Tuesday, June 30, 2009

NYISO Needs State "Visitation"

We have observed from time to time that New York State, and in particular, the Public Service Commission, should exercise some oversight power over the NYISO, a New York not for profit organization operating as a wholesale electric utility, even though the rates set in its spot markets are under federal jurisdiction. See, e.g., FERC, NYISO and PSC Watched While NYISO Gamers Looted Consumers, PULP Network, August 21, 2008; NYISO Costs Skyrocket, Benefits Questioned, PULP Network, September 26, 2006.

Recently the New York Assembly committees that oversee energy utilities, corporations, authorities and commissions held joint hearings on the NYISO. See Assembly Committees Hold Hearing to Discuss NYISO Practices and High Electric Prices. Evidence was received from McCullough Research pointing to high bidding that seemed unlikely to be based on sellers' marginal production costs, as spot market and competition advocates theorize. See McCullough Research, New York Independent System Operators Market-Clearing Price Auction Is Too Expensive for New York, and New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues.

refused to provide information requested by the committees regarding the identity and anomalous bids of sellers in its electricity spot markets. The NYISO claims its internal rules, which have been approved by FERC, require secrecy about recent bids and complete "masking" of the identity of who, for example, regularly submits bids at the market maximum of $1,000/MWH, or who submitted more than 585,000 bids above $900/MWH from September 2007 to August 2008. See Data Discredits NYISO and PSC Defense of Spot Market Rate Demands; 12% of Bids Exceed $900, PULP Network March 31, 2009; and More Questions for the NYISO, PULP Network, April 9, 2009.

A Supreme Court decision issued this week in the context of state examination of federally chartered national banks, Cuomo v. Clearing House Association, L.L.C., contains an interesting historical discussion of the power of states to look into corporation matters, including those of federally regulated companies:
In 2005, Eliot Spitzer, Attorney General for the State of New York, sent letters to several national banks making a request “in lieu of subpoena” that they provide certain non-public information about their lending practices. ****

Historically, the sovereign’s right of visitation over corporations paralleled the right of the church to supervise its institutions and the right of the founder of a charitable institution “to see that [his] property [was] rightly employed,” 1 W. Blackstone, Commentaries on the Laws of England 469 (1765). By extension of this principle, “[t]he king [was] by law the visitor of all civil corporations,” ibid. A visitor could inspect and control the visited institution at will. ****

A State was the “visitor” of all companies incorporated in the State, simply by virtue of the State’s role as sovereign: The “legislature is the visitor of all corporations founded by it.” Guthrie v. Harkness, 199 U. S. 148, 157 (1905) (internal quotation marks omitted).

This relationship between sovereign and corporation was understood to allow the States to use prerogative writs—such as mandamus and quo warranto—to exercise control “whenever a corporation [wa]s abusing the power given it, or, . . . or acting adversely to the public, or creating a nuisance.” H. Wilgus, Private Corporations, in 8American Law and Procedure §157, pp. 224–225 (1910). State visitorial commissions were authorized to “exercise a general supervision” over companies in the State. I. Wormser, Private Corporations §80, pp. 100, 101, in 4 Modern American Law (1921).****

[fn] As Justice Story’s opinion in Dartmouth College stated, visitors of charitable corporations had “power . . . to correct all irregularities and abuses,”4 Wheat., at 673, which would surely include operations in violation of law. But whether or not visitors of charitable corporations had law-enforcement powers, the powers that they did possess demonstrate that visitation is different from ordinary law enforcement.
The Supreme Court upheld the information request from the New York Attorney General -- even though federal law prohibits and preempts states from exercising any "visitorial" oversight of national banks -- because his request was not for visitorial information, but for state law enforcement purposes.

The Supreme Court's decision is a reminder that there is no real barrier to New York State exercising "visitorial" powers over the NYISO to obtain information witheld from the public that would aid in ascertaining whether the NYISO is acting in the public interest for the people of the State. Unlike the national bank case discussed above, there is no federal statutory bar to prevent New York State from exercising its visitorial powers over the NYISO, as a New York not for profit organization. This inquiry could be conducted by legislative committees, by the PSC, (if it posessed the requisite curiosity and fortitude), or by the Attorney General. Also, based on results of its investigation, the legislature could find it in the public interest to reorganize the NYISO, which has a self-perpetuating board and a structure tilted toward producers and sellers. For example, after the spot market manipulation in California, the California ISO was made public benefit corporation, with its board directors appointed by the Governor, and confirmed by the state senate. See NYISO Governance, PULP Network, June 18, 2008.

Also, if NYISO persists in its refusal to release information to the state legislators about anomalous rates demanded by sellers in its markets, it could frame for judicial review the issue whether such secrecy is contrary to the Federal Power Act, which requires sellers to file all rates and rate changes publicly, and in advance of changes. FERC approved NYISO rules that
  • allow hourly unfiled changes
  • allow sellers to charging multiple and wildly varying rates for power made the same hour from the same power plant,
  • mask the identities of sellers to whom FERC gives so called "market-based rate" permission and delay for months the release of masked data.
This system of secret, unfiled and unreviewable wholesale electric rates invented by FERC/NYISO has not been upheld by the Supreme Court. Indeed, last year the Court took pains to note it was not upholding or ratifying FERC's rationale for "market-based rates," calling it "metaphysical." See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered, PULP Network June 26, 2008. See also, May the FERC Rely on Markets to Set Electric Rates?

Friday, June 26, 2009

NY Rolls out 511 Service with Travel and Transit Data; Not All Phones Can Access the Service

With a Press Release on June 19th, Governor David Paterson announced the launch of 511 service throughout New York State . According to the announcement, 511 is a “free and comprehensive service” which provides near real-time “information about traffic incidents, roadway conditions, congestion, work zones, weather, and planned events” and is designed to benefit commuters, long distance travelers, and tourists. The service was launched last year in the New York City area, but reportedly is now available statewide 24 hours a day, seven days a week. While there is no charge to access 511, calling 511 from a landline phone will cost the same as making a local call and if a cell phone is used, airtime and roaming charges may apply.

What the Press Release failed to detail is that calls from Voice over Internet Protocol, or VoIP, providers will not work unless the company provides location address information so the system knows where the call originates. Also, customers of traditional telephone companies may not be able to reach 511 if the company has not performed the required translations in their switch (converting the three digit 5-1-1 number to a local seven digit telephone number).

Essentially, the 511 system automatically detects a landline caller’s location from where the call to 511 is placed (using the exchange or NXX code of the phone number – 518-NXX-1234) and a wireless caller’s location from the communications tower to which his or her cellular phone is connected. The system then routes the call to relevant travel information for their local region. There are nine regions in the state: New York City, Long Island, Hudson Valley/Catskill, Capital Region/Albany/Saratoga, Adirondack/Watertown/Plattsburgh, Central/Syracuse/Utica, Finger Lakes/Rochester, Southern Tier/Hornell/Elmira/Binghamton, and Niagara/Buffalo. If a caller seeks information from a different region, toll-free numbers are also available.

According to the 511 New York website, information on the following topics can be found by dialing 511:

* Emergency alerts about major transportation problems

* Traffic conditions, camera images, speeds

* Work zones and construction reports

* Border-crossing conditions

* Transit conditions

* Weather conditions and forecasts

* Transit trip-planning (door to door)

* Transit services

* Intercity bus and rail services

* Paratransit services

* Carpools and vanpools

* Park-and-ride lot locations

* Airports and airport access services

* Ferries, tunnels, and bridges

* Commercial vehicle information

* Bicycling

* Toll information

* Weather condition

Generally, alerts are updated every minute, or even sooner. Alerts will also be made available on the 511 New York website as well, .

According to the Governor, the federally funded service will cost approximately $2.5 million annually to operate and maintain. All states are required to have a 511 system in place by 2010 and 34 states are already in compliance. However, with so many New Yorkers receiving service from providers that may not have technical compatibility with the 511 service, the state may not truly be in compliance yet.

