New York PSC Asks FERC to Disburse $78 Million from NYISO Market Manipulation Settlement Fund; When Will Customers Receive their $48 Million Bill Credits?

The New York Public Service Commission on March 25, 2013 asked FERC to disburse the $78 million portion of the funds disgorged by Constellation Energy Services in a NYISO market manipulation case, intended for the benefit of New York electricity consumers.  Of that amount, $48 million is intended as "refunds" to customers.  The background and prior PULP Network links regarding this are in Where is New York's $78 Million from the Constellation Disgorgement Fund?, PULP Network, Feb.l 20, 2013.

Today's filing suggests that the PSC is modifying its position, and may decide later whether to give customers actual bill credits of $48 million, or "defer" the money.  If deferred, the PSC would let the utilities keep the funds as an IOU to customers until they are applied as a credit in the future.  In a deferral situation, hard dollars from FERC kept by the utilities might be offset against poorly substantiated and weak claims of the utility for recovery of deferred costs from customers.  (For an example of the deferral process, in which utility claims accrued during a multi-year rate plan, are netted out in subsequent confidentially negotiated rate case settlements, see PULP Opposes Central Hudson Request for $9.7 Million Storm Damage Recovery, PULP Network February 7, 2013).

Previously, there was no of any possibility that the $48 million would be used for anything other than bill credits for customers. New York proposed on September 10, 2012, and the FERC ALJ approved on October 18, 2012, allocation of the $78 million as follows for the benefit of New York electric customers:

• $48 million for immediate customer refunds based on their usage
• $10 million set aside for a ten-year $1 million per year program of customer advocacy on NYISO and FERC wholesale electricity market issues, and
• $20 million for unspecified innovative transmission projects. 

Under the March 25 filing, NYSERDA would initially receive the $78 million from FERC.  NYSERDA then would pay the $48 million for customer refunds to the utilities. But it would not necessarily be used for customer bill credits.  Here is what today's PSC filing says:

"A. A disbursement of $48 million for the purpose of distributing funds to investor-owned utilities, LIPA, and NYPA on a volumetric usage basis using 2011 NYISO data, as set forth in attachment 1 of the approved Allocation Proposal. NYPSC respectfully requests that the funds be disbursed initially to New York State Energy Research and Development Authority ("NYSERDA"). Upon receipt of the funds, and pursuant to an Order of the New York Public Service Commission, NYSERDA shall then make eight (8) disbursements to the following entities:

Central Hudson Gas and Electric Corp. ("Central Hudson"),  representing a 3.35% allocation,
Consolidated Edison Company of New York, Inc. ("Con Edison"), representing a 31.53% allocation,
New York State Electric and Gas Corp. ("NYSEG"), representing a 10.06% allocation,
Niagara Mohawk Power Corporation ("Niagara Mohawk"), representing a 21.71% allocation,
Orange & Rockland Utilities, Inc. ("Orange & Rockland"), representing a 2.83% allocation,
Rochester Gas & Electric Corp. ("Rochester Gas & Electric"), representing a 4.80% allocation,
Long Island Power Authority ("LIPA"), representing a 13.37% allocation, and
New York Power Authority ("NYPA"), representing a 12.35% allocation.

Upon receipt of the funds noted above, and, as applicable, pursuant to an Order of the New York Public Service Commission, the investor-owned utilities, LIPA, and NYPA would disburse, or defer for the benefit of their electricity customers, on a volumetric basis.

The New York allocation plan previously filed September 10, 2012 -- which is what the ALJ approved in her October 18, 2012 Order--  lists the amount for customers of each utility, ranging from $1.4 Million to Orange & Rockland to more than $15 Million to Con Edison.  The September 2012 plan indicates that the $48 million would actually be flowed to customers as a one-time credit on their electric bills in a single month.  Under that scenario it could not be kept by the utilities and deferred for use as a bargaining chip in  rate case negotiations.

Thus, today's filing suggests a possible change by the PSC to the original proposal that New York electric customers would actually see bill credits totaling $48 million.  This result is at odds with the disbursement process contained in the attachment to the September PSC filing, where it was stated to FERC:

"The six above-named investor owned utilities and LIPA would each calculate a uniform per kWh credit to their respective delivery rates to be applied in a single month"

Also, in response to criticism as to how the money would be used, the NY PSC answer filed with the ALJ October 15  represented that there will be "an immediate return in the form of a refund," and it made no suggestion that it might decide to defer the benefit:

 "NYPSC determined that its three-pronged plan best uses the funds to provide customers with an immediate return in the form of a refund, to boost consumer advocacy, and to increase efficiency of the transmission system."

