FERC Closes to Save Energy

No, you didn't read it in The Onion.

The Federal Energy Regulatory Commission (FERC) posted a notice saying all its national and regional offices were yesterday, the day after Thanksgiving, "in an effort to conserve energy."

Perhaps when FERC returns to work it will have conserved enough energy to investigate whether its "market-based rate" system is yielding reasonable rates, a task it previously found to be overly burdensome. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets, PULP Network, April 22, 2008.

Utilities Ask PSC to Keep Data on ESCOs Secret

The PSC issued orders in 1999 and 2000 requiring distribution utilities to report data including the number of customers taking service from each ESCO and the number of customers leaving each ESCO to take full service again from the distribution company. A recent letter filed by NYSEG describes the regularly reported data:

In the Orders, the Commission required the utilities to file interim retail access reports with the OCA on a monthly basis through the year 2000 and quarterly thereafter through 2001. Each report must include data from the reporting month regarding: (i) the number of customers by service classification eligible for retail access, (ii) the number of customers by service classification receiving retail access from each energy service company ("ESCO"), (iii) the amount of kWh by service classification that is eligible for retail access, (iv) the amount of kWh by service classification provided by each ESCO, and (v) the numbers of customers that have returned to jurisdictional service and that have left one ESCO for another ESCO.

This information, of course, would be useful information for customers tantalized by advertising puffery from ESCOs, claims of promotional discount prices or better values, because it would publicly reveal the number of dissatisfied customers who switch back to full utility service, for example, those who belatedly discover they pay more, not less, for ESCO service.

The utilities have requested permanent confidential "trade secret" protection of this information to exempt it from public disclosure. See, e.g.,

Letter from NYSEG to PSC in Case 94-E-0952, Nov. 17, 2009.
Letter from National Grid to PSC in Case 94-E-0952, Nov. 17, 2009.
Letter from Con Edison to PSC in Case 94-E-0952, Nov. 17, 2009.

If the ESCO regime created by the PSC was a success and providing real value to customers, companies would brag about it, not try to keep it secret. See Value of ESCO Service Questioned, PULP Network, Sept. 21, 2009.

Niagara Mohawk dba National Grid Seeks Continued Secrecy on Cost of Its "Smart Grid" Proposals

The New York PSC invited New York investor owned electric utilities to submit "smart meter/smart grid" proposals in 2006. They submitted proposals that would have cost billions of dollars to implement. at customer expense. None of the utilities has proposed to put any of its shareholders' funds at risk to invest in the initiatives, suggesting a possible lack of utility confidence in the claimed increases in efficiency and reduced costs due to the trendy but unproven smart meters.

The PSC then told the utilities not to implement the large expensive projects they had proposed but to resubmit scaled down pilot projects. See PSC Requires More Study Before Allowing Major Investment in "Smart Meters", PULP Network, July 21, 2008.

When federal stimulus money appeared on the horizon, the PSC again asked the utilities to submit large smart meter/smart grid proposals, and promised to match any federal grants with ratepayer money, which would be collected from customers through higher electric rates. See

• National Grid Responds to New York State Public Service Commission Request for Projects Suitable for Federal Stimulus Funding - Potential Projects Bring Smart Grid Technology and Enhanced Reliability to Upstate New York;
• National Grid seeks $240 million in stimulus funds to build advanced grid in, near Syracuse.

Niagara Mohawk dba National Grid submitted a proposal which blacked out the cost of its plan.

• NYSEG/RG&E submitted a proposal totalling $615 million.
• Con Edison/Orange & Rockland's proposals totalled $318 - 328 million, of which $149 - 154 million would be paid by its customers through higher rates.
  

When the Times Union sought the information, the utility obtained New York PSC approval to keep the cost of its proposed "smart grid/smart meter" proposals secret until the federal Department of Energy (DOE) acted on its request to use economic stimulus funds for the project, which the PSC said could be matched with 50% support from customers, through higher rates. See Niagara Mohawk Allowed to Keep Cost of "Smart Grid" Proposal Secret, PULP Network, September 11, 2009.

DOE denied the funding request. Under the PSC secrecy order, the cost data would soon become public.

In a November 23 letter to the PSC, National Grid asked for continuation of the secrecy about the cost of its proposed "smart meter" project, saying it still hopes to begin a possibly scaled down version of the original proposal next year. According to the Times Union, which has been seeking the cost information from the PSC through FOIL requests:

The New York portion of the project -- expected to cost $250 million -- would have taken place in Saratoga County and a small portion of Schenectady County, as well as parts of the Syracuse area. Half the funding would have come from the Department of Energy through the stimulus package, and the other half would have come from utility customers.
However, National Grid was not among the chosen when President Barack Obama announced $3.4 billion in smart grid funding for 100 projects across the country on Oct. 27.

****
National Grid revealed its plans Monday in a letter to the state Public Service Commission. The letter argues that the PSC, which regulates utilities in New York, should keep details of its smart grid plan secret. The Times Union has been seeking to have specifics of the plan made public after large portions were blacked out by the utility.

****

"National Grid is aggressively evaluating a strategy by which it could pursue its proposed New York Smart Grid Program in some shape or fashion... with the desire to establish a proposed revised course of action early in 2010," National Grid attorney Catherine Nesser wrote in a letter to Brilling.

National Grid spokesman Patrick Stella said Tuesday that the utility hasn't decided how a smaller project would be funded or what it would entail in terms of technology.

Larry Rulison, Smart grid is still an option - National Grid tells regulators it may aim for scaled-down plan, Albany Times Union, Nov. 25, 2009.

As consumers and regulators in other states learn more about "smart meters" they are beginning to question the cost and benefits of the massive investment being proposed by utilities and market rate enthusiasts. In Maryland, the "smart meter" cost benefit issues are being litigated publicly. See AARP Opposes PEPCO Plan for Spending on "Smart Meters", PULP Network, June 19, 2009.

Secrecy in New York -- by utilities and regulators that in the past saddled consumers with higher rates due to the sale of power plants to functionally deregulated merchant power and trading interests -- does not lend confidence to the smart meter initiative. See Rebecca Smith, Smart Meter, Dumb Idea?, Wall Street Journal, April 27, 2009; Consumer Uprising Against California Smart Meter Program, PULP Network, October 28, 2009; Will "Smart" Meters Pass The Test of Time?, PULP Network, Nov. 24, 2009.

Universal Telephone Service Reform Slowly Begins in New York

In the telephone world, Universal Service means that for every location, telephone service can be had by all at a reasonable rate. In order to accomplish this goal, which dates back to the original Communications Act of 1934, carriers providing service in "high cost areas" (such as rural and remote locations) can receive financial support so that their end user customers pay about what people in urban and suburban areas are charged. In addition, low income customers, regardless of where they are located, can receive assistance to ensure they can afford to pay the "reasonable rates" charged by the phone companies. It is considered to be a national priority that every citizen be able to reach every other citizen and that they themselves can be reached.