Lou Manuta

Thursday, June 25, 2009

Stimulus Funds for New York Can Be Used for Utility Assistance to Prevent Homelessness

HUD recently announced that it has allocated new economic stimulus funds to New York for prevention of homelessness, including assistance to individuals in paying utility bills when that is related to current or potential homelessness.

According to the Notice regarding the Homelessness Prevention and Rapid Re-Housing Program:

The funds under this program are intended to target two populations of persons facing housing instability: 1) individuals and families who are currently in housing but are at risk of becoming homeless and need temporary rent or utility assistance to prevent them from becoming homeless or assistance to move to another unit (prevention), and 2) individuals and families who are experiencing homelessness (residing in emergency or transitional shelters or on the street) and need temporary assistance in order to obtain housing and retain it (rapid re-housing).

Low income households are often in a situation where due to a utility shutoff, relocation is necessary, and persons in homeless shelters are sometimes stymied in securing an apartment because the landlord insists upon the tenant having a utility account that has been refused by the utility due to claimed arrears. Under the HUD program,

Financial assistance is limited to the following activities: short-term rental assistance, medium-term rental assistance, security deposits, utility deposits, utility payments, moving cost assistance, and motel and hotel vouchers. Grantees and subgrantees must not make payments directly to program participants, but only to third parties, such as landlords or utility companies.

The amount of assistance available is considerable:

HPRP funds may be used for up to 18 months of utility payments, including up to 6 months of utility payments in arrears, for each program participant, provided that the program participant or a member of his/her household has an account in his/her name with a utility company or proof of responsibility to make utility payments, such as cancelled checks or receipts in his/her name from a utility company.
The allocation of funds to grantees in New York State is as follows:

NY NY State Program $25,527,382
NY Albany $1,523,772
NY Babylon Town $526,925
NY Binghamton $955,655
NY Buffalo $6,594,081
NY Dutchess County $654,862
NY Elmira $560,951
NY Erie County $1,209,200
NY Islip Town $840,437
NY Jamestown $573,517
NY Monroe County $789,300
NY Mount Vernon $745,701
NY Nassau County $6,458,352
NY New Rochelle $686,935
NY New York $73,929,729
NY Niagara Falls $1,037,411
NY Onondaga County $897,454
NY Orange County $713,117
NY Rochester $3,954,235
NY Rockland County $860,643
NY Schenectady $1,048,938
NY Suffolk County $1,511,657
NY Syracuse $2,524,997
NY Tonawanda Town $772,574
NY Troy $845,286
NY Union Town $578,661
NY Utica $1,192,417
NY Westchester County $2,373,791
NY Yonkers $1,533,003

PSC Signals Shift in Landlord Subsidies to Implement Submetering

Pressure from tenants led the PSC in 1950 to ban residential submetering, see Resale of Power in City Is Curbed. It was reintroduced in 1978 for cooperatives and condominiums whose owners request submetering, and was expanded to rental housing in 1979. Little submetering of rental housing occurred until the Pataki administration years, when conversion to submetering was promoted through coordinated action of several agencies.
  • NYSERDA subsidies paid for submeters, installation, and landlord consultants,
  • DHCR rent reduction formulas were tilted to benefit landlords financially when they submeter,
  • PSC approved utility rate structures that encourage submetering, and
  • scores of building-specific PSC orders waived the prohibition against submetering and winked at landlord efforts to circumvent HEFPA and the PSC role in deciding customer disputes
While giving routine lip service to consumer protection in its submetering orders, the PSC actually allowed submetering landlords, in practice,
  • to avoid providing the safeguards of the Home Energy Fair Practices Act,
  • to deem electric charges to be rent and to evict tenants for unpaid utility charges,
  • to ignore complaints or divert them away from the PSC administrative complaint determination process,
  • to avoid compliance with rate calculation requirements,
  • to violate price caps, and
  • to provide service without tariffs and without tenant agreement to terms and conditions of service consistent with PSC orders.
Last year, PSC staff testified in favor of extending submetering further, to more than 600,000 additional tenants in Con Edison territory.

Previously we noted how System Benefit Charge (SBC) revenue collected under PSC orders from electric customers to promote energy efficiency is being used, in the name of helping low income customers, to subsidize landlords, cause economic hardship to tenants, and foster displacement of low-income households from subsidized and rent stabilized apartments. See, e.g.,
The PSC is key to submetering, because no submetering occurs without a PSC order allowing it, and because the PSC (not the Legislature) effectively appropriates how NYSERDA spends hundreds of millions of SBC dollars.

The EEPS Proceeding
A marathon, multi-track generic proceeding is underway at the PSC which affects how NYSERDA should spend SBC funds known as the Energy Efficiency Portfolio Standard (EEPS) proceeding. Due to its limited resources, PULP has not been participating actively in the proceeding, which entails extensive and time-consuming conferences, collaborative work groups, and comment processes.

A recent order in the EEPS case suggests that the PSC is beginning to modify its policies.

NYSERDA's Initial Proposal for More Subsidies to Landlords who Install Submeters

The Commission issued an Order on June 24 signalling a slight shift in its promotion of residential submetering. It recounts how NYSERDA initially proposed to increase subsidies to landlords to underwrite the cost of installing submeters, and master meters that will facilitate implementation of real time electric pricing passed through to captive tenants by landlords acting in the role of a monopoly utility.
The submeter rebate would be $500 for low income units and $250 for market rate units. The advanced master meter rebate would be $2,000 for low income buildings and $1,000 for market-rate buildings.
This "advanced metering" and submetering scenario creates the technical capability to introduce "real time" pricing, exposing retail customers to volatile and unpredictably spiking prices of the NYISO. This amounts to reckless human experimentation when it involves households lacking the savings or income to buffer the price spikes. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers; New York Residential Real Time Pricing Experiments Must be Voluntary. Widespread deployment of "smart meters" has been challenged as not being cost effective. See AARP Opposes PEPCO Plan for Spending on "Smart Meters".

NYSERDA's Modified Proposal for Submetering
Earlier this year, the PSC issued stays of submetering implementation in buildings where landlords were shifting costs for electric heating to tenants. Also, tenants in other buildings petitioned to vacate PSC orders allowing submetering, some involving electricity for heat, see Submetering Slowed at Roosevelt Island, and Yonkers Tenants Ask PSC to Halt Submetering at Riverview Towers, and others involve non heat related electricity, see Parker Towers Residents Petition PSC to Vacate Prior Submetering Order, and Hazel Towers Tenants Ask PSC to Act on Submetering Complaints.

According to the PSC Order, NYSERDA modified its proposal last month:
On May 19, 2009, NYSERDA filed an update to its original proposal. The update places more emphasis on market rate buildings, including condominiums and cooperatives. NYSERDA now proposes that electrically-heated, low-income buildings that are rent stabilized, rent controlled, or regulated by state or local agencies, might require the installation of two submeters in each dwelling unit – one for electric needs and another for heat. The installation of two separate meters would allow the low-income resident to continue to have their heat included in the rent, while the tenants would assume responsibility for their individual non-heating electricity usage.
This would still allow NYSERDA to subsidize submetering of electric heat in buildings with market rate tenants.

The two-meter situation, i.e., not submetering the heat, is the model implemented by Starrett Corporation at Claremont Gardens, in Ossining. This system still causes major hardship and displacement of Section 8 tenants whose utility allowances were insufficient to meet the new cost of electricity added to their rent. See Submetering Challenged at Claremont Gardens in Ossining, which contains a link to the tenant's petition. Tenant leaders say that many Section 8 tenants were driven out since submetering began. Once a subsidized tenant is evicted at Claremont Gardens, the unregulated premises can be rented at higher market rate rents.

