On September 10, 2012, "eligible" state agencies who are parties in FERC Case IN12-7 filed recommendations for allocation of a FERC fund disgorged by Constellation Energy Commodities Group (CECG) in settlement of a case investigating whether it had manipulated the wholesale bulk electricity markets, principally those of the New York Independent System Operator (NYISO). To settle the investigation, CECG agreed to pay a $135 million penalty to the government and also to disgorge $110 million of its profits from the trading gambit, $104 million of which is to be used for the benefit of electric consumers. New York's share is $78 million.
Consumer groups, including AARP, Consumers Union, and NYPIRG urged the Governor, the Attorney General, and other officials to use some of the $78 million settlement funds to assist New York consumers at risk of electric service termination, to augment energy efficiency programs, and to provide support for independent consumer advocacy in state and federal utility regulation proceedings. See Times Union, A Consumer Energy 'Seat' Wanted, Power settlement Spurs Advocates to Push for an Independent Voice, May 31, 2012.
Parties in the FERC proceeding who were not deemed "eligible state agencies" authorized to make recommendations in the first instance to FERC Deputy Chief Administrative Law Judge Bobbie J. McCartney now have 15 days in which to file their comments on the proposed allocations. Thereafter the ALJ will make her recommendation to FERC. The Illinois Commerce Commission, Illinois CUB, and Illinois Attorney General have asked for more time to submit their recommendations. Also, the District of Columbia Public Service Commission asked for an extension of time.
NYISO Region $78 Million
New York Public Service Commission filed a proposal, which the New York State Department of State and New York Attorney General supported in separate letters. The PSC proposal states:
$10 million would go to a trust set up by NYSERDA and an unnamed trustee, and then to a state agency, the Department of State, for work by its Utility Intervention Unit (UIU) on NYISO, FERC, and Reliability Council matters, "to implement [UIU]s responsibilities as the NYISO-designated Statewide Consumer Advocate."
Under the PSC proposal, all UIU work plans and significant decisions would be subject to review and joint decision making by the DPS, which is under the PSC Chairman. The draft MOU between UIU and the PSC indicates that the money for the advocacy would be held by NYSERDA and an unnamed trustee, and the work plan of the advocate would be adopted jointly by UIU and the PSC. There is no rationale offered for the existence of the trustee or indication of who the trustee would be or what role the trustee would play, or how a conflict between the PSC and UIU would be resolved.
Although the draft MOU between UIU and the PSC ostensibly gives the UIU the power to participate in civil litigation with the funds, for example, federal cases often arising out of FERC proceedings, the powers of the UIU set out in Section 94-A of the Executive Law, cited in the MOU, only authorize UIU to participate in administrative proceedings of the PSC and federal agencies. In a similar situation, with a similarly constrained legislative authorization, the predecessor of the UIU, the Consumer Protection Board (CPB), was held to lack any independent power to question orders of the PSC in court:
PJM Region $6 Million
PJM state consumer advocate agencies filed a recommendation and stipulation in July, agreeing that $1,168,800 of the fund (about 20%) be used to fund a Consumer Advocates of PJM States (“CAPS”) non-profit entity, which would participate and report regarding PJM matters on behalf of the independent state advocates.
In a joint filing of numerous state agencies in the PJM footprint, Pennsylvania, Maryland, Indiana, and New Jersey followed the prior recommendation of their utility consumer advocates to allocate 20% of the total funds available to support improved monitoring of wholesale electricity issues by independent utility consumer advocates. Ohio did not, and proposes to use most of its money to promote retail electric competition.
Pennsylvania $1,312,200
The Pennsylvania PUC filed a proposal recommending its allocation be distributed as follows:
North Carolina proposes that all of its funds be "apportioned to all of the North Carolina Load Serving Entities [utilities] within PJM’s region for the benefit of North Carolina’s electric energy consumers...." presumably
Maryland $592,800
Maryland proposed that 20% of its funds be used as recommended by the PJM consumer advocates, i.e., $118,560 and that the remainder be used as follows:
New Jersey proposed that 20% of its funds be used as recommended by the PJM consumer advocates, i.e., $142,680 and that the remainder be "distributed to a non-lapsing NJBPU fund supporting various NJBPU initiatives for the benefit of the State's electric energy consumers."
Kentucky $49,800
Kentucky proposed to allocate its entire amount to Community Action Kentucky (“CAK”), a non-profit social services agency for the distribution of LIHEAP funds within Kentucky. The $49,800 will be distributed to LIHEAP eligible households, in amounts up to $200 per household, who are facing termination of electric service for nonpayment, in the 20 county service territory of Kentucky Power, a wholly-owned subsidiary unit of American Electric Power, the only Kentucky utility in PJM during the relevant time period.
