FCC Considering New Consumer Information Rules

On August 27th, the FCC released a Notice of Inquiry (“NOI”) to examine and evaluate the communication customers receive about their telephone service. Specifically, the FCC wants to know if consumers being empowered and protected with the level of information they currently receive when it comes to choosing a service provider, selecting a service plan, managing use of that plan, and deciding whether (and when) to switch providers. A slideshow accompanied the discussion of this item at the FCC’s monthly session. In seeking more information on these topics, the FCC expressed particular interest “in understanding cost-effective best practices in information disclosure from within the communications sector.”

In the NOI, the FCC noted that “access to accurate information plays a central role in maintaining a well-functioning marketplace that encourages competition, innovation, low prices, and high-quality services. It empowers consumers by allowing them to choose services that better meet their needs and match their budgets. And it is essential to ensuring consumers are not subject to surprise charges and can avoid products and services that fall short of their expectations.” Accordingly, the question is asked – what is the level of consumer awareness about communications services – both prior to selecting a provider and after they become customers?

Input is sought about the existing tools to reach customers, new technological means of communication, and which types of providers could be affected by communication requirements for the first time, including Voice over Internet Protocol (“VoIP”) and broadband Internet access service providers.

Moreover, the FCC noted that its current Truth-in-Billing rules – including that billing descriptions be brief, clear, non-misleading, and in plain language – were extended to wireless providers in 2005. While extending billing-related consumer protections to VoIP providers was discussed as far back as 2004, the FCC has never acted on the proposals. The new Genachowski FCC has decided the time is ripe to examine these issues and is considering applying a cost/benefit analysis to the question of whether Truth-in-Billing or other consumer information rules should apply to new types of providers.

Because the August 27th document is an NOI, the FCC is seeking preliminary information as to which direction it should take and will following up with proposed rules. Parties will have an opportunity to comment on the proposed rules as well.

Comments on the NOI are due October 13th, with replies due October 28th.

Lou Manuta

Last Year's Spiking Natural Gas and Electric Prices

Last year, natural gas prices spiked to unprecedented levels. Some have argued that the price spikes were due to speculation in the insufficiently regulated commodities markets. Paul Cicio, President of the Industrial Energy Consumers of America, stated recently in testimony to Congress that

Excessive speculation in the natural gas market is real. From January to August of 2008 the price of natural gas more than doubled because of excessive speculation, not supply and demand fundamentals. During that same time period, U.S. production of natural gas rose about 8 percent, national inventories were well within the 5 year average and demand was essentially unchanged from the same period of the previous year. As a result of excessive speculation, consumers paid over $40 billion in higher natural gas costs.

In states like New York where the PSC embraced electric industry deregulation, allowing all sellers to get the same price, this meant that sky-high prices demanded for the output of natural gas-fired power plants were paid to other producers whose costs were much lower. That is still the case this summer, but the gap between the low cost hydro and non-fossil fueled power plants and the higher priced power from natural gas-fired plants has narrowed.

N.Y. Times Perpetuates Myth Supporting Unjust New York PSC-DHCR-NYSERDA Submetering Regime

A myth fostered by property owners and electric submetering proponents is that because New York tenants in rent stabilized apartments will receive an offsetting reduction in rent (due to the shift to tenants of bills for electric service previously included in rent), only tenants who are wasteful in their energy use will pay more when they get the owner's bills for electric service. See Top Ten Submetering Myths. PULP Network, July 7, 2009.

This misconception diverts attention from the state agencies (PSC and DHCR), and the state authority (NYSERDA) that adopted measures in the Pataki years to make submetering a windfall trifecta for owners -- with the PSC allowing landlords to provide de facto deregulated monopoly electric service, DHCR providing small rent reductions when separate charges are made for electricity, and NYSERDA providing grants to landlords to pay for the conversion to submetering, often with money that was targeted to benefit low income users of electricity. It suggests instead that the responsibility for higher monthly costs and hardship caused by submetering belongs to tenants who waste electricity. This myth was reinforced in a New York Times real estate blog column today, which quotes an attorney who states

Rent-stabilized tenants who use relatively little electricity may reap a slight windfall from submetering if their use is less than the average, while those who use a lot of electricity may have their combined housing and electric costs increase, he said.

Jay Romano, When a Co-op Installs Electric Submeters, Real Estate Q & A, Expert Advice for Owners and Renters, N.Y. Times, August 28, 2009.

Actually, most tenants who do not use a "lot of electricity" are likely to pay significantly more to their landlords after submetering. Tenants with average electricity usage will pay more because the rent reductions required by DHCR do not come close to offsetting the landlord's new charges for electric service. The result is a windfall to owners, often further subsidized by NYSERDA grants to defray the cost of conversion to submetering. See PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights, PULP Network, January 16, 2009.

Let's look at the numbers to see what happens in a conversion from master metering. First, assume the apartment is to be directly metered for Con Edison service.

In that situation, the rent reduction schedule in DHCR Update Number 1 to Operational Bulletin No. 2003-1 says that when there is a change from master metering to direct metering of a four room apartment, the rent is reduced by $60.00. If we assume typical 350 kwh per month in July, as Con Edison does in a recent press release, the Con Edison charge for July 2009, calculated using PULP's Con Edision bill estimator, would be $93. Average consumption is considerably higher than the amount of consumption covered by the rent reduction. The $60 allowed as a rent reduction would only buy 205 kwh.

Thus, a "typical" customer would pay $33 more for total rent and electric service with the conversion to direct Con Edison service. Keep in mind that this summer's electricity prices were lower; the situation has been much worse in recent years, and is likely to get worse again if the economy and electric usage pick up again. For example, in July 2008, a Con Edison customer would have paid $105 for 350 kwh usage, and the gap for the typical customer would have been at least $45. Also, we used a low figure for typical consumption; average year-round Con Edison residential customer usage is in the range of 400 kwh per month, and higher summer usage tends to occur when prices are higher. These factors would increase the gap between a tenant's electric bill and the amount of the DHCR rent reduction.

Next, lets look at a situation discussed in today's Times article, where the owner sells electricity to the tenant through submetering, as opposed to hooking the customer up to Con Edison direct service.

In this case, the DHCR rent reduction schedule requires a rent reduction of only $46.99. If we assume (as DHCR did to justify skewing the rent reduction schedules to favor landlords), that the charges for submetering are $20% less than direct SC-1 residential service from Con Edison, then the submetered service would cost $18.60 less than the $93 cost of Con Edison service, or $74.40, and the difference between the charges for 350 kwh electricity usage and the rent reduction of $46.99 would be $26.60 per month.

Thus a newly submetered tenant with typical usage would pay $26.60 per month more than the amount of the rent reduction. Moreover, we have used a DHCR assumption, made to justify the low rent reduction amounts, that the landlord could always get service to the tenant 20% cheaper than Con Edison direct service. That is simply not correct. The bulk rate paid by submeterers is not always 20% cheaper than the Con Edison direct service rates. The bulk rate for Con Edison SC-8 service to large submetered apartment buildings is linked to the NYISO wholesale short term spot market prices. In contrast, Con Edison direct service customers have the benefit of a portfolio of long term contracts and hedging to limit price volatility. Indeed, some landlords have charged submetered tenants significantly more for electric service than Con Edison would charge to a direct customer. See Hazel Towers Tenants to Receive $20,000 Credits of Landlord's Overcharges for Submetered Electric Service, PULP Network, August 26, 2009.

For further information on how DHCR adopted a submetering rent reduction schedule deliberately designed to make it more profitable for owners, and how the submetering regime harms tenants and favors landlords, see PULP Analyzes DHCR Submetering Rent Adjustments, PULP Network, May 27, 2009, and PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants, PULP Network, May 6, 2009.