Claims of Energy Savings Questioned
In scoring applications for SBC funds, NYSERDA evaluates the cost benefit of energy savings due to investment in energy efficiency measures. A premise of submetering proponents is that huge energy savings would occur if , instead of the landlord, the tenants pay the electric bills. This estimate of savings justifies the installation subsidies, and DHCR bases its schedule of paltry rent reductions upon, inter alia, an assumption of large usage reductions with the advent of submetering. See PULP Analyzes DHCR Submetering Rent Adjustments.

The PSC has finally begun to look beyond the claims of interested submetering applicants to check out the claims of large savings:
NYSERDA’s proposed program (both the original and updated versions) claims an annual energy savings of 20% or more due to behavioral changes alone, based on the installation and implementation of submeters in master metered buildings.
NYSERDA’s claims of 20% energy savings, strictly as a result of the installation of submetering (in the absence of further steps to reduce energy usage), appear overly optimistic. The Electric Power Research Institute (EPRI) cites studies examining the effect on customer behavior of obtaining better information on their energy usage. These studies show decreases in electric usage of between 5 and 15%. [footnote omitted] For the purpose of modeling expected energy savings, Staff assumed an energy savings rate of 8%, achieved strictly as a result of better information available to customers, and a payment obligation, as to their energy usage as a result of the installation of individual metering.
The PSC said to use an 8% savings estimate pending further evaluation:
In its program evaluation efforts, going forward, NYSERDA needs to establish more detailed requirements and specifications for examining the effects of the introduction of submeters on tenants' energy use than those that were required under the previously offered Comprehensive Energy Management Program (administered by NYSERDA) so that the energy savings relating to behavioral change, in the absence of other factors, can be isolated.
It is evident that there has been no real effort of the PSC or NYSERDA to arrive at an independent research based estimate of energy savings fairly attributable to changed tenant behavior despite a massive rollout of submetering and a decade or more of experience. NYSERDA has already begun using the reduced 8% estimate of savings due to changed tenant behavior. See PULP Analyzes DHCR Submetering Rent Adjustments.

Meanwhile, exaggerated claims of large savings are still relied upon by DHCR in its rent reduction schedules and by PSC staff in advocating even more submetering. Every time a rent stabilized tenant is submetered, and receives a rent reduction of about $30 and an electric bill that is a multiple of that, landlords are enriched and tenants are harmed.

A Submetering Subsidy Slowdown Pending Further Action
The PSC announced that it would not approve SBC funds for submetering subsidies to owners, except in market rate buildings, cooperatives, and condominiums, pending resolution of pending cases which challenge submetering orders and pending the outcome of its generic case considering revision of submetering regulations.
Another factor that will affect the size of the program involves the low-income segment of the multifamily market sector. As a result of our role in approving submetering plans within New York State, we are aware of concerns that have arisen in conjunction with installation of submetering in buildings with low-income residents. At the time of this order, rehearing petitions are pending before the Commission and original orders approving submetering are stayed. The concerns raised are building-specific and will be addressed by the Commission. General concerns raised on the topic of submetering in the low-income sector are being addressed through a collaborative effort to update the Commission’s submetering rules and regulations. Until the pending rehearing petitions are decided and until the collaborative effort to revise the regulations is completed, we will limit participation in the new Master-Metered Multifamily Buildings Program to market-rate rental buildings, cooperatives, and condominiums. These are market segments that could greatly benefit from this program.
The generic case to review and "update" submetering regulations was initiated not to protect tenants but at the behest of submetering proponents for further streamlining" of the requirements and the process for landlords to engage in submetering. The initial draft rules would have eliminated the landlords' need for a PSC order (which carries with it the theoretical potential of fines under Public Service Law section 25 if it is violated) and would eliminate all utility tariff prohibitions on retail resale of utility service. This could allowing landlords to submeter without notifying the utility or the PSC, and perhaps allow resale of electric service even without submeters, by allocating charges based on square footage or apartment size. Landlords sought complete deregulation of the maximum prices they can charge to their captive tenants. See Submetering Landlords Clamor for More PSC Deregulation of Electric Service; PULP Files Comments on PSC Proposal to Relax Submetering Rules; Bronx Tenant Association Objects to PSC Staff Proposal to "Streamline" Electric Submetering Rules.

The PSC submetering policies and practices have begun to draw the attention of the press and the Legislature due to their harsh impact on many tenants. This new attention includes several submetering bills introduced in the Legislature, including ones that would put a moratorium on any new submetering pending a thorough report to the Legislature from the PSC on the submetering that has been allowed to date. See Assembly Bill A. 7814 and the identical Senate Bill S. 5009.

The purpose of these bills is
To require the Public Service Commission to perform an audit regarding submetering orders it has issued in the last five years to determine compliance by building owners of utility price caps and tenant protection provisions, and to determine if submetering has resulted in energy savings in those buildings. The Commission will have twelve months to complete the audit and make a report to the legislature and until that time no new submetering orders may be approved.
The temporary slowdown of the PSC's submetering juggernaut, while welcome news, needs to be seen in this context.

Wednesday, June 24, 2009

FERC's Advice: Avoid Our Deregulated ISO/RTO Spot Markets

We have previously noted FERC's refusal to scrutinize the rates set in the dysfunctional spot markets it fostered and approved for wholesale electricity trading. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets. FERC again has rebuffed another plea to take a closer look.

Senator Barbara Mikulski of
Maryland recently asked FERC to respond to the request of the Campaign for Fair Electric Rates "to undertake an investigation of whether the rates produced in these RTO-run markets meet the just and reasonable standard." Maryland has been ravaged by higher electricity prices since allowing utilities to sell their power plants (as did New York). This ended state control over prices charged for the production of energy, and created a huge dependency on power now purchased in wholesale markets, from sellers who have been allowed by FERC to sell at whatever price the market will bear.

FERC responded with a defense of its market rate regime and a suggestion:
Finally, as you are also aware, jurisdiction over electricity prices is both a federal and state/local issue. While this Commission has jurisdiction over RTOs and ISOs, participation by utilities in these markets is on a a voluntary basis. Federal regulations do not require anyone to make purchases from any RTO or ISO, including PJM. Many entities generate most of their own electricity or purchase it through long-term contracts and make only limited purchases through RTO or ISO spot markets. And, while these organized wholesale markets are subject to this Commission's jurisdiction, state and local regulators have jurisdiction over retail distributor procurement policies. Those policies affect the prices that utility retail customers pay.
FERC's glib remedy for those unhappy with ISO/RTO spot market prices is simple: states can tell their utilities to stop buying at the RTO/ISO spot market convenience stores and make more long-term purchases. It is consistent with what FERC said some years ago, during the California spot market manipulation, to the effect that prudent retail utilities would arrange to buy most of the energy needed by their retail customers in long term wholesale contract arrangements, and would only buy 10% or so from the spot markets.

A 2005 report indicates that about 55% of the energy in New York is purchased in the NYISO spot markets. It is possible that much of the power sold under bilateral long term contracts has price adjustment factors which link the contract price to the spot market prices.

It is not responsible for FERC just to say buyers should purchase elsewhere. Sellers with "market-based rates" are also allowed by FERC to set their own prices for their long term sales contracts, which FERC requires to be unfiled and refuses to review for reasonableness. Obviously, the sellers are informed by their predictions of what they will receive at the ISO/RTO spot markets, and so they will tend to raise their long term rates accordingly. Some long term contracts are indexed to electricity spot market prices with a premium added.

It is also not a satisfactory answer for FERC to rely on states or local utilities to discipline the high rates of wholesale sellers by threatening to buy electricity in other markets -- from the same
sellers functionally deregulated by FERC. FERC cannot avoid or subdelegate its statutory duties under the Federal Power Act, which establishes a filed rate regulation system with rates actively overseen by FERC.

