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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