A loss of twenty-six bucks a month for a tenant in rent stabilized housing converting to submetering may not seem significant to most readers of The Times. But many tenants lack the savings and income to absorb such increases in monthly expenses. Even before submetering, they often run out of money the last week of the month, and are living in hardship that will be worsened by higher costs. Those who are homebound or who have respiratory difficulties and must use more electricity for air conditioning than the average customer just to stay alive are doubly aggrieved. In some cases higher, unaffordable costs due to submetering may lead to threats of eviction of tenants who no longer can make ends meet. Landlords have attempted shortcuts to enforce payment of submetered electric bills they "deem"to be "added rent" through eviction proceedings, rather than follow the course charted out in the Home Energy Fair Practices Act, which provides opportunities for customers to catch up on arrears prior to cessation of the electric service.

What is the source of the misperception published by the Times that only tenants who use "a lot of electricity" will pay more with submetering?

One source may be the NYSERDA Residential Electrical Submetering Manual, co-authored by a submetering consultant. This same consultant has petitioned the PSC repeatedly on behalf of landlords to gain approval to submeter more than 23,000 apartments. The NYSERDA Manual claims that

Approximately 60 to 70% of residents benefit from submetering. The only residents who fare worse under submetering than under other means of allocating electric cost are those who use excessive amounts of electricity.

This, of course, is demonstrably false, as discussed above. There is no showing that the average customer uses "excessive" amounts of electricity, and much of a tenant's usage is determined by the efficiency of the landlord's structure, fixtures, and appliances.

Such misrepresentations published by a public authority, NYSERDA, are often copied or paraphrased and distributed by building owners to tenants in buildings where a petition for submetering is pending. This may lull tenants into not opposing submetering when applications are pending. Only much later, after the PSC has acted, do they discover the truth, that they must pay more, even if they do not use "excessive amounts of electricity." NYSERDA itself takes no responsibility for the claims in its Residential Electrical Submetering Manual:

Any opinions expressed in this report do not necessarily reflect those of NYSERDA or the State of New York, and reference to any specific product, service, process or method does not constitute an implied or expressed recommendation or endorsement of it. Further, NYSERDA, the State of New York, and the contractor make no warranties or representations, expressed or implied, as to the ... usefulness, completeness, or accuracy of any processes, methods or other information contained, described, disclosed or referred to in this report. NYSERDA, the State of New York, and the contractor make no representation that the use of any ... information will not infringe privately owned rights and will assume no liability for any loss, injury, or damage resulting from, or occurring in connection with, the use of information contained, described, disclosed, or referred to in this report.

The Times story does not mention that any submetering must be preceded by an order from the Public Service Commission, and before that is issued, affected tenants must be allowed a chance to comment on the conversion. There are specific rules of the Public Service Commission with added requirements in the situation "[w]here or more nonshareholder tenants refuse to agree" to a plan for submetering of a master metered coop or condo. Con Edison tariffs similarly state

if one or more non-shareholder tenants refuse to agree to the plan proposed by the submeterer, submetering to such tenants shall be permitted only after Public Service Commission approval of an application submitted by the prospective submeterer that satisfies applicable requirements specified in Part 96 of the Public Service Commission's rules....

Perhaps this step in the submetering process was left out because submeterers have so captured the PSC and its staff that the PSC approval of waivers of the general prohibition against submetering is merely a rubber stamp. The PSC process allows owners to promise in their applications to adopt a few measures that appear to protect the tenants as electric customers, but then the PSC allows submetering to proceed without checking to see if the owner actually implemented the protective measures and without approving tariffs or the actual agreements for electric service foisted upon tenants through lease riders. Some owners have been allowed to short-circuit the PSC comment process by failing to provide adequate notice to tenants of their rights to comment to the PSC on their applications before they are acted upon. See, e.g., Townhouse West Tenants Win Three-Month Reprieve from Submetering Charges, PULP Network, August 26, 2009, describing a situation where the landlord sent incomplete notice of the application to submeter to tenants with only four business days remaining before the expiration of the 45 day SAPA comment period, and those four days were before and after the Christmas weekend. When tenants asked the PSC for a copy of the application, weeks elapsed before it was provided, and it was finally sent to the tenants by the PSC staff the day after the PSC approved the application. The PSC Order allowed this sharp practice of Stellar Management, stating

The comment period expired on December 26, 2006, and no comments were received..... All current residents have been given notice of the submetering plan ...Documentation was provided to Staff which certifies that the notification was hand delivered to each tenant on December 19, 2006.

The touted efficiency benefits of submetering, which lend a "green"patina to the unjust shifting of costs to tenants have also been grossly overstated. Tenants are usually powerless to change out inefficient structures, fixtures, and major energy-using appliances, which typically are owned and controlled by their landlords. Due to rent regulation quirks, the changeout of the inefficient appliances can raise their rent permanently, and negate or offset the cost effectiveness of more efficient refrigerators, air conditioners, and other items. The PSC recently slowed the flow of System Benefits Charge funds to landlords, deflated the rosy estimates of energy savings from submetering, and instructed NYSERDA to fund submetering projects only in coops, condos, or unregulated housing. See PSC Signals Shift in Landlord Subsidies to Implement Submetering, PULP Network, June 25, 2009.

The reality - that higher costs from submetering cause hardship to tenants who do not waste energy and who are struggling to live on low and fixed incomes - was recently reflected in a letter from Manhattan Borough President Scott Stringer and numerous federal, state, and local officials expressing concern to the state officials whose agencies have been facilitating submetering. See Elected Officials Voice Concern to PSC and NYSERDA Over Submetering of Former Mitchell Lama Projects, PULP Network, August 21, 2009.

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

Verizon Service Quality Performance Lags

In a new report issued August 27, 2009, PULP reviews Verizon telephone service quality data over recent years. See Answering the Call - Does Verizon - New York's Service Quality Performance Justify Annual Rate Increases?, written by PULP Senior Staff Attorney Lou Manuta.

The report finds that even with a 54,5% increase in basic phone service rates allowed by the PSC in the three years since June 2006, Verizon is not hitting important customer service quality targets. The result is more service outages exceeding 24 hours, more trouble reports, and more complaints.

In a number of instances, Verizon's performance rallied just prior to PSC approval of annual rate increases, only to fall back when the increases took effect. More recently, however, performance was well below the targets both before and after the rate increase approval. The PSC is merely "monitoring" the deterioration in service quality, and has not imposed any monetary consequences upon Verizon, though it has power to do so.

The PSC's deregulatory approach seems to be that Verizon customers unhappy with service quality can vote with their feet, and get service elsewhere.

The problem is that the PSC relies on a competition that does not really exist to the degree it wishes. At best there is a duopoly or oligopoly market structure for services desired by customers, with the bulk of the telephone market for popular "triple play" telephone, internet and TV service typically divided between Verizon and a local cable company provider. The degree of service quality appears largely to be left to the duopoly providers, who may have mutual interests in maximizing profit by keeping overtime budgets low and not providing swift repairs. The PSC has not adopted service quality and consumer protection measures that should apply no matter who provides the telephone service.

Hazel Towers Tenants to Receive $20,000 Credits of Landlord's Overcharges for Submetered Electric Service

Tenants at Hazel Towers, a former Mitchell-Lama housing project in the Bronx, will receive electric bill credits of more than $20,000 to correct overcharges for electric service provided by their landlord, Nelson Management. The landlord was granted permission by the PSC to submeter in 2001, and implemented it in 2007 after receiving NYSERDA grants to underwrite the cost of installing the submeters. The tenants complained of overcharges in a June 4, 2008 complaint to the New York PSC's Office of Consumer Services, and sought to halt submetering.

