Moreland Commission Recommends Stronger Utility Consumer Advocacy

The Moreland Commission  on Utility Storm Preparation and Response, was created on November 13, 2012 by Executive Order No. 73.  While its main focus was investigation of the Long Island Power Authority and storm issues, its mission also encompassed the broader functioning of utility regulation in the state:

(A) study, examine, investigate and review: (i) the emergency preparedness and response of utilities during and following emergency weather events, including the performance of the utilities during and following emergency weather events; (ii) the adequacy of present laws, rules, regulations, practices and procedures with respect to utilities’ emergency preparedness and response; (iii) the adequacy of existing oversight and enforcement mechanisms; (iv) the structure, organization, ownership, financing, control, management and practices of the utilities as they affect emergency preparedness and response; and (v) the provision of utility services to New York State under the existing legal regulatory framework, including but not limited to the jurisdiction, responsibilities and missions of the New York Power Authority, the Long Island Power Authority, the New York State Energy and Research Development Authority, as well as the Public Service Commission; (B) report and make recommendations for legislative, policy and regulatory changes, as well as reforms as deemed appropriate in utility structure, management and practices, to best protect and serve the public’s interest with respect to emergency preparedness and response, and the provision of safe, reliable, responsive utility services; and (C) review any other matters or activities which may affect the issues herein before specified....

In its Final Report issued June 22, 2013, the Moreland Commission issued several broad recommendations for legislative action to improve the system of state utility regulation and the functioning of the Public Service Commission (PSC).  These include
adding a "public interest" criterion to the currently nonexistent statutory qualifications of PSC Commissioners,    removing the exemption of the PSC from the State Administrative Procedure Act provisions regarding  private "ex parte" communication during cases with PSC Commissioners and their advisors, and
enhancement of utility consumer advocacy.

PSC Commissioner Qualifications.

The Moreland Report lamented the "decline of New York utility regulation" noting that the New York Public Service Commission, historically was nationally preeminent in utility regulation, but had in the past 20 years had years become less than stellar in its composition and achievements:

Throughout our work the Commission has been struck by one overarching shortfall. The people of New York have not been well served by aspects of the diminution and reorientation of utility regulation over the past 20 years. The Commission believes that the PSC of the 1970s, chaired by Joseph Swidler and then by Alfred Kahn and then again under the leadership of Peter Bradford from 1987 to 1995, was a national model. Its decisions were widely emulated and cited and it was staffed by recognized leaders in most of its fields. Top staff positions were filled on a nonpartisan basis and rarely if ever changed for political reasons.

The Commission considered whether statutory changes should be made, noting that the "New York State Public Service Law contains no minimum technical requirements for appointments to the Public Service Commission."  The Commission did not go down the road of specifying particular expertise as a prerequisite to service on the Commission:

The Moreland Commission believes there is little to be gained from specifying academic backgrounds or professional categories in an effort to raise the quality of Public Service Commissioners, and in fact a number of fields could prove useful in such a position, including: accounting, business, consumer advocacy, economics, engineering, environmental studies, finance, and law. Statutory qualifications add only a small weight to the scales in appointments, confirmation, and public evaluation. Of more value is a demonstrated commitment and competence in furthering the public interest in the areas relevant to utility regulation. The Moreland Commission therefore recommends the Governor immediately adopt a policy for future PSC appointments and that the Public Service Law be amended to require that appointees to the PSC have such competence.

The Commission made the following recommendation:

Appointees to the Public Service Commission should have demonstrated in their careers a commitment and a competence in furthering the public interest in one or more areas relevant to utility regulation; the Public Service Law should be amended to codify this requirement.

Ex Parte Communications.
The Moreland Commission urged legislative change and PSC regulations to implement controls over ex parte communications, stating:

The Commission learned during the course of its investigation that it is statutorily permissible and common practice for utility company executives, lobbyists and other paid representatives of interested parties to have unfettered access to the PSC Chair and Commissioners without having to disclose details of these conversations, presentation materials or other specifics to the other parties participating in cases before the PSC ex parte communications consist of  evidence, arguments or other information related to a disputed issue pending before a decision-maker or in advance of such submission. Such  communications are made in a manner that makes that information insufficiently available to challenge and counter by the adversely affected party or those with differing viewpoints. Since ex parte communications enable one party to influence a decision-maker off-the-record and outside the presence of the other interested parties, it effectively skirts procedural due process. Ex parte communications have the effect of undermining the indispensable fairness and unbiased attributes of decision-makers in judicial and administrative proceedings. 