Michigan $37,200.
Michigan proposed that is $37,200 "be distributed so as to benefit Indiana Michigan Power Company’s customers in a manner that the [Michigan Public Service Commission] determines to be just and reasonable."
Indiana $189,000
Indiana proposes to allocate $37,800 (i.e., 20% of its amount) for the consumer advocates' CAPS proposal, and the remaining $151,200 would add funding to existing demand side management and energy efficiency (DSM/EE) programs
West Virginia
West Virginia proposes to use all of the funds for augmenting LIHEAP or other consumer assistance programs as directed by the WV Public Service Commission.
Ohio $700,200
The Ohio Public Utilities Commission filed a separate proposal, seeking to use all the funds internally for new functions; none would go to support the CAPs proposal or to supplement the work of the independent Ohio utility consumer advocate, the Ohio Office of Consumer Counsel. It proposes to use the money as follows:
Background
See PULP Network, FERC Urged to Use Portion of Funds Disgorged by Alleged Wholesale Electricity Market Manipulator to Bolster Utility Consumer Advocacy, July 11, 2012
PULP Network, FERC ALJ Decides Motions of Parties Seeking Role in Proposing to FERC Uses of Disgorged $78 Million NYISO Market Gaming Profits, Clarifies Process, July 11, 2012.
PULP Network, New York Formulating Plans to Use $78 Million Disgorged by Energy Trader for the Benefit of Electricity Consumers, June 16,2012
Papers filed with FERC in Case IN12-7 are here.
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Consumer groups, including AARP, Consumers Union, and NYPIRG urged the Governor, the Attorney General, and other officials to use some of the $78 million settlement funds to assist New York consumers at risk of electric service termination, to augment energy efficiency programs, and to provide support for independent consumer advocacy in state and federal utility regulation proceedings. See Times Union, A Consumer Energy 'Seat' Wanted, Power settlement Spurs Advocates to Push for an Independent Voice, May 31, 2012.
Parties in the FERC proceeding who were not deemed "eligible state agencies" authorized to make recommendations in the first instance to FERC Deputy Chief Administrative Law Judge Bobbie J. McCartney now have 15 days in which to file their comments on the proposed allocations. Thereafter the ALJ will make her recommendation to FERC. The Illinois Commerce Commission, Illinois CUB, and Illinois Attorney General have asked for more time to submit their recommendations. Also, the District of Columbia Public Service Commission asked for an extension of time.
NYISO Region $78 Million
New York Public Service Commission filed a proposal, which the New York State Department of State and New York Attorney General supported in separate letters. The PSC proposal states:
FERC ordered that any requests for apportionment from the Constellation Fund may only be made by the appropriate state agency or agencies of the impacted states, for the benefit of electric energy consumers.[...] Deputy Chief Judge McCartney granted the Motion for Determination of Eligibility of NYPSC, the New York Attorney General ("NYAG") and the New York Department of State's Utility Intervention Unit ("NYDOS") (collectively, the "New York Agencies"). Hence, the NYPSC, as one of the named appropriate state agencies, is an authorized participant in the allocation and distribution of the NYISO Constellation Fund. NYAG and NYDOS have worked with NYPSC in the development of this proposal.
The plan of the NYPSC for the use of the NYISO Constellation Fund has three elements.
"A: $48 Million Direct Refund to CustomersThe first element of the proposal is a refund of $48 Million to NYISO consumers. Under the proposal, this amount would be distributed on a volumetric (kWh) usage basis to each of the six investor owned utilities serving NYISO customers, to NYPA and to the Long Island Power Authority ("LIPA"). The funds provided to the investor-owned utilities and LIPA would be passed back to their customers, and a similar distribution would be provided by NYPA to the municipal electric and other customers it serves.
- $1,608,000 to Central Hudson Gas and Electric Corp. ("Central Hudson"), representing a 3.35% allocation,
- $15,134,400 to Consolidated Edison Company of New York, Inc. ("Con Edison"), representing a 31.53% allocation,
- $4,828,800 to New York State Electric and Gas Corp. ("NYSEG"), representing a 10.06% allocation,
- $10,420,800 to Niagara Mohawk Power Corporation ("Niagara Mohawk"), representing a 21.71% allocation,
- $1,358,400 to Orange & Rockland Utilities, Inc. ("Orange & Rockland"), representing a 2.83% allocation,
- $2,304,000 to Rochester Gas & Electric Corp. ("Rochester Gas & Electric"), representing a 4.80% allocation,
- $6 / 417 1600 to the Long Island Power Authority ("LIPA") representing a 13.37% allocation, and
- $5 1928 1000 to the New York Power Authority ("NYPN/ ), representing a 12.35% allocation.
