Friday, December 18, 2009

AARP Calls for Reform of NYISO and Its Electricity Spot Markets

AARP has called for reform of the NYISO, the wholesale electric utility that operates the New York grid and 'organized" electricity spot markets. AARP Calls for Accountability, Oversight and Transparency in New York State Electricity Markets, AARP Press Release, Dec. 15, 2009.

AARP also issued a report identifying areas for specific reform:
• Accountability – The State Legislature should pass reforms requiring the Governor and the Legislature to appoint NYISO’s board of directors.
• Transparency – Require the bids, bidders, and computer computations in NYISO’s wholesale electricity market auctions to be public after no longer than two days.
• Oversight – Require the New York Public Service Commission to review the NYISO budget and approve the fee charged to consumers for NYISO’s operations. The NYISO should also be required to follow New York’s open meeting law.
Recommendations for Reforming NYISO to Lower Consumers’ Electricity Bills, AARP, Dec. 17, 2009.

The New York PSC and privately owned utilities began their experimentation with deregulation of power generation a decade ago, with the selloff of power plants and subsequent dependence upon wholesale purchases in functionally deregulated electricity markets. See Disconnected Policymakers. New York's electric rates are among the nation's highest. No state has followed the New York and its pied pipers of deregulation since the demise of Enron, and in recent years eight states suspended their plans to restructure, according to EIA.

According to the AARP Report and the Energy Information Agency, New York's electric rates are among the nation's highest.

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

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

The current NYISO private governance structure allows power producers and traders to block internal reforms or change its market rules, which are filed with FERC. See NYISO Governance, PULP Network, June 18, 2008. Those rules do not bar anomalous bidding, and so refunds are not an option when sellers game the rules and overcharge. 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.

When questions are raised about the results of the NYISO markets and its high cost of operations, NYISO claims it is regulated. See Larry Rulison, NYISO tighter control urged – AARP says system's policies inflate electric prices, hurt consumers, Times Union, Dec. 17, 2009.

But FERC, the federal agency traditionally charged to regulate wholesale electric rates, has itself become a proponent of deregulated market rates. FERC liberally grants permission to sellers to dispense with filing all their rates and contracts publicly for review, lets them demand and charge "market-based rates," and then suggests market nostrums, such as "demand response," as a remedy for high and spiking charges, rather than fixing unreasonable charges and investigating market gaming and ordering refunds when sellers game the markets. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets, PULP Network, April 22, 2008; FERC's Advice: Avoid Our Deregulated ISO/RTO Spot Markets, PULP Network, June 24, 2009

Thursday, December 17, 2009

Tiffany Mews Tenants Respond to Landlord's Defense of Submetering

Tenants at Tiffany Mews in Brooklyn filed a petition with the PSC asking the Commission to halt submetering. Tiffany Mews Tenants Ask PSC to Halt Submetering with No Proper Order and No Filed Tariff or Contracts Approved by the PSC, PULP Network, July 31, 2009.

The Petition was shunted instead to the Department of Public Service Office of Consumer Services, to be handled as a complaint.

On behalf of the Tiffany Mews Tenants' Council, PULP filed a Reply to the Response of Related Tiffany, the owner of Tiffany Mews on December 15, 2009.

In the reply, the tenants argue that a prior PSC order allowing submetering for a condo project that was aborted did not authorize submetreing to low income tenants because condo owners agree to submetering when they agree to the Offering Plan when they buy their units. Under PSC submetering orders for rental properties, valid tenant consent to submetering must be obtained in lease agreements containing the PSC-approved rates, terms and conditions of service.

The owner, however, did not obtain a new or revised PSC order allowing submetering to tenants, did not obtain valid tenant consents, and circumvented the Home Energy Fair Practices Act, for example, by not giving notice of the availability of PSC complaint determination procedures, and by seeking to evict tenants based on nonpayment of charges for electricity.

The owner, through its agent AMPS, also subjected tenants to real time pricing experiments without their consent, which Related Tiffany says was not authorized. See Landlord Discloses Submetering Company "AMPS" Conducted Unauthorized Time of Use Pricing Experiments on Tiffany Mews Tenants, PULP Network, November 12, 2009.

The tenants also clarify that although the premises have a central heat system, the heat is distributed through motors and fixtures that add to their electric bills, that the owner has not installed energy efficient appliances except when old ones break down, the premises are not energy efficient, and submetering is causing them hardship.

See PULP's web page on submetering for more information.

New FCC Telephone Subscribership Statistics Reveal Shortcomings in New York

This week, the FCC released the latest of its three-times-a-year Telephone Subscribership in the United States report. It contains data from July 2009 and shows that the percentage of households with a telephone in New York stands at 95.4%. While this is a slight increase from the last set of figures in March 2009 (94.7%), it still lags the national average and those of neighboring states. Subscribership increases to levels higher than New York's were in
  • the national average (from 95.6% to 95.7%)
  • Connecticut (97.6% to 98.5%),
  • Massachusetts (97.9% to 98.2%),
  • Pennsylvania (97.6% to 97.9%), and
  • Vermont (97.1% to 98.2%).
While New Jersey also saw a slight increase during this time period, from 94.8% to 95.1%, it now has fallen behind New York.

When conducting its survey, residents are asked by the FCC “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.”