In May of this year, when no action had been taken on their pending complaints, the Hazel Towers Tenants Association petitioned the PSC to take action in the case. Hazel Towers Tenants Ask PSC to Act on Submetering Complaints, PULP Network, May 6, 2009. Comments in that proceeding have been filed. See Hazel Towers Tenants File Reply to Owner's Request to Dismiss Petition Seeking to Halt Submetering, PULP Network, August 18, 2009.

Subsequently, OCS made its initial decision on August 21, 2009. The OCS made these findings

• A total credit of $20,392.64 plus interest charges ... will be issued to the tenants accounts in the near future for overcharges ... in comparison to the direct metered rate as stipulated by the Commission Order.
• Nelson Management charged a late payment fee of $25.00 instead of ... 1.5% per month.... American Metering and Planning Services (AMPS) was informed that any late payment charges assessed cannot exceed the 1.5% per month cap. Nelson Management has stated that the late payment charges are not being billed and any prior fees that were applied are being removed from tenant's accounts.
• Nelson Management's termination procedures are not in compliance with the Home Energy Fair Practices Act (HEFPA). Termination efforts are not in compliance with the Commission Submetering Order and have been withdrawn.
• Staff advised Nelson Management that it would need to incorporate the notification of low-income tenant billing in the "Notification of Rights and Procedures" to all tenants.
• Staff found that the original annual notification [of HEFPA rights] is not in compliance with the language contained in the approved Commission Order.... Staff found that these customer rights were distributed in 2008, well after submetering began.

At best, the $20,392.64 that will be recredited to tenants is a remedy for charges that exceeded what Con Edison would have charged a direct service customer through 12/03/2008. With interest, refunds of the overcharges to submetered tenants exceeded $35,000.  But significant issues still remain concerning the audit of charges and the methodology used for determining submetering charges. Under the PSC Order allowing submetering at Hazel Towers,

the "[r]ates and charges paid by the tenants will be based on the actual costs ... [and] in no event will the total charges (including any charge for billing) exceed the Con Edison residential rate for direct metering."

In its more than one year of investigation, the OCS did not conduct its own audit of books and records to determine if the owner properly calculated charges. Instead, the OCS initial determination relies on the owner's self-reported admissions of overcharges in excess of the Con Edison rate, in selected months, through 12/03/2008. This may seriously understate the magnitude of overcharges. For example,

• Did the landlord mark up the cost of service but stay below the rate cap in some months?
• Has the landlord selectively omitted some months of overcharges in excess of the rate cap?

Indeed, OCS acknowledged in another case that one of the Hazel Towers tenants was overcharged by $325.42 -- yet the partial data from the landlord OCS now relies on in the Tenant Association case shows only $95 in overcharges to that same tenant over the same period, indicating a very substantial "misunderestimation" of overcharges. If that case is typical, the actual overcharges could be more than three times the amount that has been acknowledged to date.

The OCS initial determination rejects the request of the Hazel Towers Tenants Association to halt submetering and to refund all charges until valid lease arrangements are made and full compliance with HEFPA and other conditions of the submetering Order is achieved. The determination basically allows the landlord to continue submetering even without valid agreements or lease riders for electric service in place. A new lease rider now being proposed by Nelson Management is attached to the OCS initial determination. Apparently written with ex parte collaboration of OCS, it does not contain clear provisions on how the electric bills are calculated. Under the Order allowing submetering at Hazel Towers, agreements for electric service were required to have been phased in with lease renewals. The Order clearly states

The electricity charges and concurrent rent reductions will go into effect for each such apartment upon the expiration of the current apartment lease.

There was no proper Commission-approved lease rider establishing terms and condtions of electric service for any tenant when submetering began at Hazel Towers, and the problem still has not been remedied. In addition, the proposed new rider attached to the OCS determination lacks provisions required for transparency, such as

• An Annual report to the PSC with copies to tenants,
• An independent audit of electric service charges and compliance with PSC rules and orders,
• An opportunity for tenants to inspect books and records to check whether the landlord is overcharging, and
• Revision of the rent to comply with DHCR rent reduction rules. Instead, the lease rent is not changed and a credit equal to the DHCR rent reduction is given on the bills, apparently so the landlord can apply future percentage increases allowed by the Rent Guidelines Board to the old, higher rent that included electric service, rather than to the revised rent amount.

Also, the new HEFPA information materials issued by the owner, and attached to the OCS determination, were apparently designed by the owner with the collaboration of OCS staff. These still may not fully satisfy all HEFPA requirements. For example, under HEFPA regulations, the notification of HEFPA rights for service to customers in the Bronx is required to be provided in both English and Spanish, but this apparently was not done.

Thus far, the clear lesson of this case seems to be that landlords may disregard with impunity all provisions of a PSC submetering order which relate to tenant-customer protections. If and when tenants complain, submeterers can address violations at their leisure in ex parte communications with OCS.

*********************8
Update
The PSC issued its final decision regarding complaints about submetering at Hazel Towers in 2013, nearly five years after tenants first complained.

See PSC Warns Landlords to Follow Submetering Orders Allowing Sale of Electric Service to Residential Tenants

*****************

Follow PULP on Twitter

Townhouse West Tenants Win Three-Month Reprieve from Submetering Charges

Tenants at Town House West in Manhattan won a three-month reprieve from submetering charges after they filed a Petition with the Public Service Commission seeking to halt the implementation of submetered electric service. See Town House West Tenants Ask PSC to Halt Submetering, PULP Network, July 21. 2009. The Petition seeks relief for several reasons, including

• Failure of the owner to provide adequate notification to tenants of the application for permission to submeter,
  
• Absence of filed contracts or tariffs approved by the PSC, and
  
• Failure to provide "shadow" billing in advance of implementation of submetering to give tenants better knowledge of the impact before, in most cases, being required to pay more in total monthly charges for rent and electricity,
• Complaint procedures out of compliance with the Home Energy Fair Practices Act,
  
• Deeming of charges for electric service to be added "rent," and
  
• Noncompliance with nearly every putative consumer protection condition contained in the PSC order which granted permission to the owner to submeter and provide electric service to tenants.
  

On July 27, 2009,the PSC Secretary referred the case to the PSC's Office of Consumer Services (OCS) for treatment as a complaint under the PSC complaint handling procedures, with no action taken on the tenants' request for a stay of the submetering. The Town House West Tenants Association, represented by PULP, then requested interlocutory review by the PSC of the Secretary's decision to shunt the case to the OCS without acting on the stay request. The tenants pointed out that in granting the petition for submetering approval, the PSC staff wrote that no one had commented. While that was literally true, the owner had given a notice required by PSC submetering regulations with only four business days remaining in the 45-day SAPA comment period (encompassing a Christmas weekend), and even that short notice was deficient in substance, because it only said tenants could "contact" the Commission, without advising them of the opportunity to comment on whether the owner should be allowed by the PSC to submeter, and without advising enants of the date comments were due. The tenants' request to the PSC for a copy of the owner's petition was not promptly acted upon by PSC staff, and was not sent until one day after the PSC had voted to approve the petition. See Town House West Tenants Association Interlocutory Appeal of Secretary's Referral of Stay Application to Office of Consumer Services, August 7, 2009.

Yesterday, Town House West tenants received notice that the owner, Stellar Management, is crediting back to tenants all charges for submetered electricity that have been collected to date. The bills previously sent for three months' service (May, June and July) will now be treated only as informational "shadow bills" to reveal the eventual financial impact of submetering, but will not actually be collected. Payments for electricity bills previously made by tenants are being "credited against your September rent." The owner's letter dated August 24 states, in part

Recently, as part of your August 2009 rental statement, you received a "bill" for electricity usage for your apartment for the period 5/5/09 - 6/4/09. At the same time you received another "bill" for the same period for the same amount from our outside vendor, Quadlogic or QLC. These "electric bills," however, should have been labeled as a "shadow electric bill."**** [Y]ou do not need to pay this "bill;" it is simply for educational purposes.