Funding mechanisms on both the federal and state levels function to better ensure that these two aspects of Universal Service continue to be a reality. In New York, local exchange carriers providing service in high cost areas are eligible to receive funds from the Transition Fund. When this fund was created in January 2004, the New York State Public Service Commission ("PSC") announced that when it determines that the Transition Fund only has about 18 months worth of funds remaining, a proceeding would be initiated to determine what, if anything, should replace it. That time is now upon us, so the PSC launched a new proceeding to examine Universal Service, including the future of the Targeted Accessibility Fund ("TAF")> , which provides support for, among other things, the Lifeline discount telephone service.

With the advent of wireless and Voice over Internet Protocol ("VoIP") service (primarily offered by the cable television companies), the concept of Universal Service has certainly changed since 1934.

The Administrative Law Judge assigned to develop the record in the case issued a ruling directing Department of Public Service Staff to draft a status report on "the availability and extent of deployment of various platforms, technologies, and opportunities in the telecommunications industry and provision of telecommunications services in New York." The purpose of this request was to ascertain the level of competition in high cost areas as a threshold issue to resolving the future of the Transition Fund. On November 16th, Staff filed a letter listing potential topics stating it will request data on geographic locations where wireless and/or cable modem service is not available. Depending on when the wireless and cable companies provide the requested data, Staff believes the report should be complete by December 31st. Parties to the case were then directed to file comments by November 20th on Staff's recommended topics. Several parties filed comments, including PULP.

PULP's comments question why Staff did not also include the availability of Digital Subscriber Line ("DSL") and fiber optic service (such as Verizon's FiOS) offered by local exchange carriers ("LECs") in its discussions. We believe that identifying DSL deployment is a necessary component of the ALJ's requested analysis. PULP argued that the intermodal competition offered by wireless carriers and cable VoIP providers is undoubtedly important to measure, but a complete picture requires inclusion of "nomadic" VoIP providers, which ride on top of cable modem service or DSL connections, as well as fiber optics deployment. Thus, the entire market can not be adequately analyzed without inclusion of DSL and FiOS.

PULP noted that Phase I of the proceeding as envisioned by the ALJ would only encompass Transition Fund issues and may not be complete until towards the end of 2010. Should this occur, it is not anticipated that a Phase II discussion of TAF would even begin until 2011.

As a member of the TAF Board of Directors, PULP is well aware of the ever increasing dire financial situation facing TAF and the services it supports (Lifeline, E-911 access, and the relay service for the deaf). This information has been shared with the parties to this proceeding via a Department Staff Report released on October 2nd. According to this report, in the past 10 years, the average monthly contributions to TAF have dropped by over $200,000 a month, while the assessment ratio which the companies must pay has doubled from .005% to .01% of their intrastate revenues. Moreover, in 1999, the total assessable revenue was $7.2 billion and in 2008 was $4.5 billion. During this same time period, the demand for TAF resources to support Lifeline (by far, the largest percentage of TAF) has jumped from $19.5 million to $28.5 million a year. This demand is only going to accelerate as carrier rate increases are approved and rates charged to Lifeline customers continue to be frozen. Consideration of how to begin to address these issues regarding TAF's solvency and assessment ratio should not be delayed at all, especially not for a year or more. Further, the population eligible for Lifeline is growing and prompt reforms are needed to ensure that Lifeline assistance will continue to be available to all who are eligible. We requested that consideration of the future of both funds be considered simultaneously and that the discussions begin immediately.

On the other hand, the Cable Television Association of New York argued in its comments that Phase II should be kept separate from Phase I and not be considered until after Phase I.

The small Independent local exchange carriers, which are the recipients of the high cost support from the Transition Fund, stated that the proceeding should not look to the level of intermodal competition in the Independent territories as a measurement about what to do about the Transition Fund, but rather to "the regulatory environment under which the other classes of carriers operate in the State of New York." They believe this is a much more accurate gauge of "the provision of telecommunications services in New York" because of the lack of regulation on wireless and VoIP providers. While they also requested that discussion of TAF be delayed until the future of the Transition Fund is settled, they expressed optimism that the Transition Fund issues can be "resolved quickly," even though they recognize that it is impossible to work for consensus on the issues and prepare for litigation with rival parties all at the same time.

Sprint argued in its comments that the Transition Fund should not be replaced because the high cost companies receive other revenues from their customers via unregulated lines of business.

Finally, Verizon's comments recognized the need for complete and accurate data in determining the level of competition for purposes of the future of the Transition Fund, but what happens if some non-regulated providers (i.e., VoIP and wireless) refuse to submit data?

While the process of updating the Universal Service system in New York State has begun, we are far from a consensus on how to proceed and when to address key issues.

Lou Manuta

State High Court Upholds Decision Denying Refunds in Inmate Phone Rate Case

On November 23rd, the New York State Court of Appeals issued its decision in Walton v. New York State Department of Correctional Services, upholding a ruling of the Appellate Division, Third Department which held that the families of inmates in state prisons could not receive refunds for the "commissions" paid to the prisons through high rates paid by recipients of collect calls made by inmates.

In 1996, the state Department of Correctional Services ("DOCS") created a telephone calling system that allowed inmates to contact family, friends, and legal services providers using coinless pay telephones without operator assistance. The system included security features, such as technology permitting DOCS to monitor and record calls, providing DOCS the capability to restrict access to particular telephone numbers and bar certain users from calling specified numbers, limiting the length of calls, and preventing inmate calls from being forwarded by call recipients. MCI was awarded the contract to provide the inmate calling service in 1996 and in 2001. In exchange for receiving exclusive access to inmates and their call recipients, MCI agreed to pay DOCS a commission on each call.

The payment of commissions is common in inmate calling plans in other states. In New York, while only a small portion of the commissions represented the actual costs DOCS incurred in administering the inmate calling program, the revenues were used for various programs, including free inmate postage. The commissions were set high: in 1998, a 60% per call commission payment was approved by the New York State Public Service Commission ("PSC"), which was reduced to 57.5% in 2001.

In 2003, DOCS and MCI amended their contract to provide for a flat rate (a $3.00 surcharge per call plus 16 cents per minute), but continued the DOCS commissions at 57.5%. When MCI submitted a revised tariff filing with the PSC at that time, the PSC approved the rate change, but concluded that it lacked jurisdiction to assess the propriety of the DOCS commissions. As a result, it only reviewed and approved the "jurisdictional portion" of the rate, the 42.5% retained by MCI. The Court of Appeals noted that this narrow view by the PSC of its jurisdiction was not before the court because the PSC had not been sued.

While the case was pending, then-Governor Spitzer changed executive policy and required DOCS to discontinue the practice of collecting commissions on inmate calls. The Legislature also acted on April 1, 2008 by making it unlawful for DOCS to accept or receive revenue in excess of its reasonable operating costs for administering an inmate calling system. Thus, the commission system in New York State ended in 2008 and the petitioners were able to achieve the primary relief they sought - a change in the inmate calling system, resulting in a significant reduction in costs incurred by call recipients. However, the families of the inmates sought refunds on the grounds that DOCS was precluded from entering into a telephone services arrangement that included a commission.