Using 2008 numbers, the US Census Bureau estimates that there are nearly eight million households in New York State. If 4.6% lack telephone service, that translates to about 368,000 New York households lacking telephones. By comparison, if New York achieved the 98.5% penetration rate of Connecticut, 248,000 more New York households would have telephones than have them today.

This is an unacceptably large number of households that can not reach emergency services or inquire about job openings or be reached by schools, businesses, and others.

With more than 1.3 million New York State households eligible for Lifeline discount telephone service (according to the Office for Temporary and Disability Assistance, OTDA, September 2009 Food Stamps report) and only about 300,000 participating in the Lifeline program , the problem is easily identified. However, resolving the problem requires a higher level of commitment from the New York State Public Service Commission (“PSC”) and OTDA than we have seen to date. See, Assistance Only For Some – Twenty-Four Years of New York State’s Lifeline Discount Telephone Program and Lifeline Awareness Week Coming in September; Will it Make a Difference?

Specifically, the PSC and OTDA must:
  1. Fix the automatic enrollment process between OTDA and the Lifeline providers,
  2. Break down policy barriers that inhibit the provision of the assistance to those whose phone service is provided by a cable company, and
  3. Eliminate tariff barriers which bar Lifeline to customers whose local phone service is included in a bundled package of local and long distance service.
Successful implementation of these proposals will greatly increase the percentage of New Yorkers with telephone service.

Lou Manuta

PSC Modifies Final Disconnect Notice Requirements for Verizon’s Customers

Deep within the New York State Public Service Commission’s (“PSC”) regulations regarding telephone consumer protections is language which is required to be included in all final suspension and termination notices. This required language includes the phrase: PLEASE BRING THIS NOTICE TO THE ATTENTION OF THE TELEPHONE CORPORATION WHEN PAYING THIS BILL.

When originally implemented in 1984, it was thought this phrase was essential because there was a lag in the phone company’s billing system between when a customer's payment was made and the posting of that payment to the customer’s account. At that time, the only ways a bill could be paid were through the mail and by making a payment in person at the phone company or through an authorized agent. It made sense to have the customer remind the company that a payment was made to make sure it was timely posted. Now that payments can be posted in real time, Verizon requested that the PSC waive this requirement for its customers as it is no longer needed.

The company argued in its waiver petition that “its customers now have more choices in making bill payments consisting of use of the Company’s automated telephone system, the Company’s website, on-line payments through the customer's bank, or through use of a debit or credit card. All of these payment options allow instantaneous posting of the payment to the customer’s account.” Verizon added that customers will continue to be protected because the rules also require non-payment situations to be verified prior to suspension or termination of service (section 609.4(f)) and for payments to be rapidly posted in response to suspension or termination notices (section 609.4(g)).

In its December 16th decision on Verizon’s request , the PSC agreed with Verizon that the company’s efforts to avoid loss of service after a payment is made “diminish the likelihood that a residential customer, who is willing [] either to pay or make payment arrangements to pay, will not have service terminated.” Accordingly, Verizon’s waiver request regarding application of this specific language was approved. This provision will continue to apply to termination notices of all other local telephone providers in the state.

Will the loss of this provision for Verizon’s customers have a negative impact on those trying to make a payment to avoid termination? It appears that technological advances may have made this requirement unnecessary. Since the language remains in the regulation, should problems arise, the waiver can be withdrawn.

See PULP's Law manual chapter on telephone consumer protections under the PSC's "Telephone Fair Practices Act" regulations for further information.

Lou Manuta

Monday, December 14, 2009

GAO Report: Nowhere to Turn -- FCC Not Protecting Wireless Consumers, While New York PSC Abstains

On December 10th, the federal Government Accountability Office (“GAO”) issued a stinging analysis of the FCC’s inability to resolve consumer complaints about wireless service. Compounding matters was the realization that the states, including New York, lack the authority to enforce consumer protections for wireless users. FCC Needs to Improve Oversight over Wireless Phone Service.

The GAO survey indicated that most wireless users (84%) are at least “somewhat satisfied” with their service many customers have experienced problems with billing, early termination fees, contract terms, and customer service. While the percentage of dissatisfied users may be downplayed in the statistics, they represent millions of wireless consumers. According to the Cellular Telecommunications Industry Association (“CTIA”) there were over 276 million subscribers nationwide in June 2009. If 16% are not at least “somewhat satisfied,” that represents over 44 million customers.

On top of that, the GAO reported that the FCC "processes tens of thousands of wireless consumer complaints each year but has conducted little additional oversight of services provided by wireless phone service carriers because the agency has focused on promoting competition." The FCC "processes" the customer complaints but does not actually decide them!

The regulatory agency simply forwards customer complaints to the wireless companies for a response, and closes the case if the company simply addresses the issue raised, basically allowing the utility to decide the complaint:
Once FCC receives a response from the carrier, the agency reviews the response, and if it determines the response has addressed the consumer’s complaint, it marks the complaint as closed.
Thus, after punting customer complaints to be decided by the utilities themselves, the FCC tells customers that they can, if dissatisfied with this deregulatory approach, file a real complaint:
When FCC considers a complaint to be closed, it sends another letter to the consumer, which states that the consumer can call FCC with further questions or, if not satisfied with the carrier’s response, can file a formal complaint.
The GAO doesn't mention this in its report, but according to the FCC, "The current fee for filing a formal complaint is $200.00."