The owner's letter goes on to say that the electric bills received by tenants for the periods 6/4/09 - 7/4/09 and 7/4/09 - 8/4/09 were "purely for educational purposes, and you do not need to pay these shadow bills either."

The owner indicates that it will seek to collect charges for service beginning August 4, 2009, and that those charges will show up with rent bills for October, due to a two-month billing lag. The owner's letter to tenants advising them of the newly characterized "shadow bills" also included a revised proposed lease rider and information about HEFPA rights, including the right to have billing complaints adjudicated by the OCS. The lease rider has not been approved by order of the PSC.

Market rate tenants at Town House West whose leases do not now have valid submetering provisions may be able to avoid submetering charges until they negotiate a renewal lease. According to the owner's August 24 letter, tenants whose leases are subject to rent stabilization laws will receive rent reductions beginning in August, under a DHCR order requiring rent reductions when bills for electricity are shifted to tenants.

The Townhouse West Tenant Association Petition, and the individual complaints of Townhouse West tenants, are still pending at the OCS. The Tenants' Association has not received a copy of any answer to the Petition or other papers submitted to OCS by the owner or its counsel, Harris Beach.

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

Elected Officials Voice Concern to PSC and NYSERDA Over Submetering of Former Mitchell Lama Projects

Elected officials recently wrote to PSC Chairman Garry A. Brown and NYSERDA President Francis Murray to express their concerns over submetering, referencing several cases in which submetering at former Mitchell-Lama projects owned by Urban America has been stayed by PSC orders. Their letter states, in part

We are writing in regard to the ongoing policy discussions surrounding residential submetering of electricity. **** [A]n assessment should include new independent research into the level of energy savings actually achieved through submetering, which may until recently have been overestimated, and should take into account the impact of the submetering policies of PSC, NYSERDA, DHCR and other agencies on (i) tenants in buildings that are submetered, (ii) energy efficiency incentives for owners after they have transferred responsibility for electric bills to tenants through submetering, (iii) other public agencies required to provide utility subsidies when electric bill burdens are imposed on lower income tenants, and (iv) the public interest.

We are troubled that Urban American or other owners may be pursuing conversion to submetering in their apartment portfolios in a determined attempt to shift energy costs and price risks onto tenants who lack the income or savings to afford them, or means to address them through efficiency measures. ****

We also worry that Urban American and other owners will use PSC permission to submeter as a lever to enhance revenue streams by displacing tenants from housing now affordable to them, and converting the units to more expensive, market rate rentals. ****

Additionally, we are concerned that during the submetering process at the Urban American buildings and elsewhere, tenants have been denied key protections.****

We are extremely encouraged by indications that the Commission recognizes the significant implications of submetering in regulated and subsidized rental buildings, and we would be pleased to work with you to help shape legislation and regulations accordingly****

The letter from Manhattan Borough President Scott M. Stringer was also signed by Congressman Charles B. Rangel, State Senators Bill Perkins and Jose Serrano, Assemblyman Micah Z. Kellner, and New York City Council Members Melissa Mark-Viverito and Jessica Lappin.

PULP Applies to NTIA for Stimulus Funds to Expand Broadband Opportunities for Low and Fixed Income Consumers

Fast internet access through broadband is rapidly evolving into an essential utility service, just as universal landline telephone service became a public goal in the twentieth century. Broadband is increasingly seen as a necessary input for education, communication, commerce, and global competitiveness. As stated by United Kingdom Prime Minister Gordon Brown,

The digital revolution is changing all our lives beyond recognition and today we shall set out how Britain must change with it. Whether it is to work online, study, learn new skills, pay bills or simply stay in touch with friends and family, a fast internet connection is now seen by most of the public as an essential service, as indispensable as electricity, gas and water. ****

But I am clear that this transformation must benefit us all, business and consumers alike, in every part of the country. Digital Britain cannot be a two-tier Britain - with those who can take full advantage of being online and those who can't.

So the first step must be to make the existing broadband network truly available to all. Just as we remain committed to a universal postal service, we pledge today to give every home, community and company access to broadband internet.

Gordon Brown, The Internet Is as Vital as Water and Gas - Every Home Will Have Broadband Access as We Aim for a Digital Britain Fit to Take on the World, The Times (London), June 19, 2009.

Today, with some exceptions in rural areas, nearly all New Yorkers have physical access to a broadband service, such as DSL or cable, but low income and elderly households lag in subscription to it. We estimate that less than half of low-income New York households receive broadband service, while higher income households have far greater subscribership rates.

Many people are well aware of the benefits of broadband for themselves and their children, but because of their constrained family budgets, they believe they simply can’t afford the added monthly charges of about $35. See Wages of 30% of New Yorkers Do Not Cover Minimum Needs, PULP Network, June 13, 2008. Also, broadband providers, unlike utility service providers, do not presently have the obligation to provide affordable repayment plans for customers who lack savings and fall behind in paying bills during a stretch of unemployment or disability, and need time to catch up on their bills. With unemployment still rising in the state, New York households that now have broadband may lose it as they tighten their budgets or due to disconnection when they fall behind in payments.

The lack of affordable broadband, and overreliance by the FCC and New York PSC on deregulation and market solutions rather than affirmative affordability policies, are probably factors in the United States sinking in to be only 15th in the world in broadband subscribership rates.

This week, PULP submitted an application to NTIA for federal Recovery Act economic stimulus funding to increase opportunities of low and fixed income New York consumers to afford and maintain broadband service. PULP proposes a stopgap solution - in the absence of any effective national or state broadband affordability rogram - to stimulate better utilization of existing utility low-income rate discounts, so that those now on budgets seemingly too tight to afford broadband could create enough headroom to subscribe. Large numbers of New York households are eligible for utility rate discounts for telephone and energy services, but only a small proportion of those eligible are reached by the utilities. For example, there about a million readily identifiable Food Stamps households who qualify for substantial telephone service discounts through Lifeline, but participation hovers around only 300,000. In addition to working to expand participation in the existing utility discount programs, PULP also proposes to develop a model for achieving affordable broadband service and model consumer protections to help prevent households from losing the service.

PULP submitted letters of support for its proposal to NTIA from statewide and local organizations, including New York AARP, the New York State Community Action Association (NYSCAA), the New York State Library Association (NYLA), and Syracuse United Neighbors (SUN).

Hazel Towers Tenants File Reply to Owner's Request to Dismiss Petition Seeking to Halt Submetering

The Hazel Towers Tenants Association filed a Petition in May, 2009 with the PSC seeking to halt submetering at Hazel Towers, after their complaint filed with the PSC's Office of Consumer Services (OCS) had not been decided. See Hazel Towers Tenants Ask PSC to Act on Submetering Complaints, PULP Network, May 6, 2009. The Commission Secretary issued a Notice inviting comments. More than thirty tenants and City Council member Jimmy Vacca filed comments in support of the Petition. On the last day of the comment period, the owner of Hazel Towers filed its Comments on the Petition. The owners' comments indicate substantial ex parte communications with OCS decision makers which were not shared with HTTA and its counsel.

On August 17, 2009 HTTA, represented by PULP, filed its Reply to the owner's Comments. HTTA argued that

• A stay of submetering should be granted because multiple violations of the Commission’s prior submetering order which existed when submetering began still have not been corrected,
• No valid agreements exist between the owner and Hazel Towers tenants for the provision of electric service containing PSC-approved rates, terms and conditions of service,
• The Commission cannot now retroactively approve unfiled charges, rates, terms and conditions for electric service
• The process for remediating such violations requires Commission attention due to the appearance of regulatory capture by the regulated industry.