Writing for the Court, Judge Graffeo supported the Governor and Legislature's decision to eliminate the commissions, but found that the commissions were expenses incurred by the telephone service provider and not a tax, comparable to other types of operating costs that are encompassed within the tariff filed with the PSC and charged to customers. The commissions were also deemed not to be a tax because the inmates' families were not required to purchase services from MCI and because telephone service is not a government benefit. "Not only were such commissions common in the payphone industry," Judge Graffeo wrote, "but, during the period relevant to this lawsuit, they were often included in other state inmate calling plans where the commission typically ranged from 20% to 63%." Finding that a tax had not been imposed on MCI, the Court was "not persuaded that the commission was transformed into a tax or fee just because MCI passed this cost on to call recipients along with its other reasonable operating expenses."

Further, even if the commissions were deemed to be a tax, the Court found that any claim for refunds would be barred because the petitioners "failed to pay the rate under protest. . . . [P]etitioners were not compelled to pay anything either to DOCS or MCI, nor was their money or other property confiscated by the state." The Court went on to hold that "[t]he acceptance of collect calls was voluntary action and, by taking the calls, petitioners agreed to pay the associated rate. They were in control of the length of the calls and, thus, the costs incurred. Just like any other consumer, petitioners purchased a service from MCI and were billed accordingly."

The Court also rejected the claim that the commissions were an unlawful taking:

Essentially, petitioners' takings claim boils down to the contention that DOCS had a constitutional obligation to ensure that the family members and legal services providers of inmates received telephone services at the lowest possible expense. While this might be a desirable policy decision, it was not an obligation mandated by the New York Constitution.

The Court also rejected the argument that the commissions violated the First Amendment:

[T]o state a viable claim under the free speech and association clause in this context, petitioners must allege that the DOCS commission was so high that it substantially impaired the limited right of inmates to contact and associate with family members or legal services providers and that the commission bore no reasonable relationship to legitimate penological aims. Even assuming their allegations to be true, petitioners do not meet this threshold. . . . [T]he additional expense associated with the DOCS commission on telephone calls did not imperil the right of inmates to communicate with others.

By denying the constitutional claims, the Court did not reach the alternative arguments raised by DOCS, and accepted by the Third Department, that the request for refunds was barred by the Filed Rate Doctrine.

For more information on this case and inmate calling in general, see New York Court of Appeals Revives Suit to Recover Excessive Charges for Inmate Telephone Calls and Governor Spitzer Promises Reform of Prison Inmate Telephone Charges , and PULP's website page on inmate phone service.

Lou Manuta

Will "Smart" Meters Pass The Test of Time?

"Smart" meters are being sold as the best thing since sliced bread, though we remain skeptical. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers, PULP Network, April 16, 2007. See also

• Consumer Uprising Against California Smart Meter Program, PULP Network, October 28, 2009;
• PSC Requires More Study Before Allowing Major Investment in "Smart Meters", PULP Network, January 11, 2008;
• Pennsylvania Regulators Halt Expensive "Smart Meter" Plan, PULP Network, October 29, 2009;
• Ontario Electricity Board Bans Landlord Submetering of Electricity Without Energy Audits, Transparency, and Specific, Informed Tenant Consent, PULP Network, October 02, 2009.

Until recently, I assumed the new hi-tech "smart" meters and associated software systems worked, and mainly questioned wisdom of a policy to destabilize prices and the cost of ubiquitous deployment.

When Niagara Mohawk/dba/ National Grid's Schlumberger/Itron semi-hi tech AMR meter (which is "pinged" remotely for readings by drive-by meter readers) failed at my house after last year's Albany area ice storm that left us powerless for four days, and when the failure was corrected and the meter replaced only after I protested a $900 bill (the meter apparently failed or rebooted to 99999 incorrectly indicating the use of 7500 kwh), I still assumed the failure was an anomaly.

But the recent fuss in California has raised a number of doubts about the new computer-based meters. See KMPH Fox News 26, State to Investigate Smart Meter Customer Complaints, Nov. 24, 2009. According to the New York Times:

A lawsuit in California claims that the metering system for Pacific Gas and Electric overcharges customers. California State Senator Dean Florez has called for a halt to the smart meter deployment, and the California Utilities Commission is investigating. The utility said the higher bills resulted from a rate increase and a hot summer.

Roy Furchgott, To Build a Smart Grid, Start With Smart Meters, New York Times, Nov. 18, 2009.

The New York PSC establishes standards for testing of meters, and requires testing upon customer complaint as well as in-service testing to assess accuracy of the larger meter population. Over time, the old style analog meters with the little wheels and dials were pretty reliable and lasted decades, and the PSC reduced the routine testing requirements to a minuscule portion of the number of meters in use. Perhaps the old style meters are better able to withstand temperature changes, the surges and flickering power and momentary outages than the new digital equipment. And perhaps more attention needs to be paid to in-service testing of the newer computer-based meters.

If you think about it, the new "smart" meters that communicate customer usage data to the utility's central computer billing system are analogous to using a computer, a digital clock, and a cellphone or modem -- outdoors, 24 hours a day, seven days a week. The customer usage data must then be meshed through software with constantly changing price formulas (for "real time pricing") to calculate charges, and then attributed to particular accounts in complex utility billing systems.

How often do computers, circuit boards, chips, clocks, cellphones, and software fail?

Traditionally, the cost of old-style meters was amortized slowly over decades, with the cost recovered by utilities through depreciation allowances calibrated to the lifetime of the equipment. Some utilities are now urging faster depreciation (a cost of service allowed by regulators when setting rates) for the new "smart" equipment assuming a useful life that is much shorter, perhaps eight to ten years, more in line with the shorter lifetimes of computers and communications equipment. Others are urging more immediate recovery of their "smart meter" costs through surcharges to pay for the meters over shorter periods. The utilities' advocacy of shorter depreciation or cost recovery periods suggests a lack of faith on their part in reliability of the new systems.

According to a company that analyzes the average time between breakdowns of computer equipment, there are already some indications of a much higher rate of failure for the new "advanced metering infrastructure" (AMI) "smart" meters now being hyped:

Failure Rate (MTBF) in months
Electric Meters by Type
Range:
Legacy Meters……………2400 months
“Good” AMI ……………… 1200 months
“Bad” AMI……………………800 months

* * * *

Our experience of computing and communications equipment makes us very concerned that utilities have expectations for reliability that are unfounded. Limited data on AMI meters confirms our concerns. Consider the chart of the first page – legacy meters need repair rarely – so rarely that managers do not even monitor their reliability. Yet new devices based on digital technology with electronic circuit boards, wireless links and many similarities to consumer electronics are widely assumed to be equally durable. We are already monitoring many similar devices and have data showing very poor levels of reliability relative to meters. There is no compelling evidence to believe that the weatherproof versions of computers and communications equipment are going to be more reliable than their interior counterparts.