So if you complain to a wireless carrier about an unreasonable charge or error, and the wireless company decides not to adjust the charge, and you complain to the FCC, the FCC refers the matter to the wireless utility, and if the utility decides not to change its position, you will have to pay $200 to ask the FCC to decide the issue

The FCC conducts little oversight of wireless company practices because “the agency has focused on promoting competition.” In addition, the survey found that most wireless consumers who have issues with their provider do not complain to the FCC and may not know where they can complain. Since the FCC “lacks goals and measures that clearly identify the intended outcomes of its complaint processing efforts,” the FCC is unable to “demonstrate the effectiveness of its efforts to process complaints.” By not analyzing consumer complaints, the GAO found that the “FCC may not be aware of emerging trends in consumer problems, if specific rules are being violated, or if additional rules are needed to protect consumers. FCC has rules regarding billing, but has conducted no enforcement of these rules as they apply to wireless carriers.” Ouch.

As a result of its findings, the GAO made the following recommendations to the FCC Chair to improve the effectiveness and accountability of the FCC’s efforts to oversee wireless phone service. According to the GAO, the FCC should:
1. Clearly inform consumers that they may complain to the FCC about problems with their wireless phone service and what they can expect as potential outcomes from this process, as well as expand the FCC’s outreach to consumers about these efforts;

2. Develop goals and related measures for the FCC’s informal complaint-handing efforts that clearly outline intended outcomes and address important “dimensions of performance;” and

3. Develop and implement policies and procedures for monitoring and analyzing consumer complaints in order to help the FCC identify trends and emerging issues regarding wireless service and determine whether carriers are complying with existing rules or whether new rules may be needed to protect consumers.
Further, the FCC was also directed to:
1. Develop and issue guidelines which delineate federal and state authority to regulate wireless phone service, including addressing the issues of truth-in-billing and early termination fees, and, if needed, seek statutory authority from Congress; and

2. Develop and implement policies and procedures for communicating with states about wireless service oversight.
CTIA claims 89% of the US population has a cell phone and over 20% (55 million) have cut the cord and rely on wireless exclusively for their voice communications. States like New York have regulations and other requirements in place to protect wireline telephone customers. While PULP believes that more can be done to enforce these telephone fair practices rules, they do not do anything to protect wireless customers who may be saddled with poor service quality, long term contracts, and early termination fees in the hundreds of dollars.

New York is not among the 21 states that have taken some steps to create and to enforce consumer protections for wireless users. The relevant federal law leaves ample room for state regulation to protect consumers, as noted by GAO:
Federal law provides that while a state may not regulate a wireless carrier’s rates or entry, it may regulate the other terms and conditions of wireless phone service. Section 332(c)(3)(A) of title 47 of the U.S. Code does not define what constitutes rate and entry regulation or what comprises other terms and conditions of wireless phone service. This has left it up to FCC and courts to further define which specific aspects of service fall within the scope of these respective terms.
The New York legislature has given the PSC the power to exercise jurisdiction over terms and conditions of wireless phone service if the PSC finds that to be in the public interest. Yes, the FCC should take a long, hard look at itself and how its hands-off approach to wireless protects consumers, especially now that wireless is developing into a major platform for voice communications. But, the states also need to recognize that the telephone consumer protections they have in place do not apply to wireless – or the voice services offered by the cable companies for that matter – and that they are “protecting” an ever diminishing pool of citizens as they migrate to other technologies but still require the same protections and dispute resolution services. In New York, more than half of the population of telephone users are no longer covered by the state’s consumer protections or service quality requirements.

Now that the non-partisan GAO has recognized that wireless customers have nowhere to turn regarding their service complaints, let’s see the New York State Public Service Commission (“PSC”) take the initiative to apply its telephone consumer protections to wireless and cable voice services. If legislative intervention is necessary, the PSC should be advocating for this change.

Lou Manuta

Friday, December 11, 2009

New York City Approves Plan for More Submetering

The New York City Council adopted a new law that adds to the landlord impetus to shift rising electricity bills to tenants through submetering. The new law encompasses large commercial tenants, such as street-level businesses in residential apartment buildings. The new City legislation defines its coverage as follows:
COVERED BUILDING. As it appears in the records of the department of finance:(i) a building that exceeds 50,000 gross square feet (4645 m 2 ), (ii) two or more buildings on the same tax lot that together exceed 100,000 gross square feet (9290 m 2 ), or (iii)two or more buildings held in the condominium form of ownership that are governed by the same board of managers and that together exceed 100,000 gross square feet (9290 m2).
Most large New York City apartment buildings would exceed the 50,000 gross square foot threshold in the law.

The only specific exemption from the "covered" buildings in the law is for real property classified as "class one pursuant to subdivision one of section 1802 of the real property tax law." That law defines "class one" as one, two and three-family residential real property.

Thus, large apartment buildings are "covered" by the new law. A further provision, however, gives a reprieve to residential tenants in covered apartment buildings, because the law goes on to exempt residential tenants who reside in buildings that are "covered" by the new law:
COVERED TENANT SPACE. (i) A tenant space larger than 10,000 gross square feet (929 m 2 ) on one or more floors of a covered building let or sublet to the same person, or (ii) a floor of a covered buildinglarger than 10,000 gross square feet (929 m 2 ) consistingof tenant spaces let or sublet to two or more different persons.