The Moreland Commission did not propose to prohibit all ex parte communications, which may be useful for PSC Commissioners and staff in their information gathering, but would require those involved in ex parte communications to divulge that a contact with the PSC or its DPS staff outside the case process has been made and substance of the communication, as most other state and federal jurisdictions have done.  The Recommendations are:

• The existing statutory exemption of ex parte rules as they relate to public utility commissions
must be eliminated so as to subject the PSC to the same rules that other State agencies that are
bound by SAPA.

• Upon elimination of the statutory exemption of ex parte rules, the PSC should enact an
implementing regulation that includes a specific triggering event, preferably with a set term
prior to filing with the PSC, along with sanctions that are sufficient enough to deter violations
(i.e., fines).

See NY PSC Ex Parte Communication Practices Faulted by Moreland Commission.

Consumer Advocacy
The Commission recognized that there is a problem in New York with the lack of  adequately funded utility consumer advocacy, stating at Page 13: "The State should create an independent consumer advocacy board that represents all utility ratepayers in rate cases and general consumer-related functions. More particularly, the Commission recommended creation of a new Citizens Utility Board:

The Commission believes strongly that the PSC, once New York has better qualification standards for appointees as well as stricter ex parte rules (see sections 6.1 and 6.2), requires a robust, permanent, professional consumer advocate office to represent ratepayers. There are three possible models that the  Governor – or Governor and Legislature – should consider: 

• An Executive Order could establish a CUB with an initial board of three members appointed by the governor, speaker, and majority leader respectively that mirrors Illinois’ volunteer funding model      whereby it is empowered to raise funds from individual ratepayers. Thereafter an Executive Director will be chosen by the Board or by the contributing members. Along with support staff, they will be charged with drafting governing CUB regulations.
 • Legislative Option A: establish a gubernatorial administered CUB with an alternate funding Mechanism whereby   it would receive a fixed percentage of either the PSC’s or NYSERDA’s annual budgets.
 • Legislative Option B: establish a gubernatorial administered CUB with an alternate funding mechanism whereby it would receive a fixed percentage of either the PSC’s or NYSERDA’s annual budgets, with an Executive Director appointed for a fixed term removable only for cause. The Commission urges the State to take action to ensure that the CUB be insulated from political interference and budget retaliation.
 Recommendation:• The State should create a Citizens Utility Board that is independent, controlled by ratepayers, adequately funded and not subject to political interference using one of the models identified herein.

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NY PSC Ex Parte Communication Practices Faulted by Moreland Commission

In the recent Central Hudson merger and rate plan extension case, it may be that ex parte presentations played a role in the Commission's unexpected overturning of the Recommended Decision of Administrative Law Judges presiding in the matter to reject the acquisition of the utility by Fortis, Inc.

In addition to storm and LIPA related matters, the Moreland Commission on Utility Storm Preparations and Response also looked at the functioning of New York's utility regulatory system.  One of the matters criticized in their Final Report is the practice of unreported "ex parte" communications at the PSC, between utility representatives and Commissioners or their advisors which are not divulged to parties in the case or the public.  New York's practice is at odds with the practice of most other state and federal utility regulatory agencies.

The Moreland Report states:

6.2 EX PARTE COMMUNICATIONS
While there are various ways in which any interested party may appear before and/or file comments with the PSC, it is obvious that there exists disparity in the ability of certain classes of utility customers to avail themselves of direct access to the decision-makers at the PSC and DPS. The Commission learned during the course of its investigation that it is statutorily permissible and common practice for utility company executives, lobbyists and other paid representatives of interested parties to have unfettered access to the PSC   Chair and Commissioners without having to disclose details of these conversations, presentation materials or other specifics to the other parties participating in cases before the PSC ex parte communications consist of evidence, arguments or other information related to a disputed issue pending before a decision-maker or in advance of such submission. Such  communications are made in a manner that makes that information insufficiently available to challenge and counter by the adversely affected party or those with differing viewpoints. Since ex parte communications enable one party to influence a decision-maker off-the-record and outside the presence of the other interested parties, it effectively skirts procedural due process. Ex parte communications have the effect of undermining the indispensable fairness and unbiased attributes of decision-makers in judicial and administrative proceedings. Thus, actions to control those communications, in the form of statutory frameworks, become necessary for those proceedings before the agency to maintain fairness and transparency with the public-at-large. Of particular concern to the Commission is that many ratepayers lack the necessary resources to express their opinions and concerns on matters that impact their lives and their pocketbooks, and that of other similarly situated New Yorkers. Such deficiencies may result in certain customers or customer groups, who are not in a position to advocate for themselves and may feel marginalized when compared to utility companies and other special interest groups during proceedings before the PSC. The Commission questions the fairness of allowing one side with virtually unlimited resources total access, while the other side lacks a similar voice.