See TekTrakker Reports, September 10, 2009. It may be that the new meters pass lab bench tests for accuracy, and thus satisfy engineering standards, but other variables could cause them to fail, such as outages, voltage drops, power surges, heat, cold, humidity or other conditions that may not occur in the testing labs. Also, the software and process for linking the transmitted data to individual customer accounts might be faulty.

As "smart" meter pilot projects get underway, it is important for utilities and their regulators to insist upon getting, sharing, and analyzing data about "smart" meter system failures so that research based evidence is obtained on the reliability and life-cycle cost of the "smart" hardware and software products. This is necessary to assess the costs and benefits of the new systems before billions of ratepayer or taxpayer dollars are spent, to permit meaningful comparisons, to establish customer confidence in metering and billing accuracy, and to protect customers.

Update
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."

Private Utility Assistance Programs for New York's Low Income Customers

In addition to the federally funded HEAP program and the state/local funded emergency utility assistance program, funded with public dollars, New York's investor owned utilities have a variety of programs designed to assist low-income customers having difficulty in paying their utility bills.

These utility sponsored programs, some run with charitable funds and some approved by the PSC to use ratepayer funds, do not come close to addressing the affordability issue that has resulted in more than 300,000 New York utility customers per year being shut off as part of bill collection efforts. The utility programs typically are small, and most have restrictive eligibility conditions. For example, Niagara Mohawk dba National Grid's "Care and Share" program, funded with combination of tax-deductible contributions from the utility and from customers who respond to appeals, does not assist any working families suffering hardship due to low wages or unemployment, unless the household contains an elderly or disabled member:

Managed by the American Red Cross, Care & Share meets the needs of individuals and households in the Niagara Mohawk service area who are facing difficult financial situations with nowhere else to turn for emergency energy assistance. The program serves households in which a member is 60 or older, or is disabled and receiving Supplemental Security Income or Social Security Disability, or is experiencing a medical emergency.

The eligibility of households with medical emergencies for the charitable assistance is curious. Under the Home Energy Fair Practices Act, (HEFPA), the utility generally cannot shut off service for nonpayment to any household "experiencing a medical emergency," or one which has a member with a serious medical condition that a doctor certifies would be worsened by a lack of utility service. See PULP's Help Center Page on Medical Emergencies. Could it be that some of the charitable Care and Share dollars, probably an income deduction on the utility's federal income tax returns, cycle through the Red Cross and come back to pay Niagara Mohawk dba National Grid for its charges to customers with medical emergencies who, under the law, generally cannot be shut off to collect the "emergency energy assistance" paid by Care and Share?

Some utility programs involve participation in arrangements designed to increase utility collections from customers, and steer the customer's HEAP benefits to reduce arrears that built up in prior years, sweetened with some "arrears forgiveness" incentives for participants who pay their current bills in full. These "assistance" programs are designed explicitly to cost-effectively glean more revenue from the customer than the company would otherwise receive. See PULP Comments on Niagara Mohawk's "Low-Income Affordability Program," where we noted the diversion of HEAP funds intended to address current energy needs to reduce old arrears balances of program participants:

PULP is extremely concerned that in order to participate, customers must agree to provide the full amount of every Home Energy Assistance Program ("HEAP") dollar they receive to National Grid during their time in the Program and for these payments to be used exclusively to pay down arrears. PULP believes that the intent of the HEAP program is primarily to assist qualifying energy users in meeting current household energy needs, not to retire a portion of arrears that may have accrued from past years. [n fact, the stated purpose of the federal Low Income Home Energy Assistance Act is to assist eligible low income households "primarily in meeting their immediate home energy needs." As proposed under the Program, National Grid will receive money owed a few months earlier than it would have been without applying the HEAP payments to arrears; an action taken at the expense of the low income customer and his or her ability to pay current bills. Should a HEAP qualified customer agree to participate in the Program, they will receive absolutely no benefit from HEAP for the current heating season.

A summary of the private utility programs for low income customers, prepared by the New York PSC, is posted at the PULP website. It contains a brief description of the programs and provides contact information for those seeking more information about applying.

California Report Shows Rising Number of Disconnections of Low Income Utility Customers

The California Division of Ratepayer Advocates recently issued a Status Report on California Energy Utility Service Disconnections finding that the number of low income customers losing utility service due to bill collection methods based on service termination is rapidly rising. The study finds that the number of low income customers whose service was termination grew by 19% in the past year.

Monthly data on New York utility terminations is submitted to the PSC by utilities, but is not regularly published. It can be obtained from the New York PSC through FOIL requests. Last year saw a dramatic increase in terminations in New York. See PSC Reports on Devastating Termination Statistics, April 09, 2009, PULP Network, April 9, 2009; Tim Knauss, National Grid Turns out the Lights for Central New York Nonpayers, Syracuse Post Standard, June 23, 2009.

FERC Requires Identification of Sellers in Market Abuse Case

The NYISO petitioned FERC on September 4, 2009 asking for permission to change its market rules after an apparent instance of market abuse by sellers. The sellers have been allowed to charge "market-based rates" after FERC (routinely) found they individually lacked market power. Market based rates are not filed in advance and thus are not subject to meaningful review for reasonableness. See NYISO Admits its "Market Problem" Allows "100% Or More" Overcharges Due to "An Abuse of Market Power," Proposes Rule Change, No Refunds, PULP Network, September 5, 2009.

NYISO made two filings, a non-public version, and a public version which left out details regarding the identity of three sellers who allegedly abused the market, and requested FERC to keep the matter confidential. In a November 3, 2009 Order, FERC required disclosure of the names of the sellers, but still kept details of the episode out of the public record. NYISO has 30 days to file a version of the petition that includes the names of the sellers, so, barring stays, this should occur soon.

The duration, scope, and cost to consumers of the alleged overcharges is not known. FERC policies have fostered secrecy and delayed reporting of bids -- rate changes and rate demands -- in the NYISO day-ahead and real time markets in which much of the energy in New York is sold.

The Federal Power Act requires all wholesale electric rates demanded and charged to be just and reasonable. The traditional system still on the law books requires transparency through advance public filing of all rates and contracts and rate changes.

Vonage Agrees to $3 Million Settlement over its Business Practices

On November 16, 2009, Vonage Holdings Corp., one of the largest nomadic Voice over Internet Protocol (“VoIP”) providers in the country, reached an agreement with the attorneys general of 32 states to settle an investigation into certain of the company’s “business practices.” According to its filing with the Securities and Exchange Commission, Vonage agreed to pay $3 million to customers in the participating states, including legal and investigation fees incurred. The American City Business Journal reports that the affected states are: Alabama, Arizona, Arkansas, Connecticut, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Michigan, Missouri, Montana, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Washington, Wisconsin and West Virginia.

Since Vonage operates in New York State under these same “business practices,” it is unclear why New York is not included on the list.