The HTTA papers conclude that

The Commission should reject Nelson Management's effort to paper over the dog's breakfast of its botched and unlawful implementation of submetering, and issue a stay of further charges for submetered service until new tariffs or contracts containing approved rates, terms and conditions are filed and approved.

In response to the owner's contention that the Petition should be dismissed because issues raised in the Petition are being handled by the OCS, HTTA pointed out that the head of the OCS hearing office refuses to consider the issues, and attached a copy of a motion seeking his recusal.

Niagara Mohawk Must Divulge Cost Data Regarding Proposed "Smart Grid - Smart Meter" Projects

When Niagara Mohawk d/b/a National Grid filed a proposal with the PSC to spend funds on a "smart meter" project, the cost of which would be borne by its customers, it seemed to have foreclosed critical examination of the sanity of the investment when it claimed that the cost data is confidential and trade secret. Documents supporting this fashionable "smart grid" project were filed with the sections on costs kept secret.

Alert Albany Times Union business reporter Larry Rulison requested release of the cost data, and the PSC Records Access Officer Steven Blow required its release. On appeal, PSC Secretary Jaclyn Brilling upheld the ruling in an August 13 decision. See National Grid Told to Reveal Details - PSC Says Utility Cannot Withhold Financial Info Regarding "Smart Grid" Plan, Albany Times Union, August 18, 2009.

The "smart grid" and "smart meter" rage includes the utility wishlist item to invest billions of dollars to replace all existing electric meters - many of which were only recently replaced to allow periodic remote meter reading - with meters capable of providing the utility with instantaneous additional data about when and how much electricity customers are using. This in turn would permit realization of the deregulators' dream of introducing price spikes into customer bills with volatile, unpredictable pricing systems based on flawed and perhaps manipulated wholesale NYISO prices. The PSC's companion wishlist item, for legislation to give it power again to mandate time of use pricing that has been rejected by most residential customers, which it has pursued unsuccessfully for years, is again mentioned in the recently issued Draft State Energy Plan. See New York Residential Real Time Pricing Experiments Must be Voluntary, PULP Network, August 27, 2007.

If utilities spend billions on "smart" meters they may make a good return on the investment through retail rates paid by their customers. This may be particularly attractive to New York utilities: they no longer are investing billions in power plants, due to their having largely gotten out of the power production business, and their investment adventures into less regulated activities, through holding company affiliates a la Enron, turned out to be far less profitable than safer investments in regulated activities with regulated profits.

The PSC, initially enthusiastic about "smart" metering, asked the New York investor owned electric utilities to submit proposals in 2007. When the price tag became known, however, the PSC recognized that the rate impact could harm customers, questioned the benefits claimed, rejected the utility proposals to invest billions, and suggested instead there be small scale pilot projects to test out the costs and benefits before going whole hog. See, PSC Requires More Study Before Allowing Major Investment in "Smart Meters", PULP Network, January 11, 2008.

The situation changed again this year with the possibility that "free" federal money under the Recovery Act ("ARRA") might be used to underwrite part of the cost of "smart" meter investments. The PSC issued orders recently to enhance the utilities' application for ARRA funds by assuring it would require consumers to pay half the cost of smart grid investments if the federal government gives grants to utilities for the other half of the cost. Thus, New York utility customers would be on the hook for part of the cost, while the general body of federal taxpayers would pick up the rest with the ARRA funds, with the utilities possibly picking up 10% or so per year on the new investment and possible tax incentives too.

"Smart" is not enough to justify the stampede to invest billions of utility ratepayer and ARRA dollars in this fad. It needs to be studied intelligently, and evaluated along with other options, including alternatives that may be even "smarter" in light of the limited funds available to consumers and taxpayers. For example,

• How much more efficiently would the electric system really run with the new smart grid gismos that will enable utilities to increase prices at any time without advance notice? Aren't the touted savings mainly from shifting usage to other times of the day by increasing prices during peak times? Will smart grid devices permit more import of electricity not from wind turbines, but from coal-fired generation through transmission from adjacent areas where there is a glut of cheaper coal-fired generation?
  
• Couldn't New Yorkers save far more energy by putting the same investment into other proven cost-effective energy saving measures that reduce consumption, rather than shift it, and lower bills rather than raise them unpredictably?
  
• The Draft State Energy Plan contemplates weatherizing only 25,000 homes of low income households per year. At that rate, this proven measure, which is known to result in large energy savings, will not be implemented for more than 50 years.
  
• Would a "cash for clunkers" program to unplug and crush old inefficient refrigerators, freezers, and air conditioners accomplish more economic stimulus by giving consumers lower bills and more cash to spend, in contrast with a "smart meter" program that could raise their bills, decrease their spending powers, and increase profits for a foreign utility?
• We already see 300,000-plus customers losing utility service each year due to its unaffordability, and deliberate interruption of service to collect bills, affecting about one million people, about 5% of the state's population. If "smart grid" projects result in higher costs, what will be the impact on households and businesses already at the limit of their budgets?

There is little discussion in New York of the "smart grid" costs and alternative investment choices for the proposed commitment of limited customer and public resources.

In other states, AARP and other consumer advocates have critically examined utility proposals to squander large sums on "smart" meters. When the cost is weighed against a realistic appraisal of the likely benefits, the investment may begin to look rather "dumb." See the testimony of Consumer Affairs Consultant Barbara R. Alexander for AARP in a recent case, linked in AARP Opposes PEPCO Plan for Spending on "Smart Meters", PULP Network, June 19, 2009;. See also

• "Smart" Metering Questioned, PULP Network, May 1, 2009; and
  
• Not so Smart? High Tech Metering May Harm Low Income Electricity Customers, PULP Network, April 16, 2007.
  

Critical attention needs to be paid to this issue by the public and the press and consumer advocates. Before yielding to pressure from utilities, technology, and deregulation enthusiasts to spend billions of dollars, yes, billions in New York State alone in utility candy to be paid for by ratepayers through higher bills, we need to learn a bit more about

• why price spikes and existing voluntary time differentiated rates are not popular with the overwhelming majority of consumers,
  
• whether the touted benefits of the new meters can be realized
• whether the benefits are grossly overstated,
  
• whether there are better investments of consumers' dollars to be made, for example, in the areas of energy efficiency or development of renewable energy alternatives, and
  
• a human environmental impact assessment, to learn how the cost impacts and implications of "dynamic pricing" will affect the most vulnerable New Yorkers, more than 300,000 of whom already are losing service each year because they cannot afford existing prices, before exposing them to experiments to test their behavior changes when faced with spiking prices.

In an important paper on "smart" meters, Barbara R. Alexander points out the lack of evidence to justify widespread residential real time metering, and flags important consumer issues:

The push to install more expensive smart meters (and their associated communication and data storage systems) and consider more “real time” or volatile electricity prices for residential electric customers has the potential for significant harm to many residential customers and particularly to limited income and payment troubled customers. Almost no jurisdiction has acknowledged the potential adverse impacts on these vulnerable customers who must have essential electricity service to assure household health and safety. Nor has any jurisdiction specifically ordered an analysis of proposals for dramatic changes in the pricing of electricity on limited income or payment troubled customers. * * * *

It would be unfair and poor public policy to leap into new metering technology and new methods of pricing essential electricity service to residential customers without a careful analysis and access to factual information on the impacts of such proposals on customer bills and usage patterns. The lack of such information is particularly glaring for low income customers. * * * *

Wholesale market structure and pricing mechanisms are still being vigorously debated and to rely entirely on such immature and potentially “wrong” price signals to customers who rely on essential electricity services for minimum health and safety standards should raise red flags and longer term analysis prior to embarking on expensive new metering and rate design programs.

Alexander, Smart Meters, Real Time Pricing, and Demand Response Programs: Implications for Low Income Electric Customers, 2007.

