adopted by New York and nine other Northeastern states, will increase electric rates in states like Pennsylvania and New York, where utilities divested their power plants and now buy power in RTO or ISO wholesale spot markets such as those of the NYISO and PJM:

under the “single market clearing price” method that is used to establish generation prices in restructured markets, if the market clearing price reflects the cost (or market value) of an emission allowance, this price will be paid to all generators that are operating in that hour, including nuclear units that do not need to purchase allowances and do not incur any carbon compliance costs. As a result of these factors, consumers could pay many billions of dollars in increased generation prices with only modest reductions in actual carbon dioxide emissions.

Because only the power producers whose plants emit CO2 need to buy allowances, the new revenue to New York State from the sale of allowances will be much less than the added cost to customers because the nuclear and other non-CO2 emitting producers will be paid as if they had bought allowances. Drawing upon a PJM estimate that a cap and trade program would add $12 billion to electric bills for customers in the PJM region, Consumer Advocate Popowsky estimated that "one-third, or $4 billion, of the $12 billion in increased energy costs in 2013 will go to existing nuclear plants, who are already operating today at full capacity and who incur zero carbon compliance costs."

In New York, the power producers who typically set the spot market clearing prices in every hour are fossil fueled, and so they now incorporate the price of RGGI allowances in their bids (either the price they paid or the price in unregulated secondary markets), thus raising the clearing prices. Substantial amounts of electricity are produced in New York by nuclear and small hydro and wind plants. See It Was the [NYISO] Market. These plants do not emit any CO2 and thus their owners do not need to buy CO2 allowances in the RGGI program. Because the price of energy they sell in spot markets is set at the same market clearing prices as are paid to fossil-fueled plants, the owners of non-CO2 producing power plants receive more windfall profits at the expense of consumers, without reducing any emissions.

When the price available to all sellers in the NYISO spot markets is driven up by the price inflation due to the RGGI program, one can expect that electricity prices demanded by all wholesale sellers for any negotiated off-spot market long term sales are also inflated.

Noted Economist Amartya Sen Urges Stimulus Focus on Poor; New York State Poverty Rate Hits 14%

During this national economic crisis, responses to stimulate the economy should have a major emphasis on addressing needs of the poor. As recently observed by Amartya Sen, it is not enough to rely on market results or to use federal economic stimulus money as a general economic "pump priming" Keynesian spending strategy without also addressing poverty and inequality:

The most immediate failure of the market mechanism lies in the things that the market leaves undone. [Adam] Smith's economic analysis went well beyond leaving everything to the invisible hand of the market mechanism. He was not only a defender of the role of the state in providing public services, such as education, and in poverty relief (along with demanding greater freedom for the indigents who received support than the Poor Laws of his day provided), he was also deeply concerned about the inequality and poverty that might survive in an otherwise successful market economy.
* * * *
While Keynes was very involved with the question of how to increase aggregate income, he was relatively less engaged in analyzing problems of unequal distribution of wealth and of social welfare.... Since the suffering of the most deprived people in each economy-and in the world-demands the most urgent attention, the role of supportive cooperation between business and government cannot stop only with mutually coordinated expansion of an economy. There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion. Families threatened with unemployment, with lack of medical care, and with social as well as economic deprivation have been hit particularly hard. The limitations of Keynesian economics to address their problems demand much greater recognition.

Capitalism Beyond the Crisis, New York Review of Books, V. 56, No. 5, March 26, 2009.

In its 2009 New York State Poverty Report, the New York State Community Action Association (“NYSCAA”) reports New York has a poverty rate of 14 percent, the 16th highest poverty rate in the nation, exceeding the national poverty rate of 13.3 percent and the rates of all Northeastern and Midwestern states.

NYSCAA found that more than 2.6 million New Yorkers are living below the official poverty line, including more than 860,000 children. In addition, the poverty rates in upstate cities have increased and now more than 40 percent of children in Buffalo, Rochester, Syracuse, and Utica are living below the poverty line

Poverty also disproportionately impacts people of color: NYSCAA found that while one of every 10 Whites live in poverty, more than one in five African Americans and one in four Latino New Yorkers are poor.

In addition, nearly 2.5 million individuals New Yorkers under the age of 65 do not have health insurance.

Denise Harlow, CEO of NYSCAA, noted that while these numbers are stark, “without real numbers, it can be difficult to frame the issues, structure solutions, and work to create change. This report offers the public an easy-to-use resource that is readily available. We know that many New Yorkers live in communities where the cost of living far exceeds the national average. Housing and energy stressors only increase the economic burdens facing New Yorkers and the daily struggles to feed and house their families.”