Relying on local distribution utilities to buy wisely and benefit their customers has not worked. If, as in New York, the retail utilities are allowed by state regulators to pass through all wholesale purchased power costs, they will have little incentive to fight high ISO/RTO prices and market power on behalf of their consumers.
Also, if they have holding company energy trading affiliates, for example, Con Edison Energy and Con Edison Solutions, whose business plans rely on the RTO/ISO spot market system, the local utilities may not wish to change the status quo.

FERC is simply trying to evade its duties under the Federal Power Act, which requires all rates demanded and charged to be just and reasonable. That includes all rates set at the ISO/RTO.
As the Supreme Court has stated, "the prevailing price in the marketplace cannot be the final measure of "just and reasonable" rates mandated by the Act **** the Act makes unlawful all rates which are not just and reasonable, and does not say a little unlawfulness is permitted. " FPC v Texaco, 417 U.S. 380 (1974).

As a matter of law, it is not an acceptable solution for FERC to do nothing to correct the RTO/ISO rates and tell the public, states, and local utilities to make their own power or buy it elsewhere. See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered. Under the circumstances, however, it may not be a bad idea to secure more energy from sources less affected by the spot markets.

Monday, June 22, 2009

Millions of RGGI "Cap and Trade" Auction Proceeds Unspent Due to Legal Challenge

In a prior PULP Network blog post, we discussed the pending legal challenge to the Regional Greenhouse Gas Initiative (RGGI) program now being implemented by New York and nine other states in an effort to reduce CO2 emissions from power plants, in advance of any national program.

New York is the only state where a Governor, through executive action and action through a agency and a state authority (DEC and NYSERDA), attempted to implement RGGI without specific enabling legislation. As a result, NYSERDA is receiving substantial auction revenue from the sale of allowances and allocation of the revenue -- $128 million to date -- is underway without any specific enabling legislation or budget appropriation.

As with any "cap and trade" program to reduce C02 emissions, the RGGI program is raising electric rates for all electricity sold at spot market rates in New York, even that which is produced with wind, water, or nuclear rather than by burning fossil fuels like natural gas or oil. See
Also, all sellers offering to enter into long term bilateral contracts are likely to consider what they could receive in the spot markets, even if they are non fossil producers whose own costs do not rise. Litigation was commenced by a power producer with a long term contract who could not raise its prices to the buyer due to the added cost of allowances it is now required to buy under the DEC RGGI regulations.

The Petition and Complaint in the court proceeding contends, inter alia, that the Governor, DEC, NYSERDA and the PSC acted beyond the authority delegated to them by the Legislature, and that RGGI is an interstate compact not approved by Congress.

As a result of the court case and uncertainty over legal authority to operate the program, the $128 million received to date in new revenue from the auctions of CO2 allowances is not being spent by NYSERDA. See Brian Nearing, Energy Efficiency Pool Hits $128m - Lawsuit from Corinth Operator Bars State from Spending Funds, Albany Times Union, June 20, 2009.

PULP recommends -- without success to date -- that a significant portion of revenue from the sale of RGGI allowances be specifically allocated to provide energy efficiency measures to help low-income customers reduce their rising energy bills.

Low-income households typically live in older, less efficient housing with older heating systems, controls, appliances, and energy consuming fixtures. Due to their lack of income and savings, there is a chronic market failure because they cannot afford the initial cost of investments in energy efficiency measures that will reduce usage and bills over time. Thus, providing assistance to low-income households may have significant payoffs in terms of reduced energy usage and improved living standards with less distortion of markets in which affluent customers can make cost effective energy efficiency investments without the need for subsidy. See PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs, PULP Network, January 7, 2008.

See also, NYSERDA Concept Paper - Operating Plan for Investments in New York under the CO2 Budget Trading Program and the CO2 Allowance Auction Program, which contains a brief mention of low-income energy assistance as a possible use of RGGI revenue, but there is no quantification or any proposed allocation for the purpose.

Friday, June 19, 2009

PSC Didn't Provide Complete Explanation When it Ended its 315 Area Code Proceeding

As we noted earlier this week, the New York State Public Service Commission (“PSC”) formally decided to put on hold its proceeding to add a new area code in the 315 region of central New York State. The PSC press release announcing the good news claims the reason the need additional numbering resources has dropped, causing the PSC to end its plans to add an overlay area code in the region, is “primarily due to the slowing of the economy.”

While there is certainly no argument that the current “Great Recession” is causing significant economic harm across the state, PULP does not agree with the PSC that this is the primary reason for the drop in telephone exchange code demand. Rather, it was the Commission belatedly ending its ill-advised procedure to dole out multiple 10,000 telephone number exchange codes (also known as NXX codes) to multiple providers in very rural communities.

When the PSC submitted its request to the FCC in August 2005 to expand "thousands block" pooling – that is, assigning numbering resources 1,000 at a time instead of 10,000 at a time – outside the state’s major population centers, the PSC did not signal the urgency of the need and did not request expedited treatment to stem the pending numbering crisis . While it did take the FCC over a year to grant the request, the PSC sat for an additional four months prior to implementing its new authority. During this brief time period alone, (November 2006 to March 2007), 10 new 10,000 telephone number NXX codes were assigned (19 requested, nine returned), representing 100,000 telephone numbers stranded in rural areas that did not need them.

Let’s look at more numbers: Between December 2004 and December 2007, a total of 40 NXX codes were assigned in the 315 area code, averaging between 13 and 14 codes a year. The big drop off occurred beginning in October 2007, when a net of only two NXX codes were assigned in total until July 2008 (six requested, four returned). Since then, only four NXX codes have been requested through May 2009 and three have been returned. As a result, since October 2007, a net of three NXX codes have been assigned in the 315 area code, far short of the levels hit in 2005, 2006, and 2007.

However, in order to recognize this fact, the Commission would be placed in a position to admit that the reduction in NXX code demand began when it implemented thousands block pooling. However, that admission would raise questions as to why the Commission was handing out 10,000 numbers at a time (and multiple times) to over 50 rural communities in central New York, each of which has only a thousand or two living there.

On top of this, despite souring economic conditions, demand for telephone numbers continues in other regions of the state, including New York City, where the recession has hit hard. Since the beginning of the year, 19 new NXX codes have been put in place in the city.

PULP is pleased that the PSC has rectified its numbering allocation procedures, which has caused it to avoid forcing over a million people to change their telephone number and change their dialing patterns for reasons which were completely avoidable. However, don’t blame the recession for the drop in NXX code demand. The credit for forstalling the new area code goes to the PSC's new number conservation policies, no matter how tardy they may have been in coming into play.

Lou Manuta

AARP Opposes PEPCO Plan for Spending on "Smart Meters"

Spending billions on "smart meters" seems to be really in vogue in states where utilities sold their power plants, failed to make money in their Enron-like holding companies, and now have no safe place to sink investment for a regulated return. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers.

Recently the electric utility serving the Washington D.C. area, PEPCO, proposed to roll out "smart meters" with large amounts of spending that would be underwritten in part by consumers through higher utility rates and in part by taxpayers through the use of federal ARRA stimulus funds.

The invocation of high tech and environmentalism sounds keen and green.

But on closer examination, testimony submitted today by AARP's expert witness, Barbara R. Alexander, shows that the "smart meter" proposal simply is not cost effective.

See the Comments and Reply Comments of NASUCA to U.S. Department of Energy requests for information regarding "Smart Grid" initiatives. In their Reply Comments, NASUCA stated:
"First, the consumers are the ultimate owners of their energy consumption data. The establishment of privacy protections for personal energy information is critical, and the issue must be resolved in favor of the highest degree of consumer protection.

Second, consumers should have the choice to participate in any advanced metering program or in any dynamic pricing schedule that may involve data sharing arrangements.

Third, there are unique differences among electric consumers that must be considered for any Smart Grid deployment.

Fourth, investments made in Smart Grid technologies must be supported by a detailed cost-benefit analysis and subject to evidentiary proceedings and prudence review before costs are passed on to utility consumers."