Exception: The term “covered tenant space” shall not include dwelling units classified in occupancy group R-2 or R-3.
Under the New York City Housing Code, occupancy groups R-2 and R-3 include residential tenants living in apartment buildings so they are not required to be submetered by the new law.

When we initially looked at the new law, we saw that apartment buildings are "covered" buildings, but did not immediately notice the further exemption of residential tenant space within "covered" apartment buildings.

Thus, contrary to an earlier version of this post, residential tenants are not required to be submetered under the new law.

Commercial tenants in "covered" buildings with more than 10,000 square feet of space will eventually have to deal with their landlords for measured electric service in the future under the new law. If their experience proves to be anything similar to that of residential tenants, they may wish they had direct utility service from Con Edison.

Green Illusion?
With the cost of inefficient structures and HVAC systems growing as electricity prices rise, and with growing public concern about the environment, submetering is promoted as a "green" policy, and even better, a private market solution requiring no direct public expenditures.
an initiative to submeter apartments and commercial spaces would make everyone aware of their energy use and accountable for it directly, thereby encouraging behavioral energy conservation.
Betty Cremmins, Building Sustainability for PlaNYC, Carnegie Council, Dec. 8, 2009.

published an article urging passage of the new City legislation saying that "Sub-metering will ensure that tenants have the information and incentive to be more efficient in their energy usage." New York City's Buildings About to Get Greener, NRDC Dec. 7, 2009. The "information" of course, is a bill from the landlord for electric service that once was included in the rent. A letter to the New York Times from proponents of the new law enthusiastically joined in the chorus to embrace landlord resale of electricity to tenants through submetering on this "green" rationale:
And the addition of a new submetering requirement will lead to the end of the kinds of commercial leases where tenants pay a flat rate for energy and thus have no incentive to be efficient. This is a major step and one that will lead to efficiency gains almost as large as the capital upgrades would have been.
Rohit Aggarwala and James Gennaro, In New York City, a Bill to Enhance Energy Efficiency, New York Times, Dec. 7, 2009.
With the new data that will be generated by these [submetered electric] bills, a building’s performance will be exposed. This will allow sustainability measures to be defined and subsequently assigned value. Once they are assigned value, sustainability and energy efficiency will move from nebulous concepts that people talk about to concrete solutions that people will act on – either in the form of investment decisions, or by altering their energy usage.
Eldad Gothelf, Will Energy Usage Data Lead to Different Behavior and Alter Investment?, Zone, Dec. 11, 2009. Mayor Bloomberg is quoted as saying submeters
will give tenants who currently pay energy costs at a flat rate the ability to see how much they're actually consuming. And if they consume less, they'll save money.
Mayor to tell U.N. climate conference about greening of NYC, Staten Island Advance, Dec. 13, 2009.

Undoubtedly there is some degree of "behavioral energy conservation" after tenants begin to see bills for their own usage. But there is a serious lack of impartial, peer reviewed research on the issue. It may be difficult to isolate reductions due to submetering from other factors, such as those due to simultaneous installation of energy efficiency measures, or the normal impact on consumption from rising Con Edison prices, or cost variations due to a coincidence of less severe weather conditions after submetering was installed. Reports citing large and unrealistic post submetering energy savings due to tenant behavior changes relied on by New York state agencies such as the PSC, DHCR, and NYSERDA, are not peer reviewed studies, but are typically authored by consultants to landlords -- who profit substantially from submetering conversion.

Submetering is clearly preferred by landlords, whose Con Edison bills have become unpredictable due to deregulation, with large month to month variations in bills and price spikes that hit cash flow and cannot be recovered promptly through rent increases.

Submetering is also preferred by other entities that seek to bundle properties and securitize their cash flow from rents, because submetering shifts erratic electricity prices to tenants, stabilizing the rent revenue stream to investors. See Why is Submetering Attractive to Apartment Owners?, PULP Network, July 10, 2009.

What submetering really can do is allow landlords to shed the burden of their energy inefficiency and volatile, rising electricity prices to tenants. This is recognized in the article quoted above extolling the new legislation:
For true change to occur, several other policies must be implemented along with the green building program. First, an initiative to submeter apartments and commercial spaces would make everyone aware of their energy use and accountable for it directly, thereby encouraging behavioral energy conservation. For spaces that are already submetered, an overhaul of the lease structure is needed to allow for "green leases." These leases include riders that encourage owners to implement upgrades that ultimately lower the utility bills for renters by promoting cost-benefit-sharing.
Betty Cremmins, Building Sustainability for PlaNYC, Carnegie Council, Dec. 8, 2009. The "green" dream, apparently, is that landlords and tenants will bargain over tradeoffs between rent and investment in energy cost reductions.

After submetering is accomplished, however, it could take a lot to "encourage owners to implement upgrades that ultimately lower the utility bills for renters," as this may not rank high on landlord priorities. For example, the capital cost of replacing inefficient HVAC systems, fixures and appliances or windows or improving a structure's thermal efficiency might be equal to an owner's down payment on his next building, or some other investment that would reap more than the savings from investing in efficiency measures.

Significantly, many landlords have chosen not to make investments in efficiency measures without subsidies, even though the cost savings would redound to them. Is it more likely that they will invest in efficiency measures after they have shifted the electric bills to tenants? Is it likely or realistic that tenants will finance investments in energy efficiency improvements to the landlord's structure and fixtures, the payoff period for which (when the initial cost of the measure is finally offset by energy bill savings) is longer than the tenant's lease?