NYSCAA and other community groups recently joined with PULP in opposition to the proposed settlement in the pending Niagara Mohawk natural gas rate case, seeking improvement in low income rates and programs designed to reduce energy burdens of those living in poverty.

Did Court Challenge to Legislatively Unauthorized Greenhouse Gas Allowance Scheme Prompt Governor's Concession to Power Plant Owners?

Environmental groups reacted with consternation when Governor Paterson indicated that more RGGI greenhouse gas allowances may be distributed by DEC for the benefit of power plant owners who need to buy permits but who cannot pass through the added costs in their pre-existing long term wholesale power contracts. See Paterson Reconsidering Deal on Plant Emissions, New York Governor Could Rewrite Carbon Trading Rules, Groups Call on Gov. Paterson to Come Clean About Alleged Dirty Deal with Power Plants, Paterson Downplays His Clean-air Position.

In an editorial, The Times suggests there may be a private, "done deal" between the Governor and power producers and laments that his "apparent willingness to listen to only one side of the case raises serious questions about the way he makes decisions." A Need to Clear the Air. Newsday suggests the deal was sealed last September 8 in a meeting with wholesale power producers. See Cap-and-trade Clarity Paterson Needs to Set Record Straight

This latest flap is just another consequence of a dubious and costly program lacking any proper legislative anchor. No one should be surprized it came unmoored with the slightest shift in the winds.

In late January 2009 New York's RGGI program was threatened with extinction in a pending court proceeding brought by a wholesale power producer. The case raises rather substantial claims that the entire RGGI framework, created by the executive branch with no legislative enabling legislation, is illegal. Perhaps the Governor's dispensation to the wholesale power generators is an effort to take away the aggrievement of those who could not just pass the costs on to buyers, and ultimately, to the consumers who must pay the RGGI bills.

Perhaps the move of the Governor will defuse the legal attack by caving in to the power generators and giving them more free allowances, to cover their costs which cannot be recovered in their current wholesale power contracts.

The petition in the case of Indeck Corinth, L.P. v. Paterson alleges:

NYSERDA has predicted that it will receive more than $144 million in 2009, to be disbursed by NYSERDA at its unfettered discretion, with no authorization or appropriation by the New York Legislature. Market observers generally predict that the market clearing price will increase in future auctions, and that as a result, NYSERDA will in future years receive more than $144 million in auction proceeds, all to be disbursed by NYSERDA at its unfettered discretion, with no authorization or appropriation by the New York Legislature.

The New York State Legislature did not authorize the entry into the RGGI MOU by the then Governor, and has not authorized, approved or consented to the RGGI MOU at any time since the execution of the MOU. The New York State Legislature has not authorized DEC to create a tradable allowance program to control greenhouse gases, nor authorized DEC specifically to regulate emissions of CO2 by electric generating plants. The New York Legislature has not authorized or set as state policy the RGGI Model Rule as implemented by DEC. The New York Legislature has not authorized DEC to issue greenhouse gas allowances, and has not authorized DEC to issue all such allowances to NYSERDA, for sale in a centralized auction. The New York State Legislature has not authorized NYSERDA to sell greenhouse gas allowances, has not authorized NYSERDA to sell allowances in an auction, and has not authorized NYSERDA’s receipt of auction revenues. The New York Legislature has not authorized the distribution of proceeds of the sale of allowances by NYSERDA, and the New York Legislature has not appropriated or otherwise established a policy for the use of funds received by the State of New York as a result of the sale of allowances. The New York Legislature has not authorized the participation of any state administrative agency in the implementation of the RGGI program, including but not limited to specifically the issuance and sale of allowances, and the receipt and use of the proceeds from the sale of allowances. In fact, the only greenhouse gas legislation passed by the New York State Legislature—a bill to fund an environmental task force to review greenhouse gas policies—was vetoed in January of 2007. Then Governor Spitzer issued the veto, which subsequently has not been overridden by the New York Legislature.

As part of its promulgation of the RGGI rules, DEC stated that the program is expressly premised on the assumption that electrical generation sources will include the cost they incur to acquire allowances in the rates charged for electricity they generate. In general, for the unit producing the marginal supply, the cost to produce electricity will increase by the cost of allowances. As a result of the operation of a market process conducted by the New York Independent System Operator (“NYISO”), this increased cost will be reflected in the price received by virtually all generators, allowing them an opportunity to recover the cost of allowances. Indeed, generators who do not need allowances (e.g., nuclear or hydro-electric generators), and generators located outside of the RGGI area who are not bound by RGGI but who bid to serve the New York market, simply as a function of the NYISO market process, will see their revenues and gross profits rise by an amount equal to the cost of the allowances, even though they will not bear that cost.