B. Consumer Advocacy Funding The second element of the allocation proposal is to establish a long term funding mechanism (at approximately $1 Million per year for 10 years) to support enhanced and more comprehensive advocacy for end-user interests at the NYISO and at FERC.... This advocacy initiative would be implemented through an Electric Consumer Advocacy Project ... which will be organized and managed by UIU. The scope of this Project and its implementation by UIU will be defined by a Memorandum of Understanding (MOU).
C. Program Funding to Promote Advanced Technologies to Optimize Transmission System Performance The third element of the proposal is funding to advance cutting-edge technologies that would increase bulk transmission system reliability and efficiency. Consumers exp~rience high electric costs, in part, because the NYISO bulk power transmission grid is, at times, congested.**** This third element of the proposal will fund a $20 million program focusing on new technologies to address bulk transmission efficiency and reliability. The $20 million will provide sufficient funding to not only identify projects, but also implement technologies that may improve reliability for the benefit of NYISO consumers."It is anticipated that the transmission improvement program would be managed by the New York State Energy Research and Development Authority**** To implement the program NYSERDA would publish a Program Opportunity Notice (PON) and then would choose, from the responses, projects to fund based upon the criteria set forth in the PONThus, under the NY PSC proposal, $48 million would be distributed to utilities for their consumers based on kWh usage. As a result, the majority of the $48 million will go to the largest largest commercial and industrial customers. As customers taking service at spot market based rates, the large customers may have been incidental beneficiaries of the alleged market manipulation, if spot market based prices they pay were lowered by CECG to make offsetting large profits on derivatives. Derivatives are often purchased by utilities to hedge small customers against the risk of NYISO spot market volatility, so artificially inflated costs of the derivatives could have been disproportionately borne by the smaller usage customers.
$10 million would go to a trust set up by NYSERDA and an unnamed trustee, and then to a state agency, the Department of State, for work by its Utility Intervention Unit (UIU) on NYISO, FERC, and Reliability Council matters, "to implement [UIU]s responsibilities as the NYISO-designated Statewide Consumer Advocate."
Under the PSC proposal, all UIU work plans and significant decisions would be subject to review and joint decision making by the DPS, which is under the PSC Chairman. The draft MOU between UIU and the PSC indicates that the money for the advocacy would be held by NYSERDA and an unnamed trustee, and the work plan of the advocate would be adopted jointly by UIU and the PSC. There is no rationale offered for the existence of the trustee or indication of who the trustee would be or what role the trustee would play, or how a conflict between the PSC and UIU would be resolved.
Although the draft MOU between UIU and the PSC ostensibly gives the UIU the power to participate in civil litigation with the funds, for example, federal cases often arising out of FERC proceedings, the powers of the UIU set out in Section 94-A of the Executive Law, cited in the MOU, only authorize UIU to participate in administrative proceedings of the PSC and federal agencies. In a similar situation, with a similarly constrained legislative authorization, the predecessor of the UIU, the Consumer Protection Board (CPB), was held to lack any independent power to question orders of the PSC in court:
Authority to commence this proceeding is not in the statutory language establishing the Board, and an administrative agency possesses no inherent legislative power of its own. Section 553 of the Executive Law provides that the executive director shall have the power and duty to appear before Federal, State and local administrative agencies to protect consumers' rights but the Board's authority to commence an article 78 proceeding in Supreme Court is not provided for and the Board possesses only those powers expressly conferred upon it by statute (Matter of Levy v Anderson, 65 Misc. 2d 763). When the Board's petition before the PSC for a rehearing was denied, its authority ended.Pooler v. PSC, 89 Misc.2d 700, 58 A.D.2d 940, aff'd 43 N.Y.2d 750 (1977). The original deficiency in the CPB powers highlighted in the Pooler case was only fixed partially by the legislature when it subsequently authorized the CPB to challenge PSC utility rate orders in Article 78 proceedings, but it did not authorize federal litigation, as would be needed to seek judicial review of a FERC ruling, for example, in a NYISO tariff cases or in cases involving market manipulation, market rules, or bulk transmission rates. In any event,the quasi-independent CPB is now dissolved. The new UIU is now a subordinate office within an executive agency, the Department of State, lacking express power independently to challenge any utility regulatory decisions in court. Under the draft MOU with the PSC Chairman, work plans and all significant decisions of the UIU would be subject to joint approval of the PSC Chairman. Separation of the advocacy function from regulators, and independent power to seek review of a regulatory decision in court, are the sine qua non of an independent utility consumer advocate.