The problem for tenants is that they have a short term interest in the premises and they neither own nor control the landlord's inefficient structure and fixtures.

The facile marketizer answer is that the rental market will take that into account. But the cost of moving to more efficient premises is very high, the cost to prior tenants of electric usage may not be transparent when rental decisions are made, attractiveness of location or other facilities may outweigh energy cost considerations, and so many tenants are likely to become saddled with the costs of their landlord's inefficiency, with no real remedy, particularly in areas where location is paramount for tenants.

Procedure for Commercial Submetering
In upstate areas, commercial property owners must apply for and receive an order of the PSC waiving the general prohibition against submetering on a building by building basis. In the Con Edison utility territory, howver, the PSC allows commercial submetering without PSC review. Apparently this reflects the interests of the New York City real estate industry, which dominated the PSC policy on submetering for much of the last century, with the exception of a 25 year period after World War II when residential submetering was completely forbidden and commercial submetering was slowed.

Statewide, orders of the PSC are required before any residential building is submetered. In a pending proceeding at the PSC, however, landlords are currently seeking further relaxation of regulatory requirements for residential submetering, which is generally illegal unless allowed by specific PSC orders. Their proposals amount to a call for complete deregulation. See Submetering Landlords Clamor for More PSC Deregulation of Electric Service, PULP Network, March 13, 2009.

The Residential Submetering Experience
Any notion that residential tenants would save with submetering is inaccurate, because rents do not go down enough when electric bills are shifted to tenants. See N.Y. Times Perpetuates Myth Supporting Unjust New York PSC-DHCR-NYSERDA Submetering Regime, PULP Network, August 28, 2009.

Also, landlords have been allowed by to dodge meaningful enforcement of utility consumer protections for submetered residential tenants due to the Public Service Commission's deregulatory tilt and minimalist approach to violation of provisions in its orders, which on their face appear to protect tenants, but which are regularly breached with impunity by landlords. 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; Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections, PULP Network, November 6, 2008.

Substantial rethinking and reform of the PSC submetering regime and its enforcement must occur to prevent more hardship and dislocation of lower income tenants before any additional residential submetering is rolled out under the "green" banner. Submetering is fraught with risks for residential tenants in a system that favors landlords. Rent reductions when submetering is implemented do not come close to the real cost of electricity:
Indeed, because of the potential hardships and potential displacement of tenants, every "green" residential submetering project should first be required go through a SEQRA environmental assessment of its impacts on the human population, e.g., the resulting economic hardship to tenants, and their potential displacement. This is needed to assure that the submetering is not used by landlords, with the aid of state agency orders and financial assistance from NYSERDA, as another tool to pry lower income tenants from their homes and replace them with tenants who pay higher market rents.

The implementation of submetering projects typically occurs after the four-month time to sue under CPLR Article 78 has expired. The submetering actions are typically the result of multiple state agency actions (PSC, DHCR, and NYSERDA), with no lead agency designated to assess environmental impact, as is required for environmental assessments. This, coupled with long time spans between seeking permission to submeter (accompanied with paper promises to tenants of benign impact and customer protection) and actual implementation sometimes occurring years later, and PSC non enforcement of even the minimal conditions in its orders, is resulting in unaffordability, hardship to tenants, and their eviction or displacement.

See PULP's web page on submetering for more information.

Wednesday, December 09, 2009

ESCOs Propose "Education" of Central Hudson Customers with $500,000 Postcards Touting Utility Choice

Energy services companies ("ESCOs") are asking Central Hudson to spend approximately $500,000 to bombard its more than 250,000 residential customers with three large postcards exhorting them to choose ESCO service. In addition, they propose more bill stuffers and public relations efforts by Central Hudson to push customers to take ESCO service, including "Public Service Announcements (PSAs), guest appearances on drive-time and talk radio, and letters to the editor/advertorials outlining Central Hudson’s efforts and where consumers can find more information [about switching to ESCOs]." The ESCO proposal was submitted in a "collaborative" proceeding concerning the use of more than $800,000 of unspent customer funds left over from past programs.

PULP opposes the proposal for the following reasons:

1. There is no objective evidence that switching to an ESCO is to the residential customer's long term advantage or that it is cost effective from either a customer or total societal perspective.
Utilities Ask PSC to Keep Data on ESCOs Secret, PULP Network, November 25.

2. ESCO service may actually be less efficient and more costly, sustained by unjustifiable sales tax breaks on delivery service that prop up inefficient competition and erode governmental revenues and essential public services. ESCO Advertises 9.75% Tax Savings on Delivery Service, PULP Network, June 18, 2009.

3. In light of the harsh conditions facing customers during the recession, the Public Service Commission called for more austerity by utilities to hold costs down. See PSC ORDERS UTILITIES TO LOOK AT TIGHTENING BELTS — Utilities Have 30 Days to Develop Austerity Plans in Light of Economic Downturn, PSC Press Release, May 14, 2009. To align with the Commission's goal of cutting expenses, consideration should now be given to using the funds available to ease ratepayer burdens, either by reducing rates generally or augmenting the utility's low income programs.