According to the article, “Vonage will make refunds to eligible consumers who have filed unresolved complaints regarding unauthorized charges from January 2004 through March 16, 2010. . . . According to a multistate investigation, Vonage at one time allegedly paid incentives to customer service representatives for retaining customers in lieu of cancellation. As a result, customers reported that cancellation was extremely difficult, and sometimes impossible.” The Florida Attorney General was quoted as saying the settlement requires Vonage to strictly limit this practice and “requires recording and verification of these telephone calls.” The company will also revise its disclosures regarding its "free" services, money-back guarantees, and trial periods.

PULP has had the opportunity to represent New York consumers in their attempts to terminate their service with Vonage. One in particular had been a customer of Vonage for about six months and, because he had been a customer for less than the two year term of his contract, was subject to Vonage’s disconnection fee and recovery fee, which, according to Vonage, amounted to $97.55. When we examined Vonage’s customer contract on their web page, we noticed that the company completely absolves itself from any liability due to technical difficulties.

For example, the Vonage Terms of Service states:

“We will not be liable for any delay or failure to provide service, including 911 Dialing, at any time or any interruption or degradation of voice quality that is caused by any of the following: third party omission, equipment failure, equipment modification, force majeure, equipment shortage, equipment relocation, loss of power, outages, acts or omissions, or other causes.”

These limitations absolve Vonage of any liability, even if their equipment and service fail to operate when a customer attempts to make an emergency call to 911. The time appears to be ripe for Vonage to improve its “customer experience,” especially in a state like New York where the existing telephone consumer protections do not apply to VoIP providers such as Vonage. That’s a change which is long overdue as well. Companies providing telephone service should compete on a level playing field to be the most efficient one to meet - and exceed - minimum consumer protections.

Lou Manuta

Hard Questions About "Green" Electricity

Most electric utilities have adopted a "green power" option for consumers who want to see more energy produced from renewable sources, as opposed to fossil fuel. Those who choose the option pay a higher price, which the utility collects on behalf of the "green power" provider. Yesterday's New York Times raises some questions about what happens with the money paid for "green power."

Do these programs really cause more renewable energy projects to get built? The government has looked at the question, and says it is difficult to draw an overall conclusion. Its experts say they believe that some green power programs work better than others.

“It’s a tricky issue. It’s not a one-size-fits-all market,” said Lori Bird, a senior analyst at the National Renewable Energy Laboratory in Colorado and co-author of a report in September on green power markets.

At least one major program has come under fire from regulators. Last year, a Florida Power and Light green power program, called Sunshine Energy, was terminated by the state’s Public Service Commission after an audit found that promised solar power facilities were far behind schedule. The program had more than 38,000 customers, and was once the sixth-largest in the country, according to the renewable energy laboratory.

The audit also found that the vast majority of homeowners’ payments went into marketing and administration.

“No reasonable person would have contributed to the Sunshine Energy program had they known that approximately 76.4 percent of the contributions would be spent on marketing and administrative expenses instead of renewable energy,” wrote Nathan Skop, a commissioner on the Florida Public Service Commission, in a note accompanying the termination decision.

Kate Galbraith, Paying Extra for Green Power, and Getting Ads Instead, New York Times, November 17, 2009.

The notion of "voting" with one's dollars to buy a cleaner environment was introduced with the push in the late 1990's for deregulation, as a "market based solution" to environmental problems from high carbon emissions. The notion of voting with ones dollars as a substitute for hard political choices and public action is fundamental to the marketizing ideology. See Thomas Frank, One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy. It made the utilities look like they are environmentally responsive without really forcing changes, and it made it possible for individual consumers to feel like they are doing something to reduce adverse environmental impacts. As indicated in the Times article, the results may be less than anticipated. At the level of individual action, consumers wanting to reduce environmental impacts may be better advised to use less electricity, through conservation or efficiency measures, rather than paying more for virtual "green power" financial derivatives. It is now obvious that broader societal choices regarding carbon emission reduction from all sources need to be made by federal and state legislatures and regulators.

The New York Public Service Commission should require rigorous independent audits of the claimed results of the "green power" programs to see how much additional "green power" is actually being generated with the revenue from the higher prices being paid by consumers, and determine the cost of carbon emissions actually avoided through the "green power" rates.

PULP "Winter Extra" Guide to HEAP Now Online

PULP's "Winter Extra" for 2009 - 2010 is now available online. New York State's Home Energy Assistance Program ("HEAP") , the primary federal assistance program to help low income households in meeting home energy costs, provides assistance to eligible households during the 2009 - 2010 heating season. This year's program opened on November 2nd. The PULP Winter Extra is designed to guide advocates through the labyrinth of HEAP regulations and eligibility requirements.

This year's Winter Extra highlights a number of significant changes from last year's state HEAP Plan. The primary changes to the rules governing HEAP benefits for this winter season are:

1. Regular HEAP benefits for eligible households paying an energy vendor directly are no longer determined on the basis of a point system and energy burden ratios.
2. Emergency HEAP benefits for heating are not capped at once per program year.
3. Maximum monthly income levels for Emergency HEAP (for income-tested households) have been reduced by 20% and now correspond to the Tier II maximum income levels. Last season, the maximum gross monthly income for Emergency HEAP eligibility was higher than the Tier II amount.
4. Income eligibility guidelines for Emergency HEAP have been decreased from 75% to 60% of the State median income.
5. A regular benefit to a heat-included household ($40/$50) that is eligible for a HEAP Emergency benefit may receive both benefits at the same time.
6. The regular HEAP benefit will not be increased by $100 this year.

If a household lacks resources to pay utility bills and is ineligible for HEAP, or after the HEAP program has closed in the Spring, financial assistance may still be available under the state and locally funded emergency utility assistance program. For more information about that assistance, see the PULP Manual on the Social Services Law Section 131-s emergency utility assistance program.

Lou Manuta

Landlord Discloses Submetering Company "AMPS" Conducted Unauthorized NYSERDA Sponsored Time of Use Pricing Experiments on Tiffany Mews Tenants

Earlier this year, tenants at Tiffany Mews petitioned the Public Service Commission to halt submetering at their apartments. Their petition includes allegations that

• the owner had no order of the PSC permitting submetering and resale of electric service to tenants (an order had been issued to submeter anticipated condominiums, but the condo conversion did not occur, and the PSC condo submetering rules, e.g., complaint procedures, were different from those that apply to tenants);
  
• the owner was circumventing requirements of the Home Energy Fair Practices Act; including the PSC complaint handling procedures;
  
• the owner was using eviction proceedings to coerce payment of electric charges; and
  
• time of use rates were charged without customer consent.
  

See Tiffany Mews Tenants Ask PSC to Halt Submetering with No Proper Order and No Filed Tariff or Contracts Approved by the PSC, PULP Network, Friday, July 31, 2009.

The tenants' petition was not acted on by the Commission but was instead referred by the Commission Secretary to the Office of Consumer Services, to be handled as a complaint.