Update
08/28/2009 -- Larry Rulison, Utility Asks PSC to Reconsider – National Grid Appealing Order to Reveal Details of New $290 Million Plan, Times Union, August 28, 2009.

Yonkers Tenants Win Reprieve from Eviction While Fighting Landlord's Electric Bills

Tenants at a former Mitchell Lama housing project in Yonkers, Riverview II, won a small victory in their struggle to overturn a New York State Public Service Commission (PSC) order that allowed the owner to shift electric bills for heat in an inefficient building to tenants. As a result, tenants were faced with huge electric bills they could not afford to pay. See

• PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants
  

• PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights.

The landlord's form lease allowed charges for electric service to be "deemed" to be added rent, so eviction could be threatened and accomplished if tenants allegedly fail or refuse to pay the electric bill.

Tenants, represented by Nancy Marrone, Esq. of Lower Hudson Legal Services, petitioned the PSC for a stay of submetering, see Yonkers Tenants Ask PSC to Halt Submetering at Riverview Towers, but the Commission Secretary referred the case to the Office of Consumer Services (OCS) to be handled as an ordinary complaint, avoiding -- or at least delaying -- consideration by the PSC Commissioners themselves whether to stop the submetering. Review by OCS has taken more than a year in other cases just to get a first level determination in the three-stage PSC complaint process that culminates in a final decision by the PSC Commissioners with judicial review available after that under CPLR Article 78. See PSC Secretary Finds No Evidence of Delay in Handling Hazel Towers Tenant Complaints Regarding Submetering.

Meanwhile, during pendency of OCS review of the Yonkers tenants' petition, the landlord was free to evict tenants for not paying the disputed charges for electric service through eviction proceedings in the Yonkers City Court.

In an August 4, 2009 letter, OCS staff wrote that the landlord could not seek to evict tenants for nonpayment of electric charges only, but said that it would not prevent the landlord from seeking eviction if other charges were due.

This is a small symbolic step forward, though it may be evaded in practice.

For example, if a tenant pays all the rent but withholds the electric charges in dispute, the landlord may credit the tenant's payment that was intended to be for the rent to the electric charges first, and plead in a landlord tenant court petition for eviction that "rent" is still unpaid. The right of the owner to allocate partial payments is a standard condition in many leases and nothing in the PSC letter - which is not an enforceable order of the PSC -- stops this. Also, a tenant may have a counterclaim for unauthorized or excessive electric charges that would exceed the rent due. Under the PSC letter, the landlord with a dispute pending at the PSC over these issues could still evict.

Thus, the OCS letter, like many PSC orders allowing submetering containing cosmetic flourishes purporting to protect tenants, superficially looks like it protects tenants, but reality can be the opposite. See Top Ten Submetering Myths. The PSC has not been auditing charges of submeterers, or timely enforcing HEFPA consumer protections, except in rare instances and only when tenants are represented by counsel and forcefully push for rulings that still take a year or more just for the first agency determination.

Tenants may have other defenses and counterclaims in court in situations where the OCS allows owners to collect electric charges as part of the rent in eviction proceedings, but in all likelihood would need counsel to raise them. Many tenants, however, lack access to counsel in eviction cases because they cannot afford the cost and free legal services are a rarity due to chronic underfunding of legal services organizations that serve the poor.

For an example or other defenses available to a submetered tenant, under the Public Service Law, no charge for utility service is lawful unless the contract or tariff for service containing all terms and conditions of service is filed with and approved by order of the PSC. To enforce this filed rate regulation principle, Public Service Law Section 75 bars any recovery in a court if the case involves a claim for electric charges that have not been fixed by the PSC.

Deregulation became the rage with regulatory agencies in the Enron era, and the New York PSC and its OCS staff led the way, scrapping the rate filing requirements for ESCOs and submeterers, allowing evasion of HEFPA by new providers, making up unofficial and informal rules as they go along. (The New York Legislature rebuked the effort of the PSC to allow ESCOs to avoid HEFPA in 2002, and clarified that the PSC has no power to waive HEFPA for any seller of residential electric service).

In its deregulatory fervor, the PSC

• has not been requiring submeterers to file tariffs or contracts for review and approval, allowing them, in effect to operate as essentially unregulated monopolies with captive customers, tying their electric service to apartment rentals.
  
• The PSC itself has never issued a decision on a customer complaint involving service from a submeterer,
  
• The PSC is allowing rampant disregard of even the flimsy consumer protection measures routinely incorporated into submetering orders,
  
• The PSC allowed submetering even for owners that lack an order, see PSC Asked to Rehear Decision Retroactively Approving Four Years of Submetering without an Order Waiving the Prohibition against Resale of Electricity, PULP Network, March 25, 2009; and Tiffany Mews Tenants Ask PSC to Halt Submetering with No Proper Order and No Filed Tariff or Contracts Approved by the PSC, PULP Network, PULP Network, July 31, 2009,
• The PSC staff testified in a recent rate case that it wanted to submeter all currently master metered customers in the Con Edison service area, potentially exposing more than 600,000 more tenants to the predations of their landlords and lax PSC enforcement of consumer protections and basic principles of utility law,
  
• The PSC floated a proposed regulation to further relax even the minimal existing rules by getting rid of the requirement that submeterers obtain an order of the commission before submetering, see Submetering Landlords Clamor for More PSC Deregulation of Electric Service, PULP Network, March 19, 2009.

The current deregulation of electric service provided by landlords to tenants is not recognized in the Public Service Law, which still requires a filed rate regulation system.

So if any part of the claim in landlord tenant court is really for electric charges, validity of which is disputed, the tenant may argue under PSL Section 75 that there can be no recovery at all by the landlord. This may require proof that the "rent" has been paid and that the case is really based on unpaid charges for electric service which are the subject of PSC disputes. There may also be other defenses or counterclaims to recover excessive or unlawful electric charges available to the submetered tenant whose landlord attempts to collect electric charges in court. See After Submeterer Can't Evict for Unpaid Electric Bills, Bay City Metering Asks PSC to Revise Order to Allow Service Termination, PULP Network, July 28, 2009.

For further information, see PULP's webpage on submetering.

New FCC Telephone Penetration Statistics Reveal Problems in New York

This week, the FCC released its latest “Telephone Penetration By Income By State” report. The report is based on March 2008 Census Bureau survey data from its Current Population Survey which regularly asks the question:

"Does this house, apartment, or mobile home have telephone service from which you can both make and receive calls? Please include cell phones, regular phones, and any other type of telephone."

The report made the following statistical findings:

• In March 2008, penetration among low-income households (under $10,000 annual income in 1984 dollars) nationwide was 89.7%. This contrasts with an overall nationwide penetration rate of 95.2% in March 2008.

• Since 1985, when the Federal Communications Commission (Commission) first established Lifeline to help low-income households afford the monthly cost of telephone service, penetration rates among low-income households have grown from 80.0% to 89.7%.
  

• Since that have provided a high level of lifeline support for telephone service for low-income consumers experienced an average growth in penetration of 4.0% for low-income households from March 1997 to March 2008. In contrast, states that provided a low level of lifeline support experienced an average growth of 1.4% in telephone penetration rates for low-income households between March 1997 and March 2008.
  

• Among states, penetration rates among low-income households ranged from a high of 97.3% to a low of 81.7% in March 2008.
  

The report shows that the percentage of low income households with telephone service in New York State rose from 84.6% in March 1984, to its peak of 92% in March 2000, backsliding to 88.1% in March 2008. In contrast. the penetration rate for higher income New York households (earning more than $40,000/year in 1984 dollars) was much higher: 98.5% in March 1984, 97.9% in March 2000, and 97.7% in March 2008.