Based on the Commission’s research, the only two states that currently lack a statutory framework construct to control and manage ex parte communications concerning utility regulation are New York and Massachusetts. New York, in fact, through statute specifically exempts the application of any ex parte rules as they relate to public utility commissions.... The statutory carve-out against the inclusion of ex parte rules as applied to public utility proceedings is unique to New York State....

6.2.1 APPROACHES TO MANAGING EX PARTE COMMUNICATIONS
The exact verbiage used to limit or prohibit ex parte communications varies from state to state, but differs little in substance, each limiting ex parte communication. The real difference between each states’ rules relate directly to the timing of the imposition of a ban on ex parte communication and whether communication is absolutely prohibited or instead, requires notice to all parties. Most states prefer a noticing provision and New York’s State Administrative Procedures Act (SAPA) Law governing state agencies (those to which it applies) prohibits communication in adjudicatory proceedings “except upon notice and opportunity for all  parties to participate”, therefore the timing of the imposition of the ban is the more relevant issue here. [FN]

Approach 1: Imposition Upon Filing
The majority of states impose a “contested case” triggering event for the ban on ex parte communication to begin. In short, once a case is brought before an agency or commission, ex parte communications are prohibited. For example, Ohio’s rule states:

After a case has been assigned a formal docket number neither a member of the public utilities commission nor any examiner associated with the case shall discuss the merits of the case with any party or intervener to the proceeding, unless all parties and interveners have been notified and given the opportunity of being present or a full disclosure of the communication insofar as it pertains to the subject matter of the case has been made. Failure of any assigned examiner of the public utilities commission or any commissioner to abide by this section may, at the discretion of the commissioners, lead to that examiner's or commissioner's removal from a particular case or appropriate disciplinary action. [FN] This approach sets a clearly defined triggering event that encompasses the entire public comment and decision-making process.

Approach 2: Imposition Prior to Case Assignment
A small number of states ... have all imposed earlier triggering events related to the assignment of a case or a docketing of such matters. In particular, Florida has a very early triggering event that delineates a 90-day pre-filing period, where no ex parte communications can occur after a 90-day set out date from any filing in front of an agency or commission. This is the most conservative approach; however, in some cases it may be difficult to predict the specific date that the rules would begin.

Approach 3: Imposition upon Initiation of Decision-Making Phase
A very small minority of states have a later triggering event. [They] impose ex parte rules once a proceeding has moved to the decision-making phase and any deliberations by the decision-maker have begun. This triggering period excludes the period before and during any public proceedings. This approach is the least conservative application of ex parte rules and does not include the public comment period which is critical in developing the record used in the PSC’s deliberative process.

Perhaps one of the most important mandates of the PSC is to protect and enforce the rights of the public. The rules that govern New York’s regulatory 
environment are complex and require specific acumen to navigate. The public expects, and indeed deserves, to be afforded full disclosure of PSC and DPS inte ractions with the parties involved in its proceedings. If the PSC is to hold itself out as safeguarding the public interest, it then must codify ex parte communications rules, thereby placing all New York ratepayers on a level playing field.

Recommendations:
• The existing statutory exemption of ex parte rules as they relate to public utility commissions must be eliminated so as to subject the PSC to the same rules that other State agencies that are bound by SAPA.

• Upon elimination of the statutory exemption of ex parte rules, the PSC should enact an implementing regulation that includes a specific triggering event, preferably with a set term prior to filing with the PSC, along with sanctions that are sufficient enough to deter violations (i.e., fines). 


