PSC Implements 2% Assessment on Energy Utilities; Rebuffs PULP’s Request to Protect Low Income Customers

On May 15th, PULP reported on the New York State Public Service Commission (“PSC”) proceeding to implement the recently enacted Temporary State Energy and Utility Service Conservation Assessment. See PULP Comments on PSC Proposals to Implement 2% Utility Assessment. The "Temporary Assessment" imposes a charge of two percent of gross intrastate operating revenues, minus the amount of the current assessment on utilities for the PSC’s costs and expenses. The stated purpose of the Temporary Assessment is to encourage conservation of energy and other resources and applies to public utility companies, including municipal gas and electric corporations, Energy Service Companies (“ESCOs”), and the Long Island Power Authority. The Temporary Assessment does not apply to any telephone corporations or to energy utilities with $500,000 or less gross operating revenues from intrastate utility operations. Comments on the proposals regarding the Temporary Assessment were submitted on May 15th and the PSC issued its Order on June 19th .

PULP expressed concern in its comments that the Temporary Assessment will unnecessarily and unfairly burden low income customers, because it would “significantly diminish or offset reductions” in bills available under low income programs offered by the utilities. PULP had called for an exemption from the Temporary Assessment for low income customers or, in the alternative, to reopen rate cases to increase the low income rate discounts to off-set the Temporary Assessment, so that the new assessment would not add to their total energy burdens.

While the PSC recognized that “the imposition of the Temporary State Assessment may offset benefits from low income programs,” it found that the statute does not authorize an exception for any customer class, including low income customers. Although the statute did not expressly authorize such treatment for low income customers, PULP notes that the PSC is responsible for deciding how the assessment cost will be allocated among the various customer classes, and the statute certainly does not block the PSC from allocating the new rate burden taking into account fairness and equity to those living in hardship, just as it could with any other new rate burden. The PSC made the obvious that because the Temporary Assessment “will be collected from all customers on an equal basis within a class, the low income customers’ discount relative to other customers will remain unchanged, on a dollar basis.” However, such a conclusion does not eliminate the fact that any energy burden reductions for low-income customers the PSC approved in a prior rate case will now be reduced by application of the Temporary Assessment – a new state mandate which became effective after a utility’s rates were approved. The PSC then described opening up rate cases to correct this injustice as “impractical.” But if that is too much work, there are other familiar regulatory tools to accomplish this, such as telling utilities to defer collection of the new assessment from low income customers and later reallocating the deferred amount to be collected from other customer classes in the next rate case. The PSC has authorized such deferral mechanisms for a myriad of purposes, including the Temporary Assessment, and every utility has some deferral items. Indeed, Corning Gas filed a petition this week asking the Commission to change the proposed timing of collection of the Temporary Assessment charges, as did Niagara Mohawk.

Once again, the PSC passed up an opportunity to protect low income customers in the name of expediency.

PULP had also made a suggestion to have the PSC base its assessment of energy service company (“ESCO”) revenues on actual data instead of estimating ESCO revenues by having distribution utilities multiply the amount of electric or gas delivered to ESCO customers by the commodity supply price that would be charged by the distribution company for sales to its bundled service customers. PULP believes that estimating ESCO revenues in this fashion may inaccurately estimate ESCO intrastate revenues. The distribution utility’s commodity supply price for natural gas, for example, may be 20 or 30 cents (or more) per therm lower than the actual ESCO residential end user rate, so the ESCO revenues would be higher than estimated. Conversely, some ESCOs' revenues from some large industrial customers may be less than what the distribution utility would charge, and so their revenues may be overstated for purposes of calculating the Temporary Assessment. The PSC opted to not “undertake the more complex, uncertain, and multi-faceted plan” proposed by PULP, relying on its own less-accurate estimates instead.

PULP also provided detailed documentation showing that the ESCOs with the highest residential rates also had the most PSC complaints lodged against them, increasing demand on PSC resources, and warranting a full assessment based on their actual revenues. Despite the citation to published PSC statistics on ESCO Complaints outlining this correlation, the point was dismissed out of hand by the PSC as “highly speculative.”

Lou Manuta