Put differently, the penetration gap between low and higher income households was 13.9% in 1984, 5.7% in 2000, and 9.6% in 2008.

The penetration rate for all New York households was 91.4% in 1984, 96.1% in 2000, and 93.7% in 2008.

Why did telephone subscribership of New York low income households decline in recent years?

PULP believes the major cause for the recent decline and the growing disparity between low and higher income households is that due to policies and practices of the utilities and the PSC, fewer eligible New York low income households receive service at the authorized Lifeline discount rates. Today only about 300,000 out of a pool of at least 1.2 million readily identifiable New York State Food Stamp households receive Lifeline. This is less than half the number of households who received Lifeline rate assistance in the late 1990s.

While we have discussed the reasons behind this in detail in other blog posts here and here, there is no mistake that the sagging Lifeline enrollment has coincided with the drop in telephone penetration. The FCC’s report indicates that New York State has just under 7.5 million households: 6.3% of that figure without a phone means 472,500 mostly low income households in this state lack telephone service in their homes. Assuming 2 -3 persons per household, the number of persons without access to a phone at home may range between 1 - 1.4 million. This is a sorry result in light of the national telecom policy to have universal, affordable telephone service.

Much more needs to be done by the New York State Public Service Commission (“PSC”) to bring these numbers up. The Commission has never aligned itself with the national policy, and in practice has allowed hundreds of thousands of low-income households to go without the benefit of Lifeline assistance. Recently, the PSC launched a universal service proceeding. It is time that plight of Lifeline and low income households are addressed.

Also, this week, the FCC released its “Telephone Subscribership in the United States” report. It contains data from March 2009 and shows that the percentage of households with a telephone in New York stands at 94.7%. Not only is this figure less than the national average of 95.6%, it is lower than the neighboring states of Connecticut (97.6%), Massachusetts (97.9%), New Jersey (94.8%), Pennsylvania (97.6%), and Vermont (97.1%).

The PSC has begun promoting Lifeline Awareness Week, set for the week of September 14th, when eligible people will be encouraged by advertisements to request Lifeline. Inefficient individual sign ups should not be the first way to approach the problem. Also, those who are eligible are likely to run into policy barriers which need to be removed. Systematic changes need to be made by the PSC and other state agencies to seamlessly and efficiently link participants in public assistance programs with Lifeline providers to bring the percentage of low income households having a telephone more in line with all households, as has been accomplished in North Dakota (96.4% and 98.0%), Ohio (95.1% and 97.1%), and Washington (97.3% and 98.3%).

Lou Manuta

PULP Testifies at State Senate Hearing on Telecom Taxes

The New York State Senate Select Committee on Budget and Tax Reform held a hearing August 12, 2009 to examine modernizing New York State’s telecommunications tax system. PULP’s Senior Attorney, Lou Manuta, testified as did representatives from the landline, wireless, cable, and satellite television industries. Representatives from the New York State Department of Taxation and Finance and the state’s Office of Real Property Services were in attendance as well. No one from the Public Service Commission attended or testified.

The current system taxes all telecom providers – landline, wireless, and Voice over Internet Protocol (“VoIP”) – differently. Landline carriers, such as Verizon and Frontier, pay the most in taxes. VoIP providers, such as the cable companies have been exempt from most state and local taxation. In addition, confusion arises because some taxes (such as the E-911 surcharge) appear as a surcharge and not a tax on customer bills, while the FCC Subscriber Line Charge often appears on customer bills as a tax instead of a surcharge.

We stressed six points which will benefit consumers:

1. The need to simplify and streamline any and all telecom taxes.
2. All providers of similar services should be assessed the same taxes at the same tax rate.
3. All taxes on phone service should be explicit, not implicit, on customer bills to avoid confusion.
4. Lifeline recipients should be exempt from telecom taxes, other than sales taxes.
5. If all providers of similar services were equally assessed, the tax rate could be reduced and the state could receive the same or more revenue.
6. Surcharges allowed by utility regulators should be included in the tax discussions since they can be misleading and unclear to consumers.
   

Our testimony also addressed one of the line items on most telecom bills – the universal service fee that supports Lifeline discount telephone service. We noted that only about 300,000 out of a total of at least 1.2 million eligible households subscribe to Lifeline across the state . According to the FCC’s most recent Universal Service Monitoring Report, New Yorkers contributed $445,600,000 into the federal Universal Service Fund in 2007, but New York telephone companies only received $248,838,000 in return (and of that, only $36 million for Lifeline). The difference – nearly half of what is contributed – goes off to help fund programs in other states, such as 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.

The Committee Chair, Senator Liz Krueger, remarked that the state had not examined telecom taxes for many years and there have been significant changes in the marketplace during that time period. More hearings and further analysis is expected over the next several months.

Draft State Energy Plan Issued

Governor Paterson on August 10, 2009, announced the issuance of the draft state energy plan by the State Energy Planning Board, which is comprised of state officials from various state agencies, representatives of the Governor, and NYSERDA.

The draft plan will be the subject of nine public hearings to allow for public reaction to the draft report between August 18 and September 26. This is the minimum period allowed under the State Administrative Procedure Act.

A quick review indicates little change in existing policies to favor energy efficiency and cleaner power sources.

Second Circuit Requires Consideration of GIPA Plan for Cohoes Falls Hydro Power Station

Historic Cohoes Falls is said to be the state's second most significant waterfalls, after Niagara, but is dry much of the time due to an obsolete dam that diverted the water flow, first for water powered mills including the famous Harmony Mills, and later for a hydro power station. It may have played a role in our civic history: founding fathers Jefferson and Franklin reportedly visited there, met with the Iroquois, and studied their confederacy and system of government, which some believe was adapted to create our state and federal system.

Consideration of better options for the use of the water at Cohoes Falls, to replace the old dam with a more strategically located one, to increase the output of renewable energy while improving water flow over the falls, and for new recreational and other uses, was foreclosed by FERC when the agency denied the application of Green Island Power Authority (GIPA) to intervene in a long-pending hydro relicensing case. When the case went to court, a broad coalition of public interest and consumer groups supported better use of the site. See Amicus Brief Challenges FERC Refusal to Consider Better Use of Historic Cohoes Falls, PULP Network, Feb. 12, 2008.

In a great procedural victory, the Second Circuit Court of Appeals issued an opinion on August 10, 2009 requiring FERC to reconsider Green Island Power Authority's motion to intervene. The case was remanded to FERC with the following instructions:

if Green Island is permitted to intervene upon remand, FERC must consider GreenIsland's evidence regarding the Cohoes Falls Project so that it may determine whether the Cohoes Falls Project is a feasible alternative. If FERC determines that the Cohoes Falls Project is a feasible alternative, then it must give it full consideration when determining whether the School Street Project satisfies the "best adapted" standard of the Federal Power Act....

While not the end of the story this is a great victory for groups seeking a better use of the Cohoes Falls. Some improvements have been made to increase recreational use and public access. See Cohoes Falls An Ancient Wonder of the New World - Again!, Don Rittner, Times Union May 26, 2009. According to the U.S. Fish and Wildlife Service,

In deciding whether to issue a license, the Commission is required to give "equal consideration" to the following purposes: power and development; energy conservation; protection, mitigation of damage to, and enhancement of, fish and wildlife (including spawning grounds and habitat); protection of recreational opportunities, and preservation of other aspects of environmental quality (16 U.S.C. 797(f)).

The time frame for licenses can not exceed 50 years (16 U.S.C. 799). The Commission is authorized to grant preference to applications by States or municipalities when issuing preliminary permits or original licenses (16 U.S.C. 800). The project selected must be the project which is best adapted to a comprehensive plan for improving or developing a waterway for several public benefits, including benefits for the "adequate protection, mitigation and enhancement of fish and wildlife" (16 U.S.C. 803(a)). In making this determination, the Commission is required to consider the recommendations from various sources, including fish and wildlife recommendations of affected Indian tribes (16 U.S.C. 803(a)(2)(B)).

