Friday, March 06, 2009

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

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