The October 18 Order of the FERC ALJ  approved the previously filed NYPSC September proposal, describing it as follows.

First, NYPSC proposes to refund $48 million to electric energy consumers within NYISO. NYPSC states that the $48 Million to consumers would be distributed based on a volumetric usage basis to each of the six investor owned utilities serving NYISO customers, NYPA, and the Long Island Power Authority (LIPA). NYPSC also proposes an implementation process that ensures electricity customers receive their portion of the refund.

Deferring customer credits to be applied in future rate cases, often resolved in confidentially negotiated settlements with no independent utility consumer advocate involved, hardly ensures that customers will receive "their portion" of the $48 million refund.

Today's filing by the PSC also indicates that disbursement of the fund for consumer advocacy will be subject to the legislature creating a "special account" to hold the $10 million for disbursement over a decade at $1 million per year:

"B. A disbursement in the amount of $10 Million to NYSERDA, to be held by NYSERDA until an account is created to receive and hold the $10 Million to be used for the funding of the Electric Consumer Advocacy Project.   Once a special account is created through the New York State appropriations process, NYSERDA will transfer the $10 Million to the special account."

The funding would support consumer advocacy regarding NYISO wholesale electricity market issues, which often involve FERC decisions on NYISO rules, and sometimes federal court judicial review proceedings. Under the PSC plan originally filed with FERC, the consumer advocacy funds would flow from NYSERDA or an unidentified trustee to the PSC and finally to the Department of State's Utility Intervention Unit, after the PSC reviews the advocate's workplan, budget, hiring and consultants.  The PSC directed creation of the NYISO, regulates some aspects of its operations, and has previously defended anomalous bidding and secrecy of NYISO processes which set the wholesale spot market electric rates that affect consumer bills.  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. 

Last week, legislation was introduced in the state Assembly to create an independent residential utility consumer advocate office. More than 40 other states have independent state offices devoted to representation of residential utility consumers which have control over their advocacy work and the power to question utility and regulators' actions in court.  The bill, A06239, is sponsored by Chairs of the Assembly Consumer Protection, Corporations, Aging, and Energy Committees.

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PSC Extends Time for Public Comment on Fortis' Proposed Acquisition of Central Hudson Gas & Electric to May 1

On March 22, 2013 the Secretary of the PSC issued a Notice extending until May 1, 2013 the time for comments on the proposed acquisition of Central Hudson Gas & Electric Company by Fortis Inc.  The Notice was issued in response to requests from many individuals and local and state governmental officials.  These include Assembly Member Kevin Cahill,  State Senator Terry Gipson, the Ulster County Legislature, Ulster County Comptroller Elliott Auerbach, the Town of New Paltz,who requested more time for public involvement and for public issuance of a Recommended Decision and the opportunity to comment on it before the PSC decides the case.

PULP opposed a proposed settlement of some parties who are urging PSC approval of the merger.  See PULP Comments Oppose Central Hudson/Fortis Merger Case Settlement Proposal.   In its Initial and Reply comments, PULP argues that the merger is mainly a financial and corporate restructuring with little actual gain in operational efficiency, that the putative benefits to customers are not concrete and do not outweigh the risks.  These risks include possible future downsizing of offices and workforce, and potential loss of PSC jurisdiction over the holding company that would own Central Hudson.  PULP notes in its initial comments that the merger is not supported by any independent representative of residential customers.

The International Brotherhood of Electical Workers (IBEW) Local 320, in its Initial and Reply comments, also opposed the proposed merger, which occurs amid trends of downsizing and outsourcing of the utility work force by Central Hudson, and which makes no promises regarding the future beyond two years.

The PSC case documents, public comments, and a facility for electronic filing of public comments, are here.

Comments can be emailed to the PSC Secretary at Secretary@dps.ny.gov. Those unable to submit electronically may mail or deliver their comments to the Hon. Jeffrey C. Cohen, Acting Secretary, Three Empire State Plaza, Albany, New York 12223-1350. All comments submitted to the Secretary will be posted on the Commission’s website and become part of the official case record.