Perhaps it is time for the legislature to consider the RGGI program and if it is to be authorized, how the funds from the sale of allowances to emit CO2 are best used in the public interest for the people of the state during these times of economic distress.

The legislature might also consider whether

• the unproven and expensive RGGI approach, which has failed thus far in Europe, should be adopted;
• whether a regional rather than national approach to CO2 emissions disadvantages New York's economy;
  
• whether it makes sense to focus only on electric utilities and not on other CO2 emitting sources, such as automobiles, trucks, and industry;
• whether the RGGI "market-based" alternative to a carbon tax creates undeserved financial windfalls for nuclear, hydro, and wind power producers;
• whether, if the program is approved, the revenues should be used to alleviate the energy burdens of low-income New Yorkers, more than 300,000 of whom had their service shut off last year because of unpaid utility bills.

Governor Martin O'Malley of Maryland, in his state of the state message, noted that Maryland is using some of its RGGI allowance sale revenue to help reduce rates low income consumers pay for their electricity:

Maryland participated in two RGGI auctions last year and because of these efforts we are able to invest $34.3 million in programs to promote cleaner energy sources, energy efficiency and conservation, and provide rate relief for low and moderate income households-all of which will go a long way to fight climate change and lower our electricity bills.

In contrast, PULP was rebuffed in its request to NYSERDA that RGGI revenues be targeted to help reduce energy bills of New York's low income customers. See PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs. Cerainly the Maryland approach to help low and moderate income customers would be a better use of NYSERDA funds than its grants to landlords to submeter apartment buildings, unhooking them from the incentive to improve energy efficiency of buildings, and enabling them to displace low-income tenants unable to pay the bills. See PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants’ Rights.

Large industrial customers recently asked the PSC to reduce surcharges for the System Benefit Charge by the amount of RGGI revenue to be received by NYSERDA. See PSC Asked to Offset its $330M Efficiency Surcharges with $220M from Sale of Greenhouse Gas Allowances.

Niagara Mohawk Gas Rate Proposal Fails to Address Low Income Customer Energy Burdens and Terminations

PULP and several community organizations are the only active parties in the Commission’s proceeding examining Niagara Mohawk’s request to boost its gas rates to formally oppose the Joint Proposal (“JP”) agreed to by the Signatory Parties. The utility reached an agreement with Department of Public Service Staff, as well as Multiple Intervenors (an unincorporated association of approximately 50 large industrial, commercial, and institutional energy consumers with manufacturing and other facilities located throughout the state), the Small Customer Marketer Coalition (an ad-hoc association of ESCOs engaged in the independent marketing and supply of electricity and natural gas), Hess Corporation, and the US Department of Defense and Federal Executive Agencies. The state Consumer Protection Board, another active party in the proceeding, opted to remain silent.

PULP and the community groups previously urged reform of rates and practices affecting low income customers. See Testimony in National Grid Natural Gas Rate Case Urges Low Income Rates and Reform of Utility Termination Practices; PSC Hears Public Opposition to National Grid's Proposed 33% Natural Gas Delivery Rate Increase.

Currently, National Grid charges a $14.71 minimum charge in its Niagara Mohawk service territory. The proposed increase would increase this minimum charge to $17.45 in year one and to $17.85 in year two. These increases mark an 18.5 percent and 21.5 percent increase, respectively, on Service Classification 1 customers. These figures also include a proposed $0.65 per month low income surcharge which would be added to the bills of all firm Service Classification customers, including low income customers. We believe it to be unconscionable that a utility would assess this surcharge on the very people intended to benefit from the low income discount supported by the surcharge. Low income and Home Energy Assistance Plan (“HEAP”) customers should not be required to contribute to the very program in which they are to be the intended beneficiaries.