Because a hydro license may allow private use of public resources for decades, it remains to be seen whether FERC will grant intervention to GIPA and find, after further proceedings, that the owner of the Cohoes dam should be required to do more to effectuate the Federal Power Act requirements.

Update
8/10/2009 - Cohoes Falls Project Challenge Revived, Larry Rulison, Times Union.com

8/11/2009- GIPA Wins 'Falls' Debate - Court Gives Hope to Local Firm's Push for Cohoes Falls Hydro-power License, Larry Rulison, Times Union

8/25/09 - Senator Backs Hydro Plan - Schumer urges federal regulators to drop fight against Green Island project, Larry Rulison, Times Union.

10/1/09 - GIPA One Step Closer to Getting Brookfield's FERC License Revoked, Larry Rulison, Times Union.

10/2/09 - GIPA case takes step - Federal energy commission won't challenge court's decision on Brookfield license, Larry Rulison, Times Union.

12/22/09 - Schumer backs hydro plant plan, Larry Rulison, Times Union.

Are Utilities Overreaching and Terminating Service to Collect Old Bills After Welfare Payments are Received?

This week PULP received several calls involving the attempts of utilities to terminate electric service after receiving partial payments of arrears from local departments of social services ("DSS") under New York Social Services Law ("SSL") Section 131-s. The law requires DSS officials to make a payment of up to four months' bills to eligible applicants to forestall termination of utility service, even if that amount is less than the total amount owed. Section 65-b of the New York Public Service Law in turn requires utilities to supply or continue to supply service to persons who receive a SSL 131-s grant, even if there still "may be money due to the utility corporation or municipality for services previously furnished...."

After receiving the four-month payments, the utilities again sent bills demanding the entire remainder of the past due bills and attempted to terminate service again, seeking to recover the same arrears that had been owed when the four-month DSS payment was made. This we believe is unlawful.

Chapter 895 of the laws of 1981 established the emergency utility arrears assistance program under SSL § 131-s and a complementary provision in PSL § 65-b requiring continuation of service when a payment is made or promised by DSS. The legislative history of Chapter 895 shows it was enacted to put a stop to efforts of utilities to extract payment by DSS of more than four months' bills as a condition of restoring or continuing service, and to legislatively overrule a court decision that had allowed Con Edison to do that.

The letter of the PSC Chairman in support of Chapter 895 urging the Governor to sign it recognized that the utilities cannot reuse the collection club of service termination after receiving a 131-s payment of four months' bills. The unsatisfied arrears not covered by the DSS payment may still be collected through conventional means other than utility service termination (such as lawsuits), and shortfalls in collection of the debts must be addressed in the PSC rate setting process, which makes allowances for uncollectibles as a utility expense when rates are set. The utilities thus cannot engage in an endless series of terminations for the same arrears that would require DSS to pay more than the amount of four months' bills to obtain continued service to a person eligible for the grant.

Tenants Struggle to Maintain Utility Service in Owner-Abandoned Building in Foreclosure

We received a call today from a tenant in a multiple dwelling in Brooklyn. Electric and gas utility service had been included in tenants’ rent. The owner stopped paying utility bills and apparently abandoned the property, which is now in foreclosure proceedings.

Tenants were notified by both National Grid and Con Edison of impending termination of utility service to the building for nonpayment by owner. Under the Home Energy Fair Practices Act ("HEFPA"), tenants in multiple dwellings where the landlord’s service is being terminated for nonpayment can get the utility service continued by putting prospective service in their name (which PULP generally does not recommend). Alternatively, and (usually preferred) tenants may pay for current (not past due) charges on the owner’s account, which stays in the owner's name. Public Service Law Section § 33 and Part 11. PSC Regulations 11.7 spell out the details of the arrangements with the utilities, and provide for intervention and assistance of PSC staff to work out problems so that service can be continued when the landlord has defaulted in its obligations to the utilities.

Tenants can then deduct their payments to the utility, which are credited to the landlord's account, from their rent. This course of action is specifically provided for under Real Property Law § 235-a, which provides, in part:

In any case in which a tenant shall lawfully make a payment to a utility company pursuant to he provisions of sections thirty-three, thirty-four and one hundred sixteen of the public service law, such payment shall be deductible from any future payment of rent.

In today's Brooklyn situation, tenants entered into an agreement with National Grid to pay current gas charges and to pay charges going forward, as is contemplated by the statute.

However, Con Edison often tries to get individuals to assume responsibility for the bills of a prior account holder. In this case, apparently an individual tenant allowed Con Edison to put the owner’s entire electric bill in her own name, including the arrears. When tenants who were aware of their HEFPA rights contacted Con Edison and attempted to set up an agreement for payment similar to what National Grid had done. Con Edison refused, because the owner's account balance had already been transferred to the name of the individual tenant.

PULP referred the tenants to the PSC for its assistance under PSL § 33(5) and Commission regulations 16 NYCRR 11.7(d) and (e), to get a proper arrangement set up for them to pay current charges on the owner's bills and to stay renewed threats of termination.

For further information, see PULP’s Law Manual Chapter on HEFPA.

PSC to Revisit Telecom Universal Service Policies

In a brief Notice Establishing Universal Service Proceeding issued August 3, 2009, the New York PSC indicated that it will be reexamining its universal service policies for telecommunications. Long overdue, this is a very welcome move.

The state universal service mechanisms for high cost service in rural areas, state matching funds for the federal low income Lifeline assistance program, and other functions such as E911 and TTY, have been funded through assessments paid by traditional landline phone companies. Over the years, however, many customers have migrated to other providers that provide telephone service with other technologies, such as cable, and these have not been providing Lifeline assistance. In addition, other problems have arisen that have led to a major decline in the provision of Lifeline assistance, with the result that many eligible customers are not receiving it. One result has been that hundreds of millions of dollars of federal surcharges assessed on New Yorkers' phone bills are being sent to the federal Universal Service Administrative Company for redistribution to benefit low-income customers in other states while fewere and fewer of New York's growing low income population receive the benefits.

The role and function of the Targeted Accessibility Fund ("TAF"), which was created at the request of the PSC to administer state universal service funds, needs to be revised and expanded. As a result of the migration of customers to services that do not contribute equally to TAF, the revenues available to support universal service functions are dwindling even as the need grows, for example, with the increase in the population eligible for Lifeline assistance due to rising unemployment. Some states have used entities similar to TAF to begin to address the problem of making broadband service, increasingly seen as a necessary utility service, available and affordable to all.

According to the PSC Notice,

It now appears that the Transition Fund could exhaust in the next 18 to 24 months. Accordingly, a proceeding is instituted to examine the issues raised by the exhaustion of the Transition Fund, universal service generally, and, more specifically, the future of the State’s traditional wireline telephone providers.Among the issues are the advisability of modifications to existing universal service funding regimes to address issues related to the sources of financial support for the State’s incumbent wireline telephone companies, and how best to maintain or modify existing support mechanisms for socially- beneficial telephone services, such as Lifeline and 911, in the increasingly dynamic telecommunications market in our State. Jurisdictional and universal service fund issues raised in the Commission’s Competition 3 proceeding should also be considered. There are many other complex issues that may merit consideration in the course of this proceeding. The parties are invited and encouraged to identify additional issues that they consider to be relevant to this inquiry.

The Notice indicates that the case has been assigned to an Administrative Law Judge who will develop a record for bringing a recommendation for action to the PSC. Persons and organizations interested in being active parties in the case are asked to indicate that by August 14, 2000, by following the instructions in the Notice.