4. The ESCO sales tax break is currently causing a revenue loss to the state of $150 million, plus losses to many local governments, due to the unjustified delivery service tax break given to ESCO customers. ESCO Tax Subsidies: A Hidden Cost of the New York PSC's "Retail Access" Scheme, PULP Network, January 12, 2009. In light of austerity conditions facing state and local governments, no further encouragement of switching to ESCOs should be made with ratepayer funds. The impact on state and local governments of more ESCO migration should be quantified, local governments should be notified of the revenue loss they will face if all CHG&E customers were to switch to ESCOs, and they should be given an opportunity to comment on the ESCO proposal.

5. Customers who have chosen not to switch to alternative utility service, notwithstanding a decade of entreaties from ESCOs, the PSC, and distribution utilities to do so, should not have to pay for more ESCO marketing malarkey, relabeled deceptively as "utility customer education and outreach."

6. The ESCOs' proposal does not address the need for information about the higher prices, onerous contracts and anti consumer practices of ESCOs. ESCOs Cost More -- A Familiar Experience, PULP Network, March 16, 2009. Real customer education should include the views of non-ESCO third parties, or education about how to check whether the ESCO prices are higher than the utility prices, or how to switch back to utility service. Any real educational materials should address the many problems faced by consumers who switch to ESCOs, the lack of any study demonstrating value provided to consumers by ESCO service (beyond short term promotions and a tax break on delivery service unrelated to any societal value of the ESCO service), and the cost, delay and difficulty customers often face in switching back to full service. The Commission should not approve spending customer money on ESCO outreach and "education" that ESCOs are unwilling or unable to do for themselves with their own funds.

7. The use of ratepayer funds for ESCO service "education" and promotion of deregulated ESCO service should be stopped, if not permanently, at least temporarily, until the economy recovers in the CHG&E service territory, until household incomes in the CHG&E service territory rise enough so that they can afford the added risks, costs and burdens of ESCO service and its promotion, and until economic conditions of state and local government improve enough to afford the further loss of sales tax revenues due to ESCO migration.


12/24/09 - Craig Wolf, Few Central Hudson Customers Take Advantage of Deregulation, Poughkeepsie Journal, Dec. 20, 2009.

California Senate Leader Blocks Reconfirmation of Pro Deregulation Utility Commissioner Supported by Verizon and AT&T

The leader of the California State Senate is blocking the reconfirmation of a sitting California Public Utility Commission member, Rachelle Chong:
Chong, who has been severely criticized by consumer groups, was first appointed in 2006 and had been seeking a term that would have lasted through 2014.

The decision means she will have to leave the commission at the end of the year.

Chong, who functioned informally as the Public Utilities Commission's main telecommunications regulator, had received support from the state's two largest phone companies, AT&T and Verizon, which benefited from her successful push to deregulate most land-line services.

They lobbied for her confirmation, and AT&T solicited support letters from nonprofit groups and government organizations, some of which had received funding from the company. Both phone companies also donated to a nonprofit group affiliated with Steinberg [the California State Senate President Pro Tem].

* * * * Steinberg spokesman Nathan Barankin said the problem was Chong's record, including efforts to deregulate phone services that he said could also raise rates for low-income users in the state's Lifeline program.

"We felt it was important to have a commissioner with a little more enthusiasm for consumer protection," he said.

* * * * Chong supporters say she protected consumers by capping rates during deregulation of land-line phone service and reduced a backlog of more than 25,000 consumer complaints. Consumer groups argue that her protections are coupled with giveaways for utilities, such as unlimited land-line prices after the rate caps end in 2010. They say backlogged complaints have mostly been closed without investigation.

AT&T, the state's largest phone company, had collected and given to the Senate letters of support for Chong to lawmakers from a host of grassroots organizations. Some of the groups have received donations from the company or from a technology program that it helps fund and for which Chong is an advisor.

Murray Bass, head of a small nonprofit in Northern California, wrote to lawmakers saying Chong was a strong voice for low-income seniors. But in an interview, he said he'd endorsed her at the suggestion of executives at AT&T, which has given his group money.

"There's an essential conflict of interest when a regulated -- or supposedly regulated -- entity is intervening on behalf of a regulator that's friendly to them," said Mark Toney, executive director of the Utility Reform Network, a group that opposed Chong.
Michael Rothfeld, PUC Member's Bid for Second Term Rejected, Los Angeles Times, Dec. 9, 2009.

Iberdrola USA Names Former NYISO CEO to be President of NYSEG/RG&E

Over the past decade, NYSEG and RG&E stood out among New York's investor owned utilities by resisting electric industry restructuring dogma in vogue at the PSC, such as divestiture of power plants, reliance on NYISO spot markets to buy electricity for customers at unregulated market rates, and destabilizing residential prices by passing through short term NYISO price spikes, with the goal of "migrating" all retail customers into the arms of unregulated ESCO middlemen. See Disconnected Policymakers.

The largest electric utilities, Niagara Mohawk /dba National Grid and Con Edison, were easily coaxed by their regulator into restructuring, and divesting their power plants, with the candy of holding company structures for which they had yearned for decades, and very favorable multi-year rate deals that allowed the companies to keep savings from cost cutting. The smaller electric utilities were slower to get on board with the PSC program, and some strongly resisted elements of the restructuring, such as the effort to destabilize residential prices and drive customers to ESCOs.

