PSC Approves Increase for Niagara Mohawk Gas Customers; Defers Consideration of Affordability for Low-Income Customers

On May 15th, the New York PSC issued an Order adopting the Proposal for settlement of the Niagara Mohawk (National Grid) request to raise its natural gas delivery rates. All of the parties to the proceeding -- including National Grid, Department of Public Service (“DPS”) Staff, Multiple Intervenors, the United States Department of Defense, the Small Customer Marketer Coalition, and Hess Corporation -- agreed to the terms in the Joint Proposal

PULP and the organizations it represented in the case (New York State Community Action Association, the Albany Community Action Partnership, United Tenants of Albany and Syracuse United Neighbors) opposed the proposal. The Consumer Protection Board was also a participant in the proceeding, but took no position.

Charges for the delivery portion of rates in National Grid’s upstate territory had not increased since 1993. Charges for natural gas, as distinguished from the delivery charges, have been quite volatile and generally trended higher, though they have declined recently.

The Joint Proposal called for a $39.43 million delivery rate increase beginning in May 2009 (This amount is a 13.66 percent increase in delivery revenues or 5.17 percent in total revenues, including estimated natural gas charges.) The settling parties presented a two-year rate plan that sought to avoid another major rate case next year by providing for

• a "second stage" increase in May 2010 limited to three items: property taxes; pension and other post-employment benefits, and environmental investigation and site remediation costs;
  
• a financial disincentive if the company files for another rate increase before May 20, 2011; and
• a "sharing" provision if the company earns more than 11.35% on its equity.
  

The parties also compromised their initial positions on “minimum” or per-customer charges. Rather than increase the residential minimum customer charge to $20, as National Grid
proposed, the Joint Proposal supported an increase from $14.71 to $17.45. The minimum customer charge for low income, residential customers will decrease to $9.95. The customer charge for commercial customers in Service Classification 2 will increase from $19.35 to $23.65. The minimum charges include a 65 cent charge that supports the rate discount for low income customers.

In addition to reducing the residential minimum customer charge for low income customers to $9.95, National Grid will enhance its AffordAbility Program and increase the credit for gas customers enrolled in the arrears forgiveness program by $10 a month, bringing the credit to $30 a month. National Grid will also provide a one-time $40 benefit to all elderly, blind, disabled, and life support equipment customers who receive or qualify for Home Energy Assistance Program (“HEAP”) grants.

The May 15th Order noted that at a public statement hearing in Schenectady regarding the proposed rate increase

the CEO of the New York State Community Action Association spoke on behalf of low income families throughout the state. the chief executive officer of the New York State Community Action Association spoke on behalf of low-income families throughout the State. She described the energy programs, heating assistance and weatherization services that non-profit organizations provide and the growing burdens that low-income customers face. She noted that minimum charges are relatively high and delivery charges can have a disproportionately large effect on a low-income family. She also stated that outstanding utility bill balances are growing due to high energy burdens and that customers in arrears are experiencing increased difficulties in obtaining assistance to have their utility service restored. The Association opposes the amount of the proposed rate increase and urges the Commission to establish manageable utility rates for low-income customers and fewer utility service shutoffs.

The PSC said the opposition to the Joint Proposal and its impact on low income households from PULP and the parties it represented was “appreciated and pertinent to this rate proceeding.” However, it determined that the revised low income program is satisfactory: “The minimum charge reduction for designated low income customers will ameliorate the impact of the natural gas delivery rate increase for those customers who can least afford to pay higher rates.”

The Order went on to address concerns about low-income issues, but pushed them off to another day:

As to PULP’s suggestion that we should re-design rates to implement a program to substantially reduce total energy bills for public-assisted customers, we are not prepared in this proceeding to entertain any so substantial a policy change that would have major implications well beyond the scope of the natural gas delivery rates that are at issue here. The policy questions and issues PULP has raised can receive due consideration in other settings and they do not require specific action here. The rate design we are adopting does not disadvantage low income customers on public assistance and we are satisfied that the rate design is proper for purposes of implementing the natural gas delivery rate increase that we find to be warranted.

In their Statement in Opposition to the Joint Proposal, PULP and the community groups advocated for a more meaningful low income rate that would reduce energy burdens for low income customers. They presented an expert witness, Jerrold Oppenheim, who testified in favor of a low income delivery rate about 26 percent below the delivery rate that other customers pay, modeled on a program in use in Massachusetts by an affiliated National Grid utility. We went on to express our opposition to the $.65/month low income surcharge being applied to and collected from low income customers who are themselves the beneficiaries of the programs supported by the surcharge. PULP cited to California where low income customers in its CARE rate are exempt from a similar surcharge.

PULP also stated our concern about National Grid using service terminations as a tool to collect from the unemployed. We called for reductions in the minimum charge and volumetric charges. While we acknowledged that the Joint Proposal contains a $7.50 minimum charge discount for HEAP eligible customers, we advocated for a greater discount like the one provided to National Grid’s customers in the KeySpan service areas on Long Island and in Brooklyn.

PULP stated its support for the use of an incentive mechanism to encourage National Grid to reduce service terminations and believes a collaborative process should consider a performance metric and incentive.

National Grid and DPS Staff disagreed with PULP’s assessment of the low income customer provisions contained in the Joint Proposal and believe that low income customer interests were properly addressed by the Joint Proposal. In fact, DPS Staff found that the low income consumer protections are “rational, lawful, and beneficial” and that they do “not overly burden the body of utility customers.”

The PSC did state that PULP’s insights and analysis were “appreciated and pertinent to this rate proceeding,” but then went on to reject our concerns, believing that enough is being done. When 330,000 utility customers statewide were terminated for non-payment in 2008 and the economy has greatly worsened in the meantime, is enough truly being done? Maybe more can be done to help struggling families after all.

Lou Manuta