PSC’s Market Ideology Clashes with Goals of Affordable Universal Broadband Service

Last week, PULP reported on the comments filed at the FCC regarding the development of a national universal broadband policy. See PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service. The New York State Public Service Commission (“PSC”), in conjunction with the state’s Chief Information Officer, submitted comments which in essence argue for continued reliance on failing market-based policies, policies which exacerbate the digital divide and have left millions of households without broadband. A review of other comments filed with the FCC reveals that New York is behind the times and out of step with every other state that submitted comments.

As we reported, the PSC comments did not directly voice support the goal of affordable, universal broadband, grudgingly acknowledged that the FCC has been tasked to address the problems, and then endorsed a lack of government involvement in broadband deployment:
“The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put. The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.”
Essentially, the PSC seems to be saying that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market” - which in most localities is a duopoly of landline and cable providers. Such blind faith in the market, however, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. The PSC even questioned the need to bring broadband to every citizen today:
A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.
This is a familiar refrain to defend market power of existing providers: someday the market will bring providers with a new technology that magically would bring affordable service to unserved or underserved areas, so therefore regulators and government should do nothing.

Groups that provided comments similar to those of the PSC were free-market think tanks, such as Americans for Prosperity, FreedomWorks Foundation, and Americans for Tax Reform (ATR). ATR, founded by anti-tax radical Grover Norquist. The PSC’s positions closely resonate with the comments of ATR, which glossed over the market failure and reduced competitive position of the United States in comparison to other countries, and wrote:
We are on the right track; the free market is working. Consumers are enjoying an ever-expanding array of choices and performance. . . . In order for free-market models to provide for the further development of broadband access, however, it is absolutely critical that government intrusion not prevent private capital from recouping its investment. If private capital becomes convinced that its ability to recoup its investments is less likely, it will be less likely to make the significant investments in broadband that is the very goal of this FCC inquiry.”
Both the PSC and ATR take these “hands off” positions when it comes to the price and deployment decisions of the cable and phone company duopoly, even though
  • millions of people who in theory have “access” to broadband cannot afford it,
  • the U.S. has some of the world's slowest, most costly broadband (per megabit per second),
  • the U.S. subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more affirmative broadband policies surge ahead.
See The Broadband News Is In, but it Isn't All Good. The myths spouted by the PSC and ATR about markets and competition are addressed in the comments of Consumers Union:
The disappearance of potential competitors through mergers, the domination of the in-region wireless market by the dominant incumbent local exchange carriers, and the failure of CLEC competition on the platform have left residential consumers with, at best, a cozy duopoly that dribbles out bandwidth at high prices. While the Commission should prioritize its efforts according to the extent of market failure – zero providers is a worse outcome than one and one is worse than two – it should not fool itself in to believing that the mere presence of two competitors is sufficient rivalry to ensure consumers will get the benefit of real competition. This is particularly true in urban areas, where low-income households have been priced out of the marketplace. There is nothing in economic theory or real world experience to suggest that two is enough for vigorous competition.
In contrast to the New York PSC, other states that submitted comments recognized reality: the marketplace is failing to provide universal affordable broadband and that more steps need to be taken if the United States is to keep up with countries that have a sound broadband policy and program. This is what they had to say:

The Michigan Public Service Commission (“MPSC”) hit many important notes in its comments , stating:
the FCC should develop a national broadband plan with the goal that all Americans have physical access to broadband service . . . at the location of their residence. While physical access alone does not imply that all Americans choose to adopt broadband service due to constraints like price, the FCC should not overlook this essential component. . . . The best solution would be to work toward an infrastructure that allows for broadband connections at reasonable prices at every residence, as well as robust broadband connections at free or further reduced prices available at community centers such as libraries. These two goals need not be mutually exclusive. While the national broadband plan will likely need to prioritize which of these types of projects to fund with public money, such as the money available under the [American Recovery and Reinvestment Act] ARRA, the FCC should ensure that the ultimate goal of the national broadband plan is true access for all Americans, including access through community centers and at their place of residence.
* * *
While the MPSC believes that demand-side policies will help encourage competition, thereby reduce price for consumers, it cautions the FCC against simply ‘allowing market forces to work.’ Due to the largely deregulated environment for broadband technologies, the FCC should closely monitor the competitive marketplace for broadband in order to address any areas where the market fails to provide broadband services at reasonable prices and with reasonable privacy protection. In the cases where the market does not produce sufficient demand for broadband at reasonable prices, the national broadband plan should include recommendations for reforming the universal service fund in such a way that broadband services would be supported.
Similarly, the Vermont Public Service Board and the Vermont Department of Public Service wrote that the deployment of broadband needs to be supported by the Universal Service Fund, stating:
The Vermont Public Service Board and the Vermont Department of Public Service (“Vermont”) are of the view that our national communications and technology culture have evolved to the point where broadband has become an indispensable tool for how Americans obtain and disseminate information, and communicate with each other about that information. Furthermore, for rural states such as Vermont, broadband internet service is vital for efforts to promote job creation and to retain a modern and technologically literate workforce. For these reasons, it is imperative that a national broadband policy be implemented that facilitates the deployment of a robust, inclusive broadband infrastructure that reaches American communities large and small with rate and service parity and reliability. To this end, Vermont recommends that the Federal Communications Commission (“FCC” or the “Commission”): (1) adopt a technically robust definition for “high speed” broadband; and (2) treat the deployment of broadband as a service to be supported by the Universal Service Fund (“USF”).
Vermont favors creation of a separate Broadband Fund, as outlined in the Federal-State Joint Board Recommendation, which would be tasked with expanding broadband Internet services to unserved areas.

The New Jersey Department of the Public Advocate's Division of Rate Counsel made several recommendations in its comments, including expanding universal service support to include broadband services and to make broadband affordable for all citizens.
Absent such regulatory intervention, the United States may become a two-tiered society of disparate access to and use of broadband.
The California Public Utility Commission in its comments stressed the need for government involvement for a broadband universal service fund:
At the federal level, we do support a limited federal Lifeline/Link-up Pilot Program to provide computers and discounts for monthly Internet access service to low-income consumers as a way to gauge the costs of such a program. However, if the Commission or Congress decides to permanently add Internet access or broadband service to the definition of federal ‘universal service’, all broadband and Internet access providers should be required to contribute to the federal Universal Service Fund. The FCC should then expressly clarify state authority to seek contributions from all broadband providers and Internet access providers for their respective universal service programs.
* * *
Another suggestion for funding of broadband would be for the FCC to explore universal service, at least initially, as a matter of ubiquitous availability of broadband infrastructure separate from universal subsidy of broadband service. If the broadband infrastructure is in place universally, then service plans and their costs can be approached relatively free of the costs associated with infrastructure deployment.
The Massachusetts Department of Telecommunications and Cable supports a broadband fund in its comments:
In response to the Commission’s queries with regard to universal service, the Joint Commenters affirm the [Massachusetts Department of Telecommunications and Cable] MDTC’s previous position that universal service support should be expanded to include broadband. Specifically, if the Commission were to incorporate broadband access into high-cost support, then it should establish a separate broadband fund for that purpose. In fact, the Commission should adopt the creation of a Broadband Fund comparable to that proposed by the Federal-State Joint Board on Universal Service.
The biggest telecom providers in New York support movement away from market-based solutions that have not worked. For example, Verizon in its comments stated its support for “policies that increase computer ownership, teach people how to use those computers and navigate the Internet, and demonstrate the relevance and benefits of broadband to their lives could go far in increasing broadband adoption.” Its preferred method to address affordability, however, was for refundable tax credits for low income families to help them afford broadband access. Time Warner Cable in its comments wrote that it:
encourages the use of federal funds to support broadband demand side programs, with a focus on outreach and education, subsidies for low-income consumers, and
programs that distribute laptops to low-income schools and families. Such initiatives are a core component of the broadband stimulus legislation, and figure prominently in the Rural Broadband Strategy. Even where broadband services are available from multiple providers, penetration remains relatively low in certain at-risk communities. Addressing that gap should be among the Commission’s highest priorities, facilitated by the process of obtaining improved information about the extent of that gap already underway, independent of this proceeding.
In sum, every state that submitted comments, consumer groups, and two of the largest voice and broadband providers in New York all recognized the need for a national policy and action to address the inadequate deployment and unaffordability of broadband. It is unfortunate that the New York PSC still has its head in the quicksand of the last century's market ideologies and continues to leave broadband deployment and pricing to the whims of the duopoly "marketplace" – despite the duopolies’ continuing failures to bring affordable broadband to all.