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LIPA Agreement Announced

Legislative agreement has been announced regarding revision of the operating structure of the Long Island Power Authority ((LIPA).  The announcement includes a chart comparing the existing and fully privatized scenarios with the new arrangement, which retains public ownership in LIPA but gives the private operating company more powers to change its rates, terms and conditions of service, reduces the role of LIPA in overseeing its contractor, which will be PSEG, and substitutes an advisory role of the PSC to "recommend" but not actually determine matters, including rates and customer complaints under HEFPA.
The draft bill would exempt PSEG from the consumer protection duties of an electric company under Article 2 of the Public Service Law, the Home Energy Fair Practices Act. It is not clear how customers will fare under the new arrangement, for example, whether PSEG will keep service on while customer complaints are pending PSC review or whether PSEG will follow the "recommendation" of the PSC is complaint matters. See PULP Network, Will LIPA "Reform" Provide Equal Consumer Protections for Long Island Electric Customers?, May 20, 2013.

The announcement says the LIPA deal "will also achieve savings to allow the new utility to seek a rate freeze for 2013, 2014 and 2015." The rate "freeze" discussed in the announcement, however, is apparently a freeze only of the transmission and distribution rates, and would not foreclose changes in the price of generation service.

It is unclear how energy will be purchased for Long Island customers after the change, which will sharply reduce activities of LIPA and shift duties to the contractor. In New Jersey, PSEG conducts a generation supply auction to obtains energy for its basic service customers.  LIPA is in a "load pocket" which limits the availability of competitively priced generation supply,  LIPA has obtained diverse sources of generation supply through contracts and other means, but it appears this role will shift to PSEG.

The option of full LIPA reprivatization urged by some was apparently not feasible, as this would require rate increases to cover higher interest private debt and to garner a fair return on private investors' capital, currently in the range of 9%.  When LIPA purchased the electric assets of the Long Island Lighting Company (LILCO), LILCO's rates were highest in the state.  Simply by shifting to public ownership by LIPA, bills were reduced by 20%, and leadership for the dubious honor of highest rates of a major electric utility in New York state has been held ever since by investor-owned Con Edison.

According to the American Public Power Association, publicly owned electric utilities generally have lower rates than investor owned utilities.  Consultant reports have found that undoing public ownership of LIPA, which allowed cheaper financing of the stranded costs of an unused nuclear power plant, and which avoided the need for rates to cover a 9% or so profit return on investors' equity, would require rates to go up. A 2005 report suggested that the opportune time to transition LIPA to private ownership is after 2013, when the higher costs of private ownership could be offset after more LIPA bond repayments were made and rates would otherwise go down.

LIPA has bonds scheduled to be paid off in September 2013 and in 2014, which will reduce costs, and any refinancing of current debt will likely result in savings because interest rates are low.  So other things being equal, if its transmission and distribution rates are frozen at the current level, and if all power purchasing costs are passed through to customers, LIPA may be able to earn a surplus or cover new expenses without rate increases as financing costs come down.

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Time Warner Asks PSC to Greenlight Prime Time Evening, Friday Afternoon and Saturday Phone Shutoffs for Collection Purposes, and to Relax Other Consumer Protections

Time Warner's phone service subsidiary (Time Warner Cable Information Services (New York) LLC) filed a Petition on May 1, 2013 with the Public Service Commission, seeking "Waivers of Certain Commission Regulations Pertaining to Partial Payments, Directory Distribution, Timing for Suspension or Termination of Service, and a Partial Waiver of Service Quality Reporting Requirements." In a commendable development, Time Warner acknowledges it is now providing telephone service through its Voice over Internet Protocol (VOIP) technology "as a fully regulated service...." and that it is therefore subject to the Commission's telephone consumer protection regulation.

Previously, cable companies claimed their VOIP service is not telephone service but an unregulated information service.  This recognition that phone service is being provided is a welcome change long urged by the Public Utility Law Project of New York, and of benefit to the more than one million Time Warner phone customers in New York State.

Now that it is concededly a regulated telephone service provider, Time Warner is acting like other regulated phone companies, in that it immediately is seeking to relax the rules designed to protect customers.