In a recent submission, the owner of Tiffany Mews, Related Tiffany, disclosed that its agent AMPS, an unregulated submetering company, without the owner's awareness, had implemented time of use pricing for the bills it rendered on behalf of the owner from 2005 to 2008, apparently in connection with a NYSERDA experiment:

The Time of Use (“TOU”) billing program utilized at 63 Tiffany Place was a trial program for a New York State Energy Research and Development Authority (“NYSERDA”) study. Specifically, the NYSERDA study was intended for data collection purposes only. However, unbeknownst to Related, its submetering agent, American Metering and Planning Services, Inc. (“AMPS”), began billing residents at 63 Tiffany Place at TOU rates beginning in 2005. Such action was taken by AMPS without any knowledge of, or authorization from Related. Immediately upon its discovery in 2008 that AMPS was billing residents at 63 Tiffany Place at TOU rates, Related notified AMPS to cease and resume bulk-rate billing. Accordingly, the billing of residents at 63 Tiffany Place at TOU rates was an error by AMPS and Related corrected such error as soon as it became aware of it. Related sincerely regrets that the AMPS billing error occurred.

It is clearly established that the PSC has no power to authorize time of use pricing without customer consent. See New York Residential Real Time Pricing Experiments Must be Voluntary, PULP Network, August 27, 2007.

For the same reasons we would not countenance involuntary electric shock experiments on human subjects, there should be no state, utility, or landlord sponsored electric price shock experiments on poor people who often lack savings and are surviving from check to check on tight budgets. Time of use pricing has the potential to create great hardship for homebound elderly and disabled tenants with fixed incomes who need reasonably and predictably priced electricity for air conditioning in summer or heat in winter during times of the day when erratic spot market prices are high. For this reason, time of use and real time pricing should be allowed only with informed customer consent.

See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers, PULP Network, April 16, 2007. See also

• Consumer Uprising Against California Smart Meter Program, PULP Network, October 28, 2009;
• PSC Requires More Study Before Allowing Major Investment in "Smart Meters", PULP Network, January 11, 2008;
• Pennsylvania Regulators Halt Expensive "Smart Meter" Plan, PULP Network, October 29, 2009;
• Ontario Electricity Board Bans Landlord Submetering of Electricity Without Energy Audits, Transparency, and Specific, Informed Tenant Consent, PULP Network, October 02, 2009.

It looks like the owner of Tiffany Mews threw AMPS under the bus here, in an effort to disassociate from unauthorized time of use pricing experiments on tenants of Tiffany Mews from 2005 to 2008. Under the New York Public Service Law, however, it is difficult to successfully disclaim responsibility for unlawful acts of an agent:

§ 25. Penalties. 1. Every public utility company, corporation or person and the officers, agents and employees thereof shall obey and comply with every provision of this chapter and every order or regulation adopted under authority of this chapter so long as the same shall be in force.

2. Any public utility company, corporation or person and the officers, agents and employees thereof that knowingly fails or neglects to obey or comply with a provision of this chapter or an order adopted under authority of this chapter so long as the same shall be in force, shall forfeit to the people of the state of New York a sum not exceeding one hundred thousand dollars constituting a civil penalty for each and every offense and, in the case of a continuing violation, each day shall be deemed a separate and distinct offense.
* * *
7. In construing and enforcing the provisions of this chapter relating to forfeitures and penalties, the act of any director, officer, agent or employee of a public utility company, corporation or person acting within the scope of his or her official duties or employment shall be deemed to be the act of such public utility company, corporation or person.

For more information about the sale of electric service by landlords to tenants, visit PULP's webpage on submetering.

Con Edison Seeks 16.6% Natural Gas Delivery Rate Increase from Residential Heating Customers

In a Friday, November 6, 2009 filing with the PSC, Con Edison quietly filed new tariffs, testimony, and exhibits in support of a natural gas rate increase designed to yield increased revenue of $160.76 million. No press release, customarily accompanying past rate case filings, was posted at the Con Edison website as of November 10.

Con Edison's Petition in support of the new rates says the following items are drivers behind its claimed need for increased revenue from its customers:

• $37 million of the total request is due to increased pension and other retirement benefits
• $21 million is due to expiration of one-time credits from the sale of real property on First Avenue that had temporarily depressed rates;
• $14 million is due to increased operating and maintenance expenses due to street excavation, higher uncollectible expenses, salaries and wages;
• $30 million in increased property and other taxes;
• $26 million is sought to raise the return on shareholders' equity investment from 9.7% to 10.8%;
• The balance of the $160 million increase ($62 million), and the largest single element of the rate increase, is due to future plans to spend an additional $300 million per year for new capital expenditures. This would require higher rates designed to achieve a recovery of increased invested capital, through higher allowances for depreciation, plus a return on the shareholders' equity, plus the increased operations cost to install the new facilities.
  

Unless modified by the PSC, the new gas rates would raise total charges paid by consumers of all customer classes for Con Edison "delivery" service from $1.92 billion to $2.08 billion, or 8.4% overall. Some customer classes would see higher or lower increases than the average overall increase.

The last page of the last exhibit to Con Edison's Petition discloses that the new rates would increase natural gas delivery rates for residential heating customers by 16.6%.

As with any major rate increase, the PSC will suspend the effective date and conduct an investigation and hearings, and may, of course, modify the newly filed rates. PSC-approved new rates would likely take effect on October 1, 2010.

The utility also proposes to spread the increase over three years, raising rates each year for three years so as to achieve the same financial result for the company. This would be achieved if a "Joint Proposal" for a three year settlement can be developed in the course of confidential negotiations with the PSC and rate case intervenors, as has been past practice.

The "delivery" rates are in addition to the cost of natural gas or "commodity" supplied, which has declined this year. Futures markets, however, are currently signalling that natural gas costs may be up by more than 50% from current charges in late 2010 - early 2011. Higher gas "commodity" rates along with any "delivery service" rate increases approved by the PSC could result in significantly higher gas bills for heating customers in the winter of 2010 - 2011.

Any increase would add to the hardships faced by Con Edison's low and fixed income residential customers.

Update
N.Y. Post, Nov. 11, 2009 -- Con Ed readies ga$ attack :

Con Ed is seeking to raise the price of gas for residents by 6 percent a year for three years, saying skyrocketing costs have left the utility in the hole, according to recently filed documents.

In the filings with the state Public Service Commission, Con Ed says it must make up for a shortfall of more than $160 million and is seeking permission from the board to raise residential gas prices 6 percent annually beginning in October 2010.

Consumer Groups Call on Congress and FERC to Protect Consumers and Investigate Rising Utility Costs Due to Deregulation

Consumer groups have issued a joint statement asking Congress and FERC to investigate utility rates set in wholesale markets that are causing hardship to consumers. Their letter states

High electric rates are forcing a growing number of low-income consumers to choose between energy, medicine and health care. **** While there are a number of reasons behind high electricity rates, one major contributor is the deregulated electricity markets. The 42 million consumers in full retail choice states served by Regional Transmission Organizations are being hit hardest – their rates are 55 percent higher than those in regulated states, a gap that has been increasing, according to data from the Energy Information Administration.