Lou Manuta

Thursday, June 18, 2009

ESCO Advertises 9.75% Tax Savings on Delivery Service

We commented previously on the odd tax break given to ESCO customers which reduces the cost of delivery service still provided by the utility, enabling the ESCO actually to charge more for the part of the service it provides, i.e., the "commodity" portion of gas or electric service, and still show total bill "savings" to the customer. See ESCO Tax Subsidies: A Hidden $128 Million Cost of the New York PSC's "Retail Access" Scheme

We recently received a glossy flyer in the mail from "Energy Plus", an ESCO, claiming that residential customers who buy electricity commodity will get up to 9.75% savings -- on the utility-provided delivery service taxes:
Monthly sales tax savings
Save up to 9.75% on the delivery portion of your bill every month since you will no longer have to pay sales tax when you select EnergyPlus as your supplier.
These savings are because of a law that exempts sales tax on the delivery service part of the ESCO customer's total bill. According to a publication of the state tax department, sales taxes vary locally, but in no location are the total state and local sales taxes more than the 8.75% rate for Erie County.

According page 149 of the latest New York State Division of the Budget (DOB) Annual Tax Expenditure Report, the foregone public tax revenue due to this loophole
  • was $6 million/year in 2002
  • was $128 million/year in 2008,
  • is projected to reach $154 million in 2009, and
  • is still rising at a rate of more than $20 million/year.
There is no valid reason to subsidize an industry built upon arbitrage of tax breaks for financial middlemen who do not produce electricity. This permits companies who resell the same services at higher cost to win customers by splitting the savings from the unjustified tax break. This tax break rather than superior value may account for the widespread switchover of large industrial and commercial customers to ESCO commodity service.

It is difficult to imagine why DOB regularly proposes to axe worthy programs, in the name of balancing the budget, but doesn't propose elimination or phaseout of the increasingly expensive corporate welfare tax break favoring ESCOs and their customers, which might hit more than $150 million next year. For example, the Governor proposed a slow phasein of welfare grant increases, which had not been adjusted for 18 years, whose annualized cost, when phased in fully, will be $109 million a year. While some of the ESCO sales tax break is for local sales tax, ending the ESCO tax break could have helped New York's poorest families cope.

Energy Plus customers will get US Airways "dividend miles" for each dollar they pay for their electricity. Perhaps one function of the "plus" is to add a perk - frequent flyer miles - making it even more difficult to make an "apples to apples" comparison of what is being really charged for fundamentally identical ESCO utility service. See PSC Makes ESCO Service Comparisons Difficult; and PULP's Con Edison Bill Estimator.

There is no representation in the flyer of the rates actually being charged by Energy Plus for the unbundled commodity portion of electric service. The flyer claims that "we buy electricity every day at the best possible price and use that price to set our rate." Other than the vague puffery about the "best price possible," and that we "use that price to set our rate" which might be something other than the best price possible, the only clear representation of any savings is the tax break on the portion of the bill for utility-provided delivery service - there is no real representation that total bills will be any less than the charges of the traditional utility for full bundled service.

An article about at least one Energy Plus customer's experience indicates that savings may be illusory. See ESCOs Cost More -- A Familiar Experience. There is no evidence that shopping for other ESCO suppliers of residential utility service pays off over time, and those who switch often find themselves paying more than if they had not switched. See Think Twice Before Switching Utilities.

PULP's recommendation to customers wanting to reduce their electric bills: conserve.

For more on ESCO service, see PULP's webpage on ESCO issues.

Assembly Passes Bill to Correct Diversion of Complaints Regarding Submetered Electric Service

The Basics - The PSC Decides Customer Complaints over Utility Service
The Public Service Law and the Home Energy Fair Practices Act (HEFPA), enacted in 1981, have always provided for administrative adjudication by the Public Service Commission of customer complaints regarding residential utility service and bills. HEFPA was a major reform tantamount to a utility consumer bill of rights, and part of the package was a more customer-friendly PSC complaint adjudication system that can be invoked by customers with a phone call, letter, office visit, or an email or online complaint.

HEFPA Applies to Submeterers
The PSC administratively revived the practice of residential submetering in the late '70s, allowing owners permission on a case by case basis to resell electricity to occupants, a practice generally forbidden since 1951. In its submetering orders, the PSC repeatedly includes a statement, as it did in a February 2009 order, wrongly suggesting that HEFPA's coverage of submetered service was something entirely new that came about only in 2002:
Prior to the amendment of PSL Article 2 (HEFPA) by addition of PSL §53, HEFPA only applied to the provision of residential service by natural gas, electric and steam corporations and municipalities.
The above revisionist statement is completely belied by the fact that the PSC's own submetering regulations, on the books since the 1980's, allow waiver of the prohibition against resale of electric service only if the submeterer 's application provides for "complaint procedures and tenant protections consistent with HEFPA."

When the Legislature clarified HEFPA with the Energy Consumers Protection Act of 2002 (ECPA), it should have been crystal clear to all, including the PSC, that nontraditional providers of utility service like ESCOs and submetering landlords must comply with HEFPA. Most critically, ECPA clarified PSL Section 53 so that the PSC has no power whatsoever to waive HEFPA requirements, a power it had previously asserted regarding ESCOs, and apparently has done with submeterers. Perhaps prior to 2002 the PSC thought it could waive some HEFPA requirements, and that illusion ended with the Legislature's clarification.

Waterside Plaza, one of the first large rental buildings to be converted to submetering, claimed that it could have an alternative system for deciding complaints of its 1400 submetered tenants but this was rejected in 2006 in a court decision which stated
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.
Those protections, of course, include the right to get a PSC decision on a dispute.

The PSC's Submetering Regime Fosters Diversion of Complaints
Despite the clear statutory requirements, for years, both before and after the 2002 ECPA the PSC has allowed landlords to evade and escape HEFPA requirements. [One of the methods, discussed elsewhere, is to allow landlords to "deem" charges for electric service to be rent, and to avoid many HEFPA protections like deferred payment plans, which are triggered by utility termination notices, by evicting the tenants in landlord tenant court if they did not pay in full the electric charges demanded].

Another way around HEFPA's reach was to approve terms and conditions of owner-provided electric service that diverted complaints to owner-hired private arbitrators rather than telling tenants about the opportunity to obtain PSC determinations.

Even after the 2002 ECPA clarification, the PSC routinely issued - and continues to issue - orders that provide a route for landlords to divert customer complaints about their electric service to private arbitration before owner-paid arbitrators. For example, in a decision issued in May, 2009, the PSC discussed the submeterer's internal grievance procedures -- which require written complaints not required by HEFPA's simplified procdeures -- and stated:
Thereafter upon receipt of the protest, the matter may be submitted to arbitration under the provisions in the Bylaws of Argyle Condo by the Applicant or the resident, to resolve the grievance. All residents can also contact the New York State Public Service Commission if they are dissatisfied with either the managing agent or Board’s response to their complaints.
The process described thus approves time-consuming arbitration of utility service issues. In a January 2009 decision the PSC allowed the landlord to commence court proceedings against the tenant for eviction or for damages to decide disputes over electric bills instead of direct customer access to the PSC complaint determination function:
If dissatisfied, the tenant may request a review of the determination by filing a written protest to the Applicant within fourteen (14) days from the date of the property manager’s response. Upon such protest, the property manager will initiate, at no cost to the tenant, a proceeding in either Small Claims or Housing Court in New York City. All tenants can also contact the New York State Public Service Commission if they are dissatisfied.
The orders merely say that "all residents" or "all tenants" can "contact" the PSC -- but there is never an actual reference by the PSC to its duty to decide individual complaints under Public Service Law 43.