Prime Time Evening, Friday and Saturday Shutoffs for Bill Collection Purposes.
Time Warner seeks to expand the hours when it can shut off telephone service for bill collection purposes, to include Saturdays from 8:00 AM to 5:00 PM, Fridays from 3 PM to 9:00 PM, and Monday to Thursdays until 9:00 PM. The state regulations on the timing of  phone shutoffs are designed to protect customers at times when their ability to remedy or forestall a shutoff or seek assistance is limited.  Section 609.4(d) of the PSC telephone service regulations, informally known as the Telephone Fair Practices Act (TFPA), bar the interruption of telephone service for collection purposes on Fridays after 1 PM, Saturdays, Sundays, and holidays:

(d) Suspension or termination of service--time. A telephone corporation complying with the conditions set forth in this section may suspend or terminate service to a residential customer for nonpayment of bills only between the hours of 8 a.m. and 7:30 p.m., Monday through Thursday, and between 8:00 a.m. and 3:00 p.m. on Friday, provided such day or the following day is not:
(1) a public holiday, as defined in the General Construction Law;
(2) a day on which the main business office of the telephone corporation is closed for business; or
(3) during the periods of December 23rd through December 26th and December 30th through January 2nd.

Exhibiting a fine sense of humor rarely seen in PSC filings, Time Warner says "it would like to extend these hours [when customers can be shut off] ... "for its customers' convenience."!

The purpose, however, of restricting utility shutoff times is not to mirror the times when a utility will receive payments, but to enable customers to obtain timely assistance in preventing termination or promptly restoring service.  Assistance is potentially available through the PSC, which has power exercised under TFPA to decide bill disputes, supervise and revise payment plan arrangements on terms affordable to customers, deal with situations where continued or resumed service is medically necessary, and, when appropriate, order the service to be put on.

The telephone shutoff rules initially mirrored HEFPA.  Under HEFPA, the Commission is required by statute, PSL 32,  to forbid electric and gas companies from terminating service on Fridays and weekends:

"The  commission  shall  preclude terminations for nonpayment other than between the hours of eight  a.m.  and  four  p.m.,  Monday  through Thursday,  provided  that  such day or the following day is not a public holiday....

After HEFPA was enacted by the legislature to address gas and electric service shutoffs, the Commission administratively adopted TFPA rules for telephone customers, without legislative direction.  The TFPA rules initially mirrored the HEFPA no-terminations-on-Friday rule.  Subsequently, however, the telephone companies won a relaxation of the rule to permit Friday terminations until 1 PM.  This was justified on the grounds that the Commission's Hotline service is potentially available until 7:30 PM Monday - Friday to intercede if a customer has a dispute or needs assistance in working out terms to forestall shutoff or restore service.  That purpose would be frustrated by Time Warner's proposal.

Allocation of Partial Payments
Time Warner seeks a waiver of Commission rules regarding allocation of undesignated partial payments between services, so that phone service would be paid first --"bucket 1 charges" -- and then the payments would be applied to all remaining charges -- "bucket 2" -- which could be for Time Warner services such as  internet or cable TV.  Consideration should be given instead to making it easier for customers to choose the service to which a partial payment is applied.  For example, a customer might want to jettison cable TV and keep the internet on to hunt for jobs during a spell of unemployment or other household financial crisis.  While the bills include separate items for cable TV, broadband, and telephone services, there is no information given in the bills on how customers can, if they are in arrears, keep the service they pay for with a partial payment.  Indeed, Time Warner bills have boiler plate which says that if the portions of the bill for TV or broadband are not paid, telephone service may be shut off.

Service Quality and Directories.
Time Warner seeks a waiver of service quality rules regarding the timeliness of repairs and keeping appointments, etc.  Verizon successfully won a relaxation of rules that only count incidents of deficient service to "core" customers, and Time Warner wants the same -- and more.

The PSC limited its service quality metrics and penalties to "core" customers, defined as those who have low income Lifeline reduced rate service, those with special needs (medical conditions, elderly, blind or disabled), and those who lack competitive opportunities for alternative service, who cannot deal with bad service by switching companies.  Time Warner pronounces that since it is a competitive company the rule should not apply.  This invites reexamination of the ill considered withdrawal of oversight, which occurred at a time when there was more optimism about customers having more choices of providers.  Recently, we have seen a situation where what was at most a duopoly of landline phone service providers is dwindling, due to the effort of Verizon to withdraw from the copper landline service, as is occurring on part of Fire Island.  In that situation, the only landline provider is the cable company.