“At a time when consumers are facing extreme hardships from rising electricity costs and growing numbers face shut-offs, FERC must assure electric rates are just and reasonable.” said Mark Crisson, president of APPA. “The promises of deregulation – competition and lower prices – have not been kept. While energy costs across the country have risen, the electric rates in deregulated markets have climbed faster than the rates in regulated areas.”

Groups signing the statement include
American Public Power Association
National Consumer Law Center, on behalf of its low-income clients
Public Citizen
Alliance for Affordable Energy
Citizen Power
Democracy and Regulation
Empowerment Center of Greater Cleveland, Inc.
Public Utility Law Project of New York, Inc.
TURN* The Utility Reform Network
Virginia Citizens Consumer Council

NY City Maps of Con Edison Shocks and Stray Voltage Available Online

After the tragic 2004 death of Jodie S. Lane due to stray voltage in the street from Con Edison's system, the New York PSC began to require systematic checking by electric utilities of their facilities for shock and safety hazards. For background, see PULP's website page on Con Edison safety and reliability, and PULP's comments on the new requirements that were adopted for testing of facilities in public areas.

The Jodie S. Lane Public Safety Foundation was formed to monitor utility safety. Under a settlement with Con Edison, the Foundation has access to stray voltage and electric shock data of the Con Edison system. The Foundation website now has maps of stray voltage and shock incidents in New York City that dispaly the location of discovered faults and reported shocks in one's neighborhood, simply by clicking a point on the map or entering a street address.

After several years of improved reporting of shocks, stray voltage, and safety issues, perhaps the most interesting development is the advent of mobile screening technology. Sensitive equipment, mounted on trucks, is capable of sensing voltage in the streets, with video equipment that aids in identifying energized facilities such as manhole covers and electrical boxes. The scanner also identifies non-utility property such as municipally owned and maintained street lights which may be shock and safety hazards but which are not likely to be found by manual checking of utility owned and maintained facilities.

Con Edison has agreed to do twelve full system scans of its system in 2009. Some utilities, however, have been less than enthusiastic about using the mobile scanning equipment, and are slow to adopt it, perhaps because the scans identify additional maintenance chores and could lead to attendant repair expenses the utility might prefer to avoid or defer.

Niagara Mohawk recently asked the PSC to postpone implementation of a previous plan to begin mobile stray voltage screening of its system. The Jodie S. Lane Public Safety Foundation opposed the utility's request, and it was withdrawn. See Niagara Mohawk Withdraws Request to Delay Mobile Scanning for Stray Voltage in Upstate Cities, PULP Network, September 16, 2009.

Update
See Bill Sanderson, Stray volts E. Side, W. Side, all around the town, N.Y. Post, November 6, 2009:

Hardly anyplace in New York is free of potentially deadly stray voltage, with Con Ed crews finding dozens of hot spots around City Hall, Midtown, the Village -- and even near utility CEO Kevin Burke's Upper East Side home.

The Wonkster, Stray Voltage Around the City, Gotham Gazette Nov. 5, 2009:

Within a quarter-mile of Gotham Gazette’s offices, there were 103 incidents of stray voltage in the past 21 months. Five of them were potentially fatal, and one shocked a person or a pet.

Patrick McGeehan, Mapping the Sites of Con Ed's Stray Voltage, N.Y. Times, Nov. 5, 2009:

Mr. Lane had this warning for New Yorkers: “As a pedestrian, you cannot avoid energized objects; they’re there.” His best advice to New Yorkers, he added, is to “never touch a street light, never touch a traffic light, don’t walk in the puddles on the sidewalk and you should absolutely never walk barefoot.”

Riverview II Tenants Rebut Owner's Opposition to Request to Stay Submetering

We have previously discussed the efforts of tenants to stop landlord submetering of electricity at Riverview II, a Yonkers housing development. See

• Yonkers Tenants Ask PSC to Halt Submetering at Riverview Towers, PULP Network, April 9, 2009.
• Submetered Yonkers Tenants Show How PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants, PULP Network, May 6, 2009;

The tenants originally asked the PSC to halt submetering in April. Based on a staff letter not in the online files in PSC Case 08-E-0439, the PSC Secretary denied the request, deeming it to be an untimely request for rehearing, and shunted the matter over to the PSC's Office of Consumer Services, to be handled as a customer complaint.

At the PSC's September 17, 2009 meeting, a Commissioner inquired as to why stays of submetering were being granted in several other cases where the petitions for relief were not being deemed to be untimely rehearing requests. The Yonkers Riverview II tenants filed a new petition with the PSC, again asking for a halt to submetering. See Yonkers Riverview II Tenants Again Ask PSC to Halt Submetering, PULP Network, October 14, 2009 and Yonkers Riverview II Tenants' Association Petition filed on October 12, 2009.

The Commission Secretary issued a Notice Establishing Pleadings Schedule. The owner filed papers opposing the petition, and on October 30, the tenants filed their response. In their papers, tenants point out

• There were no rent reductions when costs for electricity were shifted from the owner to tenants, contrary to indications in the owner's application and in the PSC's submetering order. As a result, the owner is obtaining a windfall not intended by the Commission, and adversely affecting the housing subsidy agency and tenants.
• The submetering of heat was not mentioned in the PSC order allowing submetering,
• Shadow electric bills were far higher than offsetting tenant rent subsidy adjustments, which are not received by some tenants and which do not come close to offsetting normal costs of electricity for normal usage,
• The building is occupied by low-income tenants for whom higher costs are a hardship,
• Tenants were being made to pay the high costs of the owner's energy inefficient building structure and electrical fixtures,
• The owner did not consider less costly and more efficient alternatives to electric baseboard heat,
• Controls for usage and heat are inadequate, with only three settings on the knobs on the electric baseboard heating units: Low (50 degrees F), Comfort and High,
  
• Inadequate energy education to inform tenants about ways to reduce energy consumption and costs,
• Failure to comply with HEFPA required rules and complaint procedures prior to initiating service,
• The owner failed to meet its burden of proof to show that tenants on average will be held harmless by submetering,
• Data supplied by the owner was incomplete and inaccurate, underestimated usage and costs, and was not normalized to account for price, weather, and usage variations,
  
• Deeming of charges for electricity to be "added rent" and threatening termination of tenancies for nonpayment of electric charges,
• Unilateral promulgation by the owner of rates, terms and conditions of service not approved by the PSC and in conflict with the submetering order,
• Defective notice to tenants of their right to comment on the submetering proposal before the PSC acted on it, and
  
• Failure to obtain necessary individual tenant agreement to lease riders containing reduced rents and rates, terms and conditions of electric service to be provided by the landlord prior to initiating service.There are no valid new lease riders signed by the tenants containing revised rent amounts and rates, terms and conditions of electric service approved by the Commission and required by its Order.

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

New York Deregulation Failing, Says Central Hudson Executive

According to the Poughkeepsie Journal, the President of CH Energy Group, the holding company that owns Central Hudson Gas & Electric Corporation, has acknowledged the failure of deregulation to bring lower prices.