In 2001, before the fall of Enron, NYSEG warned:
Since the inception of the New York Independent System Operator (NYISO) operations in November 1999, wholesale electric prices in New York have risen over 100%. Because there is insufficient supply in the state, consumers who are facing market price pass throughs are almost assured of increased total electric prices – demand is growing, generation reserve margins are tightening, and this summer is expected to be warmer than last year’s, which was one of the coolest on record. High and irrationally volatile wholesale electric prices will be inescapable for years to come. Action must be taken now to ensure long-term, reliable energy supply and to restore stable prices. To do otherwise is to expose the state to the power disruptions and extreme price volatility experienced in California; New York will be faced with economic dislocation. We must insist that the right solutions to protect consumers are pursued and become a priority.

Currently, the New York wholesale electric energy market, like a train without brakes, is on a volatile, high priced track leading toward possible derailment.
NYSEG Policy Paper, April, 2001. For years, NYSEG and RG&E resisted efforts of PSC staff and ESCOs to institute default variable rates that change unpredictably every month, like those of Con Edison. RG&E, which held on to much of its power generation available at the cost of production, rather than at wholesale market rates, wound up with the lowest residential prices of any investor owned electric utility in the state. In contrast, the rates and bills of Con Edison and Orange & Rockland, which embraced the PSC restructuring regimen and relied heavily on wholesale purchases influenced by NYISO spot market prices, soared. See PULP's Chart of Typical Residential Electric Bills.

NYSEG/RG&E were still providing hedged residential rates and were talking in 2006 -2007 about building new, cleaner or renewable energy power plants, whose output would be available on a state-regulated cost of service basis, rather than on a deregulated market rate basis influenced by flawed NYISO spot markets.

Along came Iberdrola USA.

Iberdrola USA, an affiliate of a Spanish utility, proposed a merger agreement to take over NYSEG and RG&E. Initially Iberdrola USA also proposed to build a cleaner power plant to replace the RG&E Russell Station. But in the course of proceedings at the PSC, Iberdrola USA satisfied demands of the merchant power industry and PSC staff by agreeing to sell power plants still owned by RG&E, and by not building new power plants through the state-regulated NYSEG/RG&E utilities.

The latest shoe to drop is the naming of a former NYISO President and CEO, Mark Lynch, to be President of NYSEG/RG&E. Lynch is a stalwart defendar of the electric deregulation still in favor at the PSC and with power producers and traders, but rejected by every state to consider it since the demise of Enron. See NYSEG Gets New President, Elmira Star Gazette, December 7, 2009.

This does not augur well for residential NYSEG and RG&E consumers who need lower prices, price predictability and stability.

The former President of NYSEG/RG&E, James Laurito, has been named to be CEO of Central Hudson Gas & Electric. Central Hudson is now the last investor owned electric utility still speaking the truth about the results of the New York PSC's deregulation experiment. See New York Deregulation Failing, Says Central Hudson Executive, PULP Network, November 02, 2009; Central Hudson chief responds in energy deregulation debate, Poughkeepsie Journal, December 6, 2009.

Friday, December 04, 2009

Auburn Tenant Seeks Judgment that Water Termination was Unconstitutional

PULP has filed a brief in support of a motion for partial summary judgment contending that the shutoff and denial of water service by the City of Auburn violated constitutional rights of a tenant. The tenant's landlord, who was in foreclosure proceedings, had stopped paying for water and sewer utility service provided by Auburn. The water was shut off due to the landlord's nonpayment and was denied without notice to the tenant of an opportunity for a hearing, and she had no opportunity to put the account in her name for prospective service. The day after the shutoff, the house was condemned by the City as unfit for human habitation -- due to a lack of water it had shut off.

The City demanded, as a condition of restoration of service that the tenant pay her landlord's arrears for past service to the landlord's account.

When a municipality provides water utility service, it is exempt from PSC regulation under the New York Public Service Law. When the Home Energy Fair Practices Act was expanded to cover water service, municipalities were excluded. Thus, a municipality providing electricity or natural gas service is subject to HEFPA in its dealings with customers, but not with regard to water service. As a consequence, the law applying to municipal water utilities boils down to the City's rules, the common law, and the Constitution. See Municipal Water Companies Exempt from HEFPA Must Still Provide Due Process and Equal Protection to Tenant Users, PULP Network October 3, 2008.

Water was restored only after a motion was made in federal court for a preliminary injunction. See Auburn Restores Water Service After PULP Files Federal Lawsuit and Seeks Preliminary Injunction for Tenant in Property Subject to Foreclosure, PULP Network, October 16, 2008. The case is being pursued for a declaration that the tenant's constitutional rights were denied, and for damages.

Other municipalities have similar harsh practices regarding tenants in properties being foreclosed where the owner has stopped paying for water service. We recently heard of a situation in Troy where a tenant family became homeless after the City shut water off due to the owner's arrears and the City condemned the premises due to the absence of water service.

Post Standard Calls for Openness on Cost of Plans for "Smart Meters" and "Smart Grid" Projects

The editorial board of the Syracuse Post Standard has called for an end to the secrecy regarding Niagara Mohawk dba National Grid's proposals for deployment of "smart meters." Public Deserves to Know Cost of National Grid's 'Smart Grid', Post-Standard Editorial Board, December 02, 2009.

Consumer advocates across the country have begun to question cost effectiveness of proposals for massive deployment of "smart meters" for residential use. See, Niagara Mohawk dba National Grid Seeks Continued Secrecy on Cost of Its "Smart Grid" Proposals, PULP Network, Nov. 25, 2009.