Also Time Warner seeks relaxation of the rule requiring provision of directories to customers.

The Utility Law Project believes the Petition for approval of night time, Friday afternoon and Saturday telephone service terminations should be denied forthwith, in order to protect customers at risk of termination, and that the other relief requested should not be entertained until after public comments are received and further proceedings are held.  The PSC issued a SAPA notice inviting comments at page 22 of the State Register for June 19, 2013.

The 45 day public comment period expires August 3, 2013.  Public Comments can be filed electronically here.

Gerald A. Norlander
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Governor Names Audrey Zibelman as New PSC Commissioner and Chair

The composition and leadership of the New York Public Service Commission is in flux.  In a swift move at the end of the legislative session Audrey Zibelman was nominated by the Governor to be a Commissioner of the New York Public Service Commission, replacing Commissioner James Larocca, who is serving at will after the expiration of his term.

In addition, she will be designated to be the new Chair of the Commission, replacing current Chairman Garry Brown in that role.  See Times Union Capitol Confidential, New PSC commissioner candidate spills beans about chair post, and Senate breezes through confirmations, June 19, 2013.

It is not clear whether or for how long Commissioner Brown will continue to serve on the Commission after the mantle of Chairmanship is shifted.  There is also a vacancy on the Commission due to the recent resignation of  Commissioner Maureen Harris.

Zibelman comes with much energy and utility experience.  According to the Governor's press release,

Ms. Zibelman is a Founder and was President and Chief Executive Officer of Viridity Energy, Inc., which she formed after more than 25 years of electric utility industry leadership experience in both the public and private sectors. Ms. Zibelman is a recognized national and international expert in energy policy, markets and Smart Grid innovation. Previously, Ms. Zibelman was the Executive Vice President and Chief Operating Officer of PJM, a Regional Transmission Organization that operates the world’s largest wholesale power market and serves 14 states throughout the eastern United States. Ms. Zibelman also held executive positions at Xcel Energy, served as General Counsel to the New Hampshire Public Utilities Commission, and as Special Assistant Attorney General in the Minnesota Attorney General’s Office.

  In an upbeat note, she is quoted in the press release as saying it is her goal for New York to become "the platinum standard for delivering reliable, affordable, resilient and clean energy services."  The emphasis on affordability, rare at the Public Service Commission, is heartening.  According to Bloomberg Business Week, she has seen the effects of poverty at close range.

Audrey Zibelman spent two years in the Peace Corps in the late 1970s, working in a village in Chad which had no electricity. She was struck by how the lack of power exacerbated poverty. “For these people I was living with, about 80 to 90 percent of their day was spent just on staying alive,” she recalls.

Perhaps some of that experience in Chad -- which  is ranked 163rd out of 169 countries on the 2010 United Nations Human Development (UNDP) Human Development Index -- will come to bear in New York on neglected universal service and affordability issues.  For example, telephone penetration in low income households is sagging, more than 200,000 Con Edison customers are threatened with shutoff each month due to unpaid bills, and around 300,000 New York residential customers, and their families, experience interruption of service each year as a bill collection measure.

On an encouraging note, the Governor's Press Release states that "she will be an aggressive regulator and strong advocate for New York’s ratepayers.” The concern expressed for customers is welcome. Historically, the role of the New York Commission has at times lacked focus on doing justice for consumers.  For example, in 1932, former New York Governor and President Franklin Delano Roosevelt described his vision of the PSC:

When I became Governor, I found that the Public Service Commission of the State of New York had adopted the unwarranted and unsound view that its sole function was to act as an arbitrator or a court of some kind between the public on the one side and the utility corporations on the other. I thereupon laid down a principle which created horror and havoc among the Insulls and other magnates of that type.

I declared that the Public Service Commission is not a mere judicial body to act solely as umpire between complaining consumer or the complaining investor on the one hand, and the great public utility system on the other hand. I declared that, as the agent of the Legislature, the Public Service Commission had, and has, a definitely delegated authority and duty to act as the agent of the public themselves; that it is not a mere arbitrator as between the people and the public utilities, but was created for the purpose of seeing that the public utilities do two things: first, give adequate service; second, charge reasonable rates; that, in performing this function, it must act as agent of the public, upon its own initiative as well as upon petition, to investigate the acts of public utilities relative to service and rates, and to enforce adequate service and reasonable rates.