Wishy washy PSC orders such as this allow submeterers to discourage and deter complaints with the spectre of formal and risky arbitration and court proceedings, and encourage landlords to evade full disclosure of the real decisional function and duty of the regulatory agency.

The confusing PSC orders issued over the past decade affect more than 28,000 tenants. For detailed examples of these orders, see Under HEFPA, the New York PSC Must Decide Complaints of Submetered Customers. Even worse, if tenants check their leases or information provided by landlords when they submetered, they will typically find misleading gibberish about having to arbitrate disputes before landlord-hired arbitrators in formal arbitrations, or being taken to landlord/tenant court, and no solid information at all about the PSC complaint handling procedures and detailed information about how to access them.

The PSC's Laissez Faire Approach
Generally, we have found that landlords with PSC submetering orders never provided adequate notice to their tenants of their statutory right to have their complaints about electric service decided by the PSC, just as landlords never implemented other requirements of the orders, such as including essential terms and conditions of utility service in agreements signed by the tenants, as riders to their leases. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections.

A consequence of this subversion of utility customer rights is that PULP's research cannot identify a single PSC complaint determination involving submetered electric service, even though an estimated 28,000 rental apartments have been submetered in the past decade, and even though there is considerable tenant dissatisfaction with chronic billing errors, high bills, defective meters, shared meters, miswiring, violation of the rate cap provisions of submetering orders, and other service issues. Parenthetically, we also note that even though the PSC's Office of Consumer Services logs a high level of complaints lodged involving ESCO service, we cannot find a single PSC decision in a case against an ESCO. Shifting customers to unregulated utility providers, a legacy of the Enron era, still remains part of the New York PSC deregulation agenda: at least circumstantially, it appears that part of that deregulation agenda may be never to issue a precedental decision regarding the service of the new providers of utility service, i.e., ESCOs and submetering landlords.

Pending Legislation to Require Notification to Submetered Tenants of PSC Complaint Remedies
Assemblyman Micah Kellner sponsored a bill, A.7867, as part of a five-bill package to address submetering issues. A.7867 requires all submetering landlords to notify their tenants annually of their right to have disputes over landlord-provided electric service decided by the PSC. As stated in the Memorandum of Support for A.7867:
These alternative venues for complaint adjudication all involve time consuming and comparatively formal proceedings. They may also prove to be expensive and risky, for example, if an eviction case is the forum for resolution. These factors may serve to deter customers with meritorious complaints from making them, and reduce awareness at the Public Service Commission of the nature and quality of customer service actually provided by certain utilities.
Assembly Passes A.7867
Today, the New York State Assembly passed A.7867. A counterpart bill is pending in the State Senate, S. 5252.

For more information see PULP's website page on submetering.

Tuesday, June 16, 2009

PSC Seeks Comments on Petition of Hazel Towers Tenants to Halt Submetering

Tenants at Hazel Towers, a former Mitchell-Lama housing project in the Bronx, petitioned the Public Service Commission to halt submetering previously authorized by a PSC Order that waives the general prohibition against resale of electric service. The Petition alleges noncompliance with the Home Energy Fair Practices Act and the Commission Order. See Hazel Towers Tenants Association’s Petition for Investigation and Remediation of Noncompliance with Prior Order for Vacatur or Modification of Order Establishing Terms and Conditions of Submetered Electric Service at Hazel Towers and for a Stay. PULP is representing the Hazel Towers Tenants Association (HTTA).

The Petition of the Hazel Towers Tenants Association maintains that no valid agreements exist between the landlord and tenants for providing electric service to the tenants at rates, terms and conditions approved by the PSC, and that the Commission cannot now retroactively approve charges for service not agreed to by the tenants and not provided in accordance with the terms and conditions in its prior Order. Some tenants were overcharged in six out of the first twelve months of submetering, which began in 2007. Tenants disputing their landlord's charges for electric service were not given notice of the opportunity for PSC decisions on their complaints, and were threatened with court action or arbitration of disputes before private arbitrators hired by the landlord. Tenants first complained to the PSC more than one year ago. See Hazel Towers Tenants Ask PSC to Act on Submetering Complaints, PULP Network May 6, 2009.

On June 6, 2009, the PSC issued a Notice Establishing Comment Period providing for comments from interested parties by July 15; reply comments are due by August 15. Comments are to be filed with PSC Secretary, Hon. Jaclyn A. Brilling, at the Public Service Commission, 3 Empire State Plaza, Albany, New York 12223 and electronically via email at Secretary@dps.state.ny.us.

For further information see "Top Ten Submetering Myths" and PULP's web page on submetering.

Monday, June 15, 2009

Update on Lack of Lifeline Information at the PSC Website

A PSC representative took issue with our statement in All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies that
We could look for details on Lifeline and LinkUp assistance at the New York PSC’s Lifeline webpage -- but there isn’t one.

In fact, about all the consumer information you’ll find by searching the NY PSC website is an “Options for Telephone Consumers” page, which offers a one sentence description of Lifeline.
We were pointed to another PSC-funded web site, "AskPSC.com. It has a page on the Lifeline assistance program.

Still, the site index on the main PSC website does not mention Lifeline and Linkup, nor does the "A-Z Index" on the main PSC site.

The vast majority of eligible customers eligible for but not receiving Lifeline assistance should not have to "ask" the PSC and apply one by one at the alternative website or through their telephone company. Indeed, many of the households eligible for Lifeline assistance may be living in hardship made worse by high phone bills, and they cannot afford the internet service or computers they need to find information via the internet and the "AskPSC" website.

They should be more efficiently automatically enrolled in the reduced rate through a confidentiality protected match of records of customers receiving Food Stamps, HEAP, and other Lifeline-qualifying programs.

On the PSC's watch
  • the major provider, Verizon, was allowed to adopt tariffs restricting Lifeline assistance when the customer buys service in a package,
  • competing telephone service providers such as cable companies are allowed to avoid providing Lifeline, and
  • the automatic enrollment system pioneered in cooperation with PULP, state agencies, and telephone companies is broken, with only 300,000 households getting the assistance out of an easily found population of four to five times that number.
As a result, a million easily identifiable eligible households are not getting assistance, low-income New Yorkers are losing hundreds of millions of dollars every year in telephone assistance, and New Yorkers are paying universal service surcharges that go to other states.

Update - July 7, 2009
According to latest available statistics, 309,000 customers received telephone lifeline assistance in 2008. While this is more than the 300,000 mentioned above, it reflects the downturn since the peak of 746,000 customers about ten years ago, and illustrates the failure of the PSC to commit to providing assistance to all who are eligible for Lifeline and to oval of barriers to enrollment.

PSC Acknowledges 315 Area Code Change is Not Needed

With the release of a three sentence Notice on June 15th, the New York State Public Service Commission ("PSC") brought an end to a proceeding to provide area code "relief" to the 315 area code region in central New York. This case began with a December 2007 Order to resolve the apparent diminishing availability of exchange (or NXX) codes in this area, a problem created by the PSC itself when it assigned multiple 10,000 telephone number NXX codes to competing phone companies in rural communities.

PULP identified this issue of waste and stranding of unused numbers in filings over the ensuing months - contending that a new area code should not be necessary for the mostly rural area with about 1.4 million residents and asking the PSC to reconsider its action:
The Commission defended its action, saying it was correct in how it allocated upwards of 50,000 telephone numbers to each of over 50 tiny rural exchanges with just a couple of thousand residents each, stranding hundreds of thousands of telephone numbers that could have been used elsewhere.