The deregulation of the electric power industry, by and large, has not achieved the goals that advocates claimed for it, says the head of CH Energy Group, parent of Central Hudson Gas & Electric Corp.

A few benefits have been realized, but lower costs - the key piece - would be hard to prove, said Steven Lant, chairman, president and CEO of the Poughkeepsie-based utility.

Given the chance, Lant said, Central Hudson would like to go back into the generation business that the state stripped away from it in the deregulation program announced by the Public Service Commission in 1996.

If it's ever allowed to go back to building generating plants, Central Hudson would likely do it in the renewable energy areas, he said. ****

Deregulation meant utilities had to sell their generating plants. Central Hudson now buys power from independent owners and the New York Independent System Operator and delivers it to customers. The deregulators' theory was that competition among generators would lead to lower prices and that giving consumers a choice of suppliers would help.****

A flaw in the system is that incumbent generators have an incentive to throw out new generation, which would increase supply and competition. Tight markets mean higher prices for generators, he said.

"They benefit from scarcity, and I don't think you can get away from that," Lant said.

Craig Wolf, CH Chief Says Utility Deregulation has Disappointed, Poughkeepsie Journal, Oct. 30, 2009. Central Hudson's electric rates were once the state's lowest. For several years, the company protected its consumers by resisting the sale of its power plants, but it finally divested them under pressure from PSC regulators to align with its "vision" of wholesale and retail deregulation, and also adopted the PSC-favored monthly variable pricing regime.

Central Hudson's electric rates dipped temporarily for a few years while the proceeds of the sale of the power plants were used to depress rates. Later, when buyback contracts with the new owners expired, and more energy had to be purchased at wholesale market rates influenced by the NYISO spot market (instead of being based on the cost of production, as had been the case when Central Hudson owned the plants), Central Hudson's residential customers began to see higher, destablilized, and unpredictably spiking rates by 2007. See PULP's chart of New York utilities' typical bills for residential electric service.

As shown by the chart linked above, Rochester Gas & Electric (Energy East), which retained its power plants under traditional cost-based regulation the longest of the New York utilities, displaced Central Hudson and became the state's lowest price investor-owned utility.

That may change, however, because, as a condition of its merger with Iberdrola, RG&E/Energy East agreed to divest power plants. Apparently the utility's power plant assets were so much more valuable in the hands of merchant power entities -- who hoped to sell the output at market prices rather than cost -- and the pressure from PSC regulators so intense, RG&E/Energy East drank the deregulation Kool-Aid and sold the plants. It may just be a matter of time, when RG&E buyback contracts end, that we begin to see higher, destabilized prices in RG&E territory too.

FERC Asks Supreme Court to Limit Maine's Challenge to Wholesale Utility Rates in NRG Power Marketing Case

FERC is again trying to reduce the possibility of meaningful review of wholesale electric rates in another Supreme Court case, NRG Power Marketing v. Maine Public Utilities, Docket No. 08-674. The case arose when Maine did not join in a settlement agreement to adopt new rules for a capacity market in the New England ISO. The new market rules will be very expensive for Maine, which basically contends it had developed sufficient capacity in the state and shouldn't pay existing power plant owners more in order to encourage others, indirectly, to build somewhere else in other states.

FERC said the settlement agreement of a number of parties to adopt new capacity market rules -- which are filed with FERC as a "rate" by the New England ISO -- is a contract under the Mobile Sierra doctrine, enjoying a "presumption" of reasonableness, so when third party challengers object, as the Maine PUC did, they must face an insuperable burden of showing harm to the public interest to overturn them.

FERC's position reversed the normal burden of proof, which is on the utility -- even in cases where the majority of parties agree to settle -- to establish on the record that a rate or rate change is lawful. See Stefan H. Krieger, Problems for Captive Ratepayers in Nonunanimous Settlements of Public Utility Rate Cases, 12 Yale Journal on Regulation, No. 2,

The Court of Appeals rejected FERC's effort in its opinion, finding that "the Commission has unlawfully deprived non-settling parties of their rights under the Federal Power Act.

Supporters of the settlement sought and obtained Supreme Court review.

Public Citizen filed an amicus brief pointing out how FERC's effort to thwart third party challenges to utility rates, if endorsed by the Supreme Court, filed under an agreement of settling parties could limit states, state regulatory commissions and consumer advocates in challenging rates terms and conditions of wholesale electric service as unreasonable and unlawful.

the positions taken by FERC and the petitioners in this case are, if anything, even more damaging to the protection of the public than FERC’s embrace of “market-based rates.” The expansion of the Mobile-Sierra doctrine that FERC and petitioners advocate would effectively nullify the consumer protection goals of the FPA by imposing a virtually insurmountable obstacle to challenging wholesale electricity contracts that result in unjust and unreasonable rates paid by consumers. * * * *
There is no basis for the further leap that contracting parties can also be expected to protect the interests of the public. Indeed, there is every reason to believe that they will not, because wholesale purchasers who resell power to consumers are typically entitled to pass on their costs directly to consumers, and thus have reduced incentives to minimize costs. Thus, where members of the public or their representatives are asserting their own rights under the FPA to have FERC determine the lawfulness of rates that directly affect their interests, neither Mobile-Sierra nor Morgan Stanley supports the imposition of any heightened burden on them.

Briefs of the parties and amicus briefs in NRG Power Marketing v. Maine are available at the ABA's Supreme Court webpage. The case is scheduled for oral argument November 3, 2009.

FERC has been trying to implement a system of "market-based rates charged with no possibility of effective review, by administratively eliminating the public rate filing and rate regulation system established in 1935 by the Federal Power Act (FPA). Last year, FERC pushed in its filed briefs in the Morgan Stanley case for Supreme Court legitimization of its efforts to deregulate wholesale electric power. Public Citizen and PULP filed briefs opposing that effort to achieve judicial ratification of its dubious doctrines.

In a decision by Justice Scalia, the Supreme Court clarified in Morgan Stanley the applicable standard of review under the "Mobile-Sierra" doctrine when parties to a bilateral contract for the sale of power subsequently try to modify the contracts they signed.

Fortunately, the Court did not accept FERC's invitation to bless its market rate mess. Indeed, the Court pointed out twice in the Morgan Stanley opinion that it was not addressing legality of the "market-based rate" regime, and made a pointed reference to FERC's somewhat "metaphysical" doctrine that statutory requirements can be waived or satisfied if the agency simply determines that a seller cannot exercise market power. See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered, PULP Network, July 26, 2008.

The sitting FERC commissioners are electricity deregulation and market rate enthusiasts initially appointed by former President Bush, two of whom (Kelly and Wellinghoff) were renominated by President Obama when their terms ended. See Wellinghoff Designated Chairman of FERC by President Obama, PULP Network, March 25, 2009; FERC Commissioner Kelly Quitting: Who Will Take Her Place?, PULP Network Sept. 25, 2009.

Update
11.03.2009 - The transcript of oral argument is here.