The regulating commission, my friends, must be a Tribune of the people, putting its engineering, its accounting and its legal resources into the breach for the purpose of getting the facts and doing justice to both the consumers and investors in public utilities.

For background on prior PSC appointments, see

• Greg Sayre Confirmed as New PSC Commissioner
• State Senate Begins Review of PSC Nominees
• Governor Paterson Renominates Two PSC Commissioners;
• In a New York Minute, Governor Paterson Appoints and Senate Confirms James Larocca as New PSC Commissioner;
• Public Interest Coalition Urges Transparency in Selection Process for PSC Commissioners;
• Will Governor Paterson Repurpose the Public Service Commission to Protect Consumers?
• More New PSC Commissioners Coming Soon?;
• Governor Spitzer Nominates NYISO Executive for PSC Post.

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Parties Respond to Central Hudson/Fortis Revisions to Merger Proposal and Rate Plan Extension

With the time for a PSC decision on the Fortis proposal for takeover of Central Hudson approaching, and facing a Recommended Decision of DPS Administrative Law Judges urging disapproval, Central Hudson and Fortis filed a revised proposal with dubious "enhancements."  See After Final Submissions on Prior Proposal, Fortis, Central Hudson File New Plan With PSC for Fortis Acquisition, May 30, 2013.

Parties have filed responses to the revisions.  PULP maintains that continuing the rate plan is actually more of a benefit to the utilities, and not customers, because it allows an excessive return on equity (ROE) of ten per cent at a time when the PSC is allowing less.  Earlier this year, the PSC allowed a 9.3% ROE in the Niagara Mohawk d/b/a National Grid rate case, and DPS staff has testified in support of an 8.7%S ROE in the pending Con Edison case.  Also, the Central Hudson/Fortis proposal continues "single issue" ratemaking, where an item of cost that may go up (storm damage cost) is allowed to be "deferred" for future collection from customers, while other items of cost, such as interest on debt may go down and the utility is allowed to keep the benefit of that cost reduction.  Normally, as a narrow exception to the general rule against retroactive rate making and the filed rate principle, "deferral" of unexpected costs during a rate plan are disfavored, and are not allowed to be recovered later if the utility is overearning or would overearn if customers paid the deferred cost.

PULP demonstrated in its Response to Petitioners' May 30 letter to Commissioners and in an attachment to them that Central Hudson's ROE for the past three years has been well over what would be allowed now if there were full review of the rates, which would be in the range of 9%.

PULP’s analysis, based on Central Hudson’s filings with the Securities and Exchange Commission (SEC), finds that Central Hudson’s earnings have generally been well above 9.3% over the course of the current Central Hudson rate plan.  These SEC filings, which can be used to calculate ROEs on a trailing four quarter basis that generally agree with DPS regulatory calculations to within +/- 30 basis points, show that during the implementation period of the Company's current rate plan to date (the eleven quarters from July 1, 2010 through March 31, 2013), Central Hudson’s four quarter trailing ROE has exceeded 10% six times.  Four of these times the Company achieved an ROE at-or-above the 10.5% threshold for sharing.  

Thus, PULP argues, extending the flawed rate plan beyond its term is not in the interest of customers.  PULP pointed out that there is no evidence in the form of testimony to support the reasonableness of a 10% ROE for Central Hudson after its rate plan expires at the end of this month, because there were no evidentiary hearings in the case.

PULP also cited the pending National Fuel Gas Distribution Company (NFG) case in which the Commission is considering temporary rates and lowering rates due to that company's apparent excessive earnings.  In that case, DPS staff is seeking a 9% ROE. Also, Multiple Intervenors, representing large business customers,  is urging even lower rates for NFG and an end to mounting deferrals of single item costs that have risen whose recovery from customers would increase over earnings. Inexplicably, Multiple Intervenors filed a letter supporting further extension of Central Hudson's rate plan with a 10% retrurn and additional deferral liability for customers - rate flaws it objected to in the NFG case.

Citizens for Local Power filed extensive documentation of financial risks from the takeover, widespread community and local government opposition to the merger, and supplemental information regarding Fortis operations elsewhere, in further opposition to the merger.  Robert F. Kennedy, Jr. also filed a letter in opposition based on Fortis' environmental record in Belize, and an additional letter was submitted by Assemblyman Kevin A. Cahill, who asked the Commission not to rule on the matter until a Commission vacancy is filled by a newly appointed Commissioner.