One of the objectives of smart meter/demand response advocates is to create a market based solution (reduced demand) to correct unreasonable high prices in the wholesale electricity spot markets. This is in lieu of effective FERC regulation of unreasonable, gamed or manipulated prices in ISO/RTO markets such as those of the NYISO. Underlying the notion are flawed premises -- if spot market prices are competitive they are therefore just and reasonable and so they should be passed thru to consumers.

Such conflation of competitive prices and reasonable wholesale electric rates is wrong, as a matter of law -- and the Supreme Court has said so. The introduction of smart meters to charge the continually changing ISO/RTO prices would be harmful and costly.

FERC, which is now enthusiastic about smart meter deployment, previously said that retail utilities should not base their prices on spot markets:
A retail rate design that exposes consumers to the volatility of commodity prices would be extraordinary, particularly when consumers do not have the ability to receive or respond to price signals. While the Commission has no authority over retail electricity rates nor authority to rule on the prudence of SDG&E's provision of retail electric service, we would expect any responsible retail supplier to rely on a portfolio of resources and to turn to the spot market only to engage in economy transactions or to meet portions of its load that could not be predicted well in advance or which were not anticipated due to resource outages greater than are covered by prudent reserves.
San Diego Gas & Electric Company, FERC Docket No. EL00-95-000, p. 10 (Aug. 23, 2000).
See PULP Comments to Task Force on Competition.

Earlier this year, FERC rejected efforts of consumer groups to investigate whether ISO/RTO spot markets are yielding reasonable rates, saying in essence that retail utilities can avoid those prices:, stating
While this Commission has jurisdiction over RTOs and ISOs, participation by utilities in these markets is on a a voluntary basis. Federal regulations do not require anyone to make purchases from any RTO or ISO, including PJM. Many entities generate most of their own electricity or purchase it through long-term contracts and make only limited purchases through RTO or ISO spot markets. And, while these organized wholesale markets are subject to this Commission's jurisdiction, state and local regulators have jurisdiction over retail distributor procurement policies. Those policies affect the prices that utility retail customers pay.
FERC's Advice: Avoid Our Deregulated ISO/RTO Spot Markets, June 24, 2009. Giving customers the means to "receive or respond to price signals" (presumably those set in real time by RTO/ISO spot markets with smart meters) is not a reason to abandon the principles of portfolio purchasing, stable and predictable rates to rely on the flawed spot markets and introduce real time pricing for residential consumers, as Enron and other market enthusiasts proposed in the latter part of the last century. FERC rebuffed efforts to conduct a simple inquiry into the gameability and exercise of market power in the spot markets in its RM 04-7 order regarding market rates. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets, PULP Network, April 22, 2008.

In addition to serious questions of the cost and the wisdom of introducing price spikes to customers through smart meters, consumer advocates are also questioning the reliability of the new devices, their potential use to accomplish remote shutoffs, use of the data from the meters, and potential cyber security issues. See Will "Smart" Meters Pass The Test of Time?, PULP Network, November 24, 2009.

Wednesday, December 02, 2009

NYISO Tenth Anniversary Marked by High Prices and High Costs

Today's Albany Times Union sheds some light on the high cost of operating the NYISO. See James Odato, Pay, Perks Hit at Power Grid Operator -- NYISO Policies "Bleeding the Ratepayers," Whistleblower Warns, Times Union, Dec. 2, 2009.

The NYISO is a nonprofit utility created at the request of the New York PSC to replace the grid management functions of the New York Power Pool and to create new spot markets for trading of energy. The NYISO just celebrated its tenth anniversary. The self congratulatory press release from the NYISO does not tell the whole story.

The old NYPP cost less than $20 million a year to run the state's bulk power grid and rationalize production by directing plants to run based on least cost and reliability principles.
The NYISO has grown. In 1998 the NYPP had employed approximately 111 people and had a budget of $14.5 million. Initially, the transformation of the NYPP into the NYISO was estimated to cost less than $5 million per year more than the NYPP. This rosy estimate is reflected in a Report prepared by the State of Georgia indicating at p. 121 that "New York Power Pool estimates an annual budget of $20 million." That, in hindsight, was laughably low, indicative of the wishful thinking of "Disconnected Policymakers" about markets that substituted for analysis of the economic and reliability costs of restructuring.
See NYISO Costs Skyrocket, Benefits Questioned, PULP Network, September 26, 2006.

The budget of the NYISO is now over $150 million a year. The NYISO has not issued its annual report for 2008, a year in which it took belated action to halt some trading practices that took advantage of market rules.

The NYISO has the ability simply to collect its expenses by adding them to the market price of energy in its markets. There is no real scrutiny of NYISO expenses by FERC, the federal regulatory agency which ostensibly regulates wholesale electric rates. FERC is still on a deregulation binge that depends on "organized" spot markets for the sale of electricity at unregulated prices run by the NYISO and other ISOs or Regional Transmission Organizations.

Legislative hearings have focused on the design and possible gaming of the NYISO markets. Recently, NYISO took belated action to address possible gaming of the markets. 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. "While NYISO did not go so far as to claim that this behavior technically violated any existing rule, it did state that such actions depart from conduct normally expected under competitive market conditions." Troutman Sanders, FERC Allows NYISO to Subject Three Generators to New Market Mitigation Rules, Nov. 16, 2009.