Proposed PSC Storm Outage Remedies Would Allow Utilities Three Days to Restore Power Before Reducing Delivery Revenue

Today, the New York Public Service Commission opened a new generic case and issued a Notice Soliciting Comments on several proposals to address storm outage related policies.  The Commission order recounts that after "Superstorm Sandy" it had approved, on an ad hoc basis, the waiver of current utility tariffs in order to give prorated refunds of monthly customer charges for the period when service was off during extended outages, and that it had allowed forbearance of late payment charges and other collection measures.  The Commission now proposes to adopt generic policies that would be applicable in the future to all major gas and electric companies under its jurisdiction, stating:

the recurrence of lengthy service outages has caused the Commission to consider, inter alia, whether it should formally adopt a policy requiring utilities to offer similar waivers of tariff charges automatically in the future under a defined set of circumstances. At the Commission session, the Commission also considered whether it should further direct utilities to modify their ‘business as usual’ collection and termination practices during such times.

Late Payment Charges and Collection Forbearance.  The Commission proposes various measures intended to ease customer burdens at times when their household budgets may be suffering from the consequences of major storm losses and expenses.  Late payment charges would be excused, and normal service terminations for nonpayment would be suspended during the period of outage and for a period after the outage equal to the duration of the outage.  

As a realistic matter, utility crews that work on field terminations for collection purposes probably would be doing other things of greater importance during and shortly after a major storm outage, so this measure may involves no major readjustment of utility work priorities.  

There is no discussion regarding rate treatment of any lost revenues due to these proposals.  To the extent that storm damage increases household budget burdens and causes late payments which then trigger extra utility charges, the utility may receive higher late payment charge revenue than anticipated.

Customer charge/minimum charge credits.  When a customer is not provided electric or gas service for three days or more, the PSC proposes that the utility would refund a prorated portion of the monthly customer charge for electric service (or the "minimum charge" for gas service).  For example,

customers out of service for six days would receive a credit in the amount of 6/30ths of the customer charge for that service classification) and applied to customer bills within 60 days of the outage.

For Con Edison customers, the electric customer charge is $15.76 per month, or about 53 cents per day.  For a customer suffering a six-day outage, the proposed credit would be $3.18.

That's not much.  

Some customers of Con Edison lost power for about two weeks.  The refund to them of $7.42 would not begin to address the hardship, personal, and societal losses flowing from the lack of continuous service. 

Recovery of lost delivery charges and reduced customer charges.  Under traditional utility regulation, utilities have a strong incentive to avoid outages and to restore power quickly:  if the meters are not registering service, the utility does not receive revenue.  That incentive has been eroded by the recent PSC rate plans which include so-called "Revenue Decoupling Mechanisms" (RDMs).  These ostensibly reduce the utility incentive to promote usage (never mind that it is customers who turn the switches on) and to insulate utility revenues from reduction when energy efficiency measures are installed. 

These RDM mechanisms work to true up and stabilize revenues received by the utility to a level predetermined in the rate case. As a consequence utility revenue is not affected at all when customers use less, whether due to conservation, or installation of efficiency measures, economic recession -- or extended storm outages.  

The PSC seeks comment on two options under consideration:

Option 1.  One of the options proposed by the PSC is to exclude from the RDM revenue true-ups the "lost revenues" due to service being off after three days.  Also it is proposed that customer charges refunded due to service being off would not be trued up in the RDM and collected from all customers in the future.  Under this proposal, utilities would still recover full revenue from customers -- as if service was on -- even though no service is provided, for the first three days of an outage.

Option 2. The other option under consideration is worse.  It continues the current plans, in which shortfalls in revenue due to the lack of service provided during outages is trued up later under the RDMs.  The customer charge refunds to customers who go without service for more that three days would still be given, but the lost revenue from that would eventually be trued up and essentially paid by all customers under the RDM, with no loss of revenue at all to the utility when service is off.

Conclusion.  The credit and collection measures are benign.  The other proposals only address outages of three days or more.  They essentially tolerate without remedy outages up to three days.

Under one option, the utility has no risk of reduced revenue for outages less than three days, under the other option, there is no risk of reduced revenue, period.

The PSC proposals do nothing to alter its "performance regulation" plans that 

• do not measure or penalize storm related outages of more than 24 hours,  
• allow utilities full discretion to cut expenses for tree trimming and maintenance and keep the savings as profit, and 
• allow utilities full recovery of 100% of storm cost recovery costs.