The case is on the PSC Agenda for June 13, 2013.

PULP Files Testimony in Con Edison Rate Case, Seeking Improved Low Income Rates, Reduced Service Interruption to Collect Bills, Improved Storm Cost Recovery Measures

Con Edison filed new rates in January 2013 which were suspended by the Public Service Commission for an 11-month review and likely modification.  Con Edison requested an electric rate increase of approximately $375 million and updated the request in March to $411.9 million.  The total "delivery rate" increase requested is about 7.9%.  (Con Edison sometimes describes the increase as lower, based on total bills which include the estimated cost of "supply" service, which is handled separately for rate purposes.)

On May 31, 2013, New York's Utility Project filed testimony of expert witness Nancy Brockway in the pending Con Edison rate cases.  The Project is seeking improved low income rates, reduced use of service interruption as a bill collection measure, and improvement in allocation of risks and incentives in storm outages and storm cost recovery.  See As Poverty Continues its Tight Grip on New York State, Utilities Increase Interruptions of Electric and Natural Gas Service to Collect Bills (New York's Utility Project, April 1, 2010).

Referencing an AARP report, The Quiet Blackout, New York's Utility Termination Storm, the testimony makes the point that for many customers, Con Edison bills are not affordable, and that each month more than 200,000 households are threatened with interruption of service due to unpaid bills.  The Utility Project proposes improved coverage of low income rates to reach more low income customers, and reform of collection practices to move toward reduced reliance on interruption of service. The Project urges review of low income customer participation and benefits from existing utility ratepayer funded energy efficiency programs, and reforms necessary to assure a fair measure of participation and direct benefits for low-income customers.  In addition, the Project urges review and reform of the "Revenue Decoupling Mechanism" which, ceteris paribus, gives Con Edison the same revenue through upward rate adjustments when service is interrupted and no electricity is delivered, for example, during storm outages or during periods when service is deliberately interrupted for collection purposes.  The Project also seeks reforms to decrease ratepayer subsidy of ESCO services and improved information for customers considering ESCO service, or who for any reason, want to know what Con Edison would charge for a specific amount of service during a particular time period.

Department of Public Service (DPS) Staff and other intervenors also filed testimony, which is available at the PSC website page for Case 13-E-0030 et al.

Notably, DPS Staff recommended electric and gas  rate decreases, as opposed to the increases requested by Con Edison.  The largest proposed DPS Staff adjustment to the Con Edison request is a return on equity (ROE) of 8.7%, in contrast to Con Edison's request for an ROE of 10.35.  The Department of State's utility Intervention Unit proposed a lower ROE, and improved low income rates.

Rebuttal testimony is due June 21, and hearings are currently scheduled to begin July 22.

Gerald A. Norlander

Updates

Rebuttal Testimony of Nancy Brockway (June 21, 2013)

ConEd Rates Turn Off Commission, Utility Says It Needs Increases to Fund Storm Protection (Wall Street Journal, October 7, 2013) 

Cuomo urges PSC to reject Con Ed rate hike, NYP&L October 8, 2013

Consumers would pay in multi-year Con Ed deal, NYP&L October 8, 2013

Gov. Cuomo Calls on Commission to Reject ConEd Rate Increases (Wall Street Journal, October 8, 2013)

AARP: Con Ed $420 Million Rate Hike Proposal Bad News for NYC Kitchen Table Economies (PR Newswire, October 9, 2013)

Settlement talks accelerate in Con Ed rate case, NYP&L (October 21, 2013) 

Who’ll say “Booyah!” when Con Ed’s rate case is decided?

NYP&L (October 21, 2013) 

Official: 3 children die in Bronx fire after candle lit (CNN, October 27, 2013)

FDNY says fire that killed 3 boys in the Bronx sparked by candle (ABC News, October 27, 2013)

Fire Kills 3 Boys After Con Ed Shut Power Off to Collect Unpaid Bill and Mom Used Candles (New York's Utility Project, October 26, 2013)

Fatal Bronx Fire Was Caused By Candles (New York Times, October 26, 2013) 

Officials: Candles Likely Cause Of Fire That Killed 3 Young Boys In The Bronx (CBS News, October 26, 2013)

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