PULP, on behalf of itself and the community groups, opposed the rate design negotiated by the Signatory Parties because it places far too much weight on raising the minimum customer charge. Not enough of Niagara Mohawk’s revenue requirements have been placed into the volumetric charges. As a result, low and fixed income customers will be unnecessarily subjected to a regressive form of rate design which burdens those who use the least amount of natural gas and can least afford to pay for it. PULP argued:

Raising the minimum charge also works against the policies of the State and the Commission favoring greater energy conservation. Every dollar added to the minimum charge is a cost that cannot be avoided or reduced due to conservation or efficiency measures. Every dollar added to the minimum charge is, from the standpoint of a customer faced with a usage decision, a sunk cost that cannot be avoided. As more gas is used, the average cost of the next therm is lower, as the initial minimum charge is amortized or averaged over all units of usage. Every dollar added to the minimum charge allows the volumetric delivery charge to be lower than it otherwise would be, stimulating more sales. The minimum charge, if anything, should be eliminated or significantly reduced, not increased, to promote the goals of energy conservation and efficiency.

Recognizing that the new rate plan in the JP would introduce for the first time a $7.50 monthly minimum charge discount for all HEAP and HEAP eligible customers, we wrote that the proposed rate design “still results in an unnecessary and continued undue burden on low and fixed income customers.” Even with the discount, the minimum charge for eligible customers will, effectively, be $9.95 in year one and $10.45 in year two. While lower than the current minimum charge, the minimum charge discount does not go nearly as low as National Grid has already established in two of its other New York utilities, and does not address the need for reductions in the second usage block.

We cited to the reduced rate charges established in 2007 for low income customers in National Grid’s Long Island and Brooklyn service territories. In the Long Island territory, reduced rate heating residential customers receive an 83.5 percent reduction from the regular residential minimum charge rate and pay only $1.88. Similarly, in National Grid’s Brooklyn territory, heating residential customers receive a 73 percent reduction in the minimum charge and pay only $3.53. Such a rate design is clearly delineated on the customer’s bill and provides a much larger percentage and real dollar savings than the discount proposed in this proceeding. In addition, the Brooklyn and Long Island customers of Niagara Mohawk affiliates receive further reductions in the second block of delivery rates, which are further reduced in the winter heating months.

Similar reduced rates are charged to low income customers in National Grid’s service territories in Massachusetts and Rhode Island – everywhere National Grid offers gas service, but in Upstate New York. PULP’s call for the creation of a low income rate in the Niagara Mohawk service territory fell on deaf ears.

Niagara Mohawk customers are having difficulties meeting today’s bills, as illustrated by a recent article in the Syracuse Post Standard that one out of every 15 Niagara Mohawk customers was threatened with shut-off in January 2009. In total, the company terminated service to 22,098 heat-related customers in 2007 and another 23,852 in 2008, an increase of nearly nine percent in one year. With the current economic condition facing the citizens of New York State, 2009 will likely result in even higher termination numbers. Despite all this, the JP has no performance incentives designed to reduce the company’s growing number of deliberate service interruptions for collections purposes. Without concrete limitations being placed by the Commission on the company’s harsh collection tactics, more low income customers would face service turn offs if Niagara Mohawk’s rates are permitted to rise.

The JP also proposed the creation of a one-time $40 bill credit to all elderly, blind, disabled, or life support equipment customers for whom the company receives a HEAP grant. However, this modest credit would not apply to, say, adults under 62 or working single mothers with young children who also receive HEAP, thus it lacks a rational basis. Improvements were also proposed for Niagara Mohawk’s “AffordAbility Program,” which reduces the arrears owed to the company the longer a customer remains with the program. While the JP would increase the monthly arrears forgiveness amount, PULP continues to take issue with the program because the company accepts HEAP grants and applies the money exclusively to arrears and not to current charges. It does not reduce bills for current service.

Despite all of these concerns raised by PULP during the proceeding, no other party opposed the JP. While Multiple Intervenors, the Small Customer Marketer Coalition, Hess, and the US Department of Defense and Federal Executive Agencies submitted brief statements supporting the JP, none of them even addressed the rate impact issue on low income customers.

On the other hand, National Grid, and to an even greater extent, Department Staff, could not stop boasting how the trivial sops in JP will benefit low income households. They were silent on the termination concerns raised by PULP as well as the need for performance incentives to promote continuous service.Department Staff wrote that “the JP expands the Company’s existing Low Income program” and it introduces “a gas delivery credit for income qualified low income customers with automatic enrollment, enhancement of its Affordability Program and a HEAP incentive program to assist customers who are blind, elderly, disabled or on life support equipment.” It believes that the “proposed budget level and associated rate impacts strike a reasonable balance between providing low income assistance while not imposing an undue burden on the other customers.” That is, the company would recover the cost of the low income credits as a $0.65 monthly surcharge on the minimum charge every customer pays and would be made whole, thus ignoring the findings that more and more customers can not afford this essential service. Department Staff concluded its Statement in Support by adding that the JP “furthers the Commission's policy objectives especially with regard to low income customers in these difficult economic times,” despite all facts to the contrary.