PJM Region $6 Million
PJM state consumer advocate agencies filed a recommendation and stipulation in July, agreeing that $1,168,800 of the fund (about 20%) be used to fund a Consumer Advocates of PJM States (“CAPS”) non-profit entity, which would participate and report regarding PJM matters on behalf of the independent state advocates.
In a joint filing of numerous state agencies in the PJM footprint, Pennsylvania, Maryland, Indiana, and New Jersey followed the prior recommendation of their utility consumer advocates to allocate 20% of the total funds available to support improved monitoring of wholesale electricity issues by independent utility consumer advocates. Ohio did not, and proposes to use most of its money to promote retail electric competition.
The Pennsylvania PUC filed a proposal recommending its allocation be distributed as follows:
- $500,000 for retail electric competition campaign on "how to shop smart"
- $308,000 for a confidential PAPUC hotline for reporting electricity market abuse
- $262,440 for the consumer advocate proposal
- $166,670 for PAPUC consultants for complex wholesale electricity and transmission issues
- $25,000 for an appliance recycling research study required by state law
- $25,000 for a energy savings data platform required by state law
- $25,000 for a C&I Lighting program data bank required by state law
North Carolina proposes that all of its funds be "apportioned to all of the North Carolina Load Serving Entities [utilities] within PJM’s region for the benefit of North Carolina’s electric energy consumers...." presumably
Maryland $592,800
Maryland proposed that 20% of its funds be used as recommended by the PJM consumer advocates, i.e., $118,560 and that the remainder be used as follows:
- $237,120 to supplement the Maryland Department of Housing and Community Development’s Weatherization Assistance Program (“WAP”).
- $237,120 to fund low-to-moderate income energy efficiency grants provided through the EmPOWER Clean Energy Communities Low-to-Moderate Income Grant Program administered by the Maryland Energy Administration
New Jersey proposed that 20% of its funds be used as recommended by the PJM consumer advocates, i.e., $142,680 and that the remainder be "distributed to a non-lapsing NJBPU fund supporting various NJBPU initiatives for the benefit of the State's electric energy consumers."
Kentucky $49,800
Kentucky proposed to allocate its entire amount to Community Action Kentucky (“CAK”), a non-profit social services agency for the distribution of LIHEAP funds within Kentucky. The $49,800 will be distributed to LIHEAP eligible households, in amounts up to $200 per household, who are facing termination of electric service for nonpayment, in the 20 county service territory of Kentucky Power, a wholly-owned subsidiary unit of American Electric Power, the only Kentucky utility in PJM during the relevant time period.
Michigan $37,200.
Michigan proposed that is $37,200 "be distributed so as to benefit Indiana Michigan Power Company’s customers in a manner that the [Michigan Public Service Commission] determines to be just and reasonable."
Indiana $189,000
Indiana proposes to allocate $37,800 (i.e., 20% of its amount) for the consumer advocates' CAPS proposal, and the remaining $151,200 would add funding to existing demand side management and energy efficiency (DSM/EE) programs
West Virginia
West Virginia proposes to use all of the funds for augmenting LIHEAP or other consumer assistance programs as directed by the WV Public Service Commission.
Ohio $700,200
The Ohio Public Utilities Commission filed a separate proposal, seeking to use all the funds internally for new functions; none would go to support the CAPs proposal or to supplement the work of the independent Ohio utility consumer advocate, the Ohio Office of Consumer Counsel. It proposes to use the money as follows:
- $620,699 to defray part of a new statewide PUC program to promote retail electric competition
- $79,501 to defray part of the cost of one additional PUC employee devoted to federal wholesale issues
Virginia
Virginia's eligible agencies asked for more time to make their filing, but indicated that they support the PJM Advocates' CAPS proposal for 20% of their allocation, and that they would allocate the balance for the Virginia Consumer Counsel.
New England $20 Million
The states in the NE ISO footprint (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont) filed their joint recommendation to use the entire fund to provide bill credits to customers.
See PULP Network, FERC Urged to Use Portion of Funds Disgorged by Alleged Wholesale Electricity Market Manipulator to Bolster Utility Consumer Advocacy, July 11, 2012
PULP Network, FERC ALJ Decides Motions of Parties Seeking Role in Proposing to FERC Uses of Disgorged $78 Million NYISO Market Gaming Profits, Clarifies Process, July 11, 2012.
PULP Network, New York Formulating Plans to Use $78 Million Disgorged by Energy Trader for the Benefit of Electricity Consumers, June 16,2012
Papers filed with FERC in Case IN12-7 are here.
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