AARP/PULP Report.  AARP and PULP recently issued a report calling for more meaningful reform of New York utility regulation.  The recommendations include:

• Protecting Consumers from "pass-through" of storm recovery costs: AARP and PULP state that storm-related rate hike proposals, such as the $400 million one being proposed by Con-Edison, must be scrutinized to ensure consumers don't get hit with the costs, while the utility company bears no risk.
• Reviewing Utility Performance Regulations:  The New York Public Service Commission ("PSC") "Performance Regulation" ratemaking approach should be reviewed and revised or eliminated. It currently allows utilities to set multi-year rates, and then cut costs while keeping savings during the term of the rate plans so long as they satisfy minimum performance standards --  which exclude any standards for major storm outage prevention and restoration.  The plans allow recovery of 100% of storm related costs from customers without regard to adequacy of preventive measures..  The  incentives to cut costs for tree trimming and other preventive measures like replacement of weak poles may have exacerbated the damage from Superstorm Sandy. Further, the, PSC-approved rate plans give utilities the same revenue whether or not meters are spinning after major storm, eroding the normal economic incentive of a utility  to get power back on quickly,
• Funding an Independent Utility Consumer Advocate: An independent consumer advocate is essential to the strengthening of oversight of the state's utilities by giving consumers a seat at the table in complicated rate hike and regulatory hearings and level the playing field.  A recent AARP survey found the move is supported by nearly 77% of 50+ consumers in the NYC and Long Island areas. Forty other states in the country already have an independent utility consumer advocate office. 

• Establishing Protection for Long Island Power Authority (LIPA) customers: The Moreland Commission recommends re-privatizing LIPA. AARP and PULP believe the costs, benefits, and rate impacts concerning utility consumers on Long Island must be examined when proposing to re-privatize LIPA as well in comparison with continued public ownership.

Case File and Comments.  The case file with all documents is here.  Public comments can be posted electronically to the public case file here

The Commission Notice Soliciting Comments also states that

"Interested parties may submit comments on the draft policy and any additional information pertinent to implementing uniform policy electronically by e-filing through the Department’s Document Matter and Management System (DMM)2. . . .Those unable to submit electronically may mail or deliver their comments to the Hon. Jeffrey C. Cohen, Acting Secretary, Three Empire State Plaza, Albany, New York 12223-1350. Initial comments are requested no later than May 15, 2013. Reply comments will be accepted through May 28, 2013. All comments submitted to the Secretary will be posted on the Commission’s website and become part of the official case record."

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Update
Larry Rulison, Rule would force utilities to issue outage credits, Times Union, March 28, 2013

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Asleep at the Switchboard: New York Telephone Subscribership Sags, Now Ninth from the Bottom

A measure of well being and community connection is the household penetration level of telephone service.  The FCC maintains statistics which have measured over time the success of the universal service programs and telephone affordability policies of the state utility regulators.  The most recent FCC report, TELEPHONE SUBSCRIBERSHIP IN THE UNITED STATES (Data through July 2011), shows that New York State's household telephone penetration level had reached 95.6% in 2010 but fell to 94.6% by July 2011.

Only seven states and the District of Columbia had lower household telephone penetration rates than New York did in July 2011.The data includes households where wireline service has been supplanted by mobile phones:

The specific questions regarding telephone asked in the CPS are: "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."6 And, if the answer to the first question is "no," this is followed up with, "Is there a telephone elsewhere on which people in this household can be called?" If the answer to the first question is "yes," the household is counted as having a telephone "in unit." If the answer to either the first or second question is "yes," the household is counted as having a telephone "available."

Over time, other states have achieved far more progress toward universal telephone service than New York.  In 1983, the household penetration level for New York was 90.8% of households.  Far from being a leader, New York was in the bottom half of the states on this measure in 1983, but there were 21 states with even worse telephone penetration levels.

Since 1983, many states achieved more improvement than New York and now they surpass it.  States that once lagged but now outstrip New York include Alabama, North Carolina, Wyoming, Alaska, Utah, Texas, South Carolina, Kentucky, Idaho, Nevada, Louisiana and Mississippi.

New York is clearly lagging in implementation of proactive universal service policies to assure full availability of affordable phone service to all households.  More attention needs to be paid by the legislature to the performance of the PSC and telephone utilities in implementing state and federal universal service and telephone lifeline programs to aid low income New Yorkers who cannot afford phone service.