Meanwhile, National Grid claimed in its Statement in Support that “[t]he JP provides much needed aid for low income customers” and that the low income programs included in the JP “further demonstrate that the JP is reasonable and in the public interest.” The fact that low income customers who can not afford National Grid’s current rates – as illustrated by the increase in service terminations for non-payment – will have to pay more if the JP is approved, that the company has instituted reasonable low income rates in other service territories in New York and New England but refuses to do so in the Niagara Mohawk service territory, and there are no performance incentives in place to curb terminations, means that the JP is anything but “reasonable and in the public interest.”

It is now up to the Commission to wake up, do its appointed job, and scrutinize the JP for the failure it is. In its current form, the JP does not serve the public interest and is a disservice to low income families across Niagara Mohawk’s service territory.

Lou Manuta

Assembly Committees Hold Hearing to Discuss NYISO Practices and High Electric Prices

A joint hearing by the Assembly Committee on Energy and the Committee on Corporations, Authorities, and Commissions was held on March 5th to discuss the practices of the New York Independent System Operator (“NYISO”). See New York State Assembly Committees to Hold Hearings on NYISO Wholesale Electricity Pricing.

The NYISO is a not-for-profit corporation that began operations in 1999, operating New York’s bulk electricity system and administering the wholesale electricity markets. The Assembly Corporations Committee, chaired by Richard Brodsky, held a press conference earlier in the week to release a report by McCullough Research, “New York Independent System Operators Market-Clearing Price Auction Is Too Expensive for New York”, which reveals $2.2 billion in excessive electric bills for New Yorkers caused by the NYISO spot market system that privately sets artificially high unregulated market prices for electricity through its “Market-Clearing Price” auctions.

One of the major issues that the Committees sought clarification on is the NYISO’s practice of employing “Market-Clearing Price” auctions, which require the buyer to pay to all sellers the highest price calculated by a complex computer program at the NYISO. The Assemblymen are concerned that using Market-Clearing Price auctions require utilities to pay excessive amounts of money to generators, which yields excessive electric bills for ratepayers. They are also concerned about the secretiveness of the bidding process.

The hearing consisted of four panels.

The first included government and quasi-government personnel involved with running or overseeing the NYISO. The NYISO presented testimony of its CEO and of its "Market Monitor."

The second panel included Robert McCullough, Cornell Professor Timothy Mount, Russ Haven, Legislative Director of NYPIRG, the Working Families Party, APPA General Counsel Sue Kelly, and PULP's Executive Director, Gerald Norlander, who discussed their concerns with the current market results and bidding processes and offered suggestions for reforms and alternative mechanisms.

The third panel included representatives from four distribution utilities that purchase electricity from the NYISO.

The fourth panel included speakers from the Independent Power Producers of New York and the Alliance for Clean Energy.

Legislators indicated that there would need to be more exploration of the impact of the NYISO markets and the need for reforms.

Lou Manuta

UPDATE

3-15-09 Schumer: Investigate NY Electric rates.

Governor's Budget Bill would Gut HEFPA Shared Meter Protections for Tenants in Two and Three-Family Dwellings

The Home Energy Fair Practices Act (HEFPA) is New York's Bill of Rights for utility consumers. Landords of two and three family dwellings frequently attempt to shift energy costs for heating equipment and water heating and lighting to tenants. To address chronic problems of landlords shifting to tenants the cost of utility service consumed outside the tenant's apartment, the Legislature amended HEFPA to add section 52 of the Public Service Law, declaring that shared meters are against public policy. Known as the "shared meter law," section 52 requires utilities to investigate shared meter situations and when discovered, to put the shared meter account in the owner's name, and to rebill shared meter service for the preceding twelve months.

The Governor's proposed budget for 2010 contains a substantive provision in part MM that would amend the Public Service Law to allow owners of two and three family buildings to avoid the twelve month rebilling of service. As a result, they can have shared meters until they are detected, with no adverse financial consequences.

Enactment by the Legislature of this stealth provision would be an open invitation to landlords to violate and eviscerate the shared meter law, to the detriment of many low income tenants who reside in such housing. Also, for the reasons stated in Governor's Budget Bills Would Allow PSC to do More Utility Deregulation, a budget bill that needs to be negotiated in the next three weeks is hardly the place to consider substantive revision of the duty of landlords not to shift utility costs to their tenants and the consequences of violation of the shared meter law.