Until today, the Commission had forged ahead with the proposal to add a new area code, and decided to implement it with an "overlay" code. If the "overlay" had been implemented, new numbers within the existing 315 area code would have a different area code, requiring the public to use ten-digit dialing instead of the current seven-digit dialing to make local calls. A company across the street or across town could have a different area code, requiring changes in signs, advertising, and directories. The legislature began to review the PSC's process for deciding whether to add area codes. In the 315 case, the PSC only had public hearings on how to implement a new area code ("split" versus "overlay") and refused to hold an on-the-record proceeding to hear evidence on whether to add a new area code. See Bill Would Require PSC to More Closely Scrutinize Area Code Changes. The Assembly passed the bill last month.

While the Notice does state that the 315 area code proceeding will merely be “held in abeyance” until the need for relief has arrived, with 100 NXX codes still available (with 10,000 telephone numbers each) and no NXX codes being requested at all in 2009, the case should be in "abeyance" for at least 10 or 20 years. The residents of the 315 area will thus be spared the cost and inconvenience of an unnecessary area code change.

Lou Manuta

See No New Area Code for Syracuse, Syracuse.com, June 15, 2009

Friday, June 12, 2009

PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service

A New York state goal "to ensure that every New Yorker has access to affordable, high speed broadband Internet," was articulated by former Governor Spitzer, and it looks like the current Governor also well understands the connection between broadband availability and economic development. Governor David Paterson's recently released report, Bold Steps to the New Economy: A Jobs Plan for the People of New York, affirms the state commitment to universal broadband service:
Universal broadband is the keystone to creating equal access to opportunity in the innovation economy. The pace of business in the global economy has far surpassed the age of dial-up Internet connections. Governor Paterson is taking steps to ensure broadband is universally available throughout New York.
The crafters of American Recovery and Reinvestment Act ("ARRA") also recognized the need to improve access to broadband service. Among its numerous provisions to help jump start our ailing economy, Congress, through the ARRA, directed the FCC to develop a national broadband plan to bring broadband access to all Americans.

The FCC requested public input, and more than 500 entities submitted comments, including the New York State Public Service Commission ("PSC") in conjunction with the state's Chief Information Officer/Office for Technology. While the FCC requested and received comments on a variety of issues, including data mapping (which is used to determine where broadband is lacking and to focus activities), public safety, and network diversity, the New York PSC's positions on broadband availability are worthy of note. Indeed, they are disappointing and unsupportable.

The PSC began its comments by taking a position in seeming direct opposition to Governor Paterson's public statements about the benefits of broadband deployment.
The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put.... The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.
Is the PSC displaying its true colors here, adhering to a laissez faire deregulation approach and opposing meaningful governmental action to bring affordable broadband to all?

In addition, the State's Chief Information Officer, who signed onto the PSC's broadband comments to the FCC, stated in the New York State Universal Broadband Council's recently released Annual Report:
There has never been a more critical time in our history to invest in the future of our children, to enable us to jumpstart our economy and compete on a global level. We must continue to effectively educate our citizens on how to use technology resources and Internet applications to enrich their lives.
So, how did the PSC, a representative of the state, take positions in comments to the FCC on broadband seemingly at odds with what the Governor himself - and his Chief Information Officer - publicly stated in the "Bold Steps" document and the state's own universal broadband report?

The whole purpose of ARRA's broadband provisions is to reallocate public resources in order to make affordable broadband universally available. The current "hands off" PSC approach has been a major failure - today the U.S. has some of the world's slowest, most costly broadband (per megabit per second) and the subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more proactive broadband policies surge ahead. See The Broadband News Is In, but it Isn't All Good, PULP Network, June 5, 2009.

The PSC comments went on to share the Commission's antagonism to expanding universal service support for eligible low-income broadband customers:
We're concerned that decisions will be made to subsidize the supply of broadband which would in turn be funded by the Commission's Universal Service Fund. This would harm New York, a net payer into the fund. New York would subsidize states that have not undertaken the investment - an unreasonable burden.
While it is true that New York is a net payer into the Universal Service Fund ("USF"), why is this so? Perhaps a reason is the New York PSC's own deficient policies which reflect a sad lack of commitment to universal service, a lack of direction, and a failure to devote resources needed to increase universal service support to New York's low-income telephone consumers:
Over the years the PSC has passed up many opportunities to expand Lifeline eligibility criteria, advocate for increased participation to keep federal universal service dollars from leaving New York for other states, and to work with the providers and the Office of Temporary and Disability Assistance to make automatic enrollment work better, but has chosen to sit on the sidelines. As a result, everyone loses. . . . According to the FCC's most recent Universal Service Monitoring Report (with 2007 data), New Yorkers contributed $445,600,000 into the federal USF in 2007, but New York telephone companies only received $248,838,000 in return ($36 million for Lifeline). The difference - nearly half of what is contributed - goes off to help fund programs in other states, most notably Alaska, Kansas, Louisiana, Mississippi, and Oklahoma. With an increase in the number of Lifeline customers in New York, more of this money would stay in New York, with little (if any) impact on the contribution level.
See All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies, PULP Network, March 21, 2009.

So now, under PSC logic, the failure of the New York PSC to revive and roll out the low income telephone assistance program, which makes New York a net payer into the federal USF, becomes a justification not to support universal service programs that would make broadband more affordable to the poor!

The failure of the PSC to advocate for increased federal support for broadband - because New York pays more into the USF than it receives when the reason for that disparity rests at the feet of the PSC -- is disingenuous and harms low income residents. Is that a valid reason to oppose a broadband Lifeline program? Or should New York's telephone Lifeline assistance program be fixed instead. In addition, somehow, the PSC believes it deserves a pat on the back for the "success" of its automatic enrollment process ("In New York we have increased our efforts on automatic enrollment program for lifeline and worked with other state agencies to streamline the applicability process.") The automatic enrollment process is obviously broken when there are more than a million easily identifiable recipients of Food Stamps yet the number of Lifeline customers is dropping in a nose dive - from over 750,000 Lifeline customers in 1996 to under 300,000 in 2008. See Low-Income Telephone Lifeline Assistance Reaches Fewer than 300,000 New Yorkers, Lowest in 20 Years, PULP Network, June 5, 2009.

In any event, the PSC does not seem to be too concerned about low income customers - or broadband ubiquity - in its comments. The PSC wrote:
A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.
The PSC advocates this position, while asserting that 95 percent of New Yorkers have access to broadband, yet only 71 percent subscribe. Besides the fact that the U.S. census claims only 54.1 percent of New Yorkers subscribe to broadband, the PSC offers no explanation for the large gap between availability and subscribership. Why do 20 (or 40) percent of those with "access" to broadband fail to subscribe? Obviously the PSC is not seeking answers to whether the cost of broadband is affordable to those low-income households not now subscribing, or causing hardship to those who do.

Could it be the combination of a lack of digital literacy and a lack of affordability? While PULP does support the PSC's goal of bringing broadband to libraries and schools (which the PSC referred to as "community gathering places"), we do not believe that stopping there will promote broadband in the home at some later date. Yes, educating people to the benefits of broadband is vital and is a natural role for libraries and schools, but creating a broadband Lifeline program is an equally important goal that should not be pushed off until some time down the road. See Is There a Need for a "Broadband" Universal Service Fund?, PULP Network, April 23 2008 Universal broadband means the service runs to the front door and the customer can afford to subscribe. Obviously if 20 to 40 percent of New Yorkers do not subscribe when it is on their doorstep, cost is a major factor.

In these comments, the PSC may have displayed its true colors - an agency out of step with its own administration, an agency which still wishfully believes the market will take care of all when market failures are abundantly clear, and an agency which caused most of the problems it discussed but tried to present as victories. New Yorkers need and deserve better.

Lou Manuta