Saturday, October 26, 2013

Fire Kills 3 Boys After Con Ed Shut Power Off to Collect Unpaid Bill and Mom Used Candles

The importance of continued, safe electric service was tragically underscored again last night, when three young Bronx boys, ages 4 months, 2 years, and 5 years died in a fire apparently caused by a candle used for light.  According to a CBS news report,  "Con Edison confirmed that it had shut off power to the apartment due to non-payment. Neighbors said the mother of five who lived in the unit had been using the candles as an alternative to light the apartment. The power had only been off for a few days, Con Ed told CBS 2.

According to ABC News, "The mother had been approved for public assistance, and the lights were due to come back on Saturday."

According to a story, "A Con Edison spokesman said the apartment's electric meter had been removed and power shut off on Thursday. The electric bills had totaled $8,700 and had about $500 of late fees tacked on, a landlord told He said the one-bedroom unit was still in Turner's grandmother's name..."

The Utility Project has repeatedly warned that utilities are being allowed by their regulator, the Public Service Commission, to have rates unaffordable to the poor, to reduce customer service to those in need, and to unduly rely on service interruption, as a bill collection tactic, instead of negotiation or assistance in obtaining public aid as a last resort.  See, e.g.,
After Tropical Storm Irene raised awareness of the cost and danger of electric service interruptions due to storm blackouts, AARP issued a White Paper on the less noticed but no less dangerous and harmful deliberate service interruptions for collection purposes.  See The Quiet Blackout, New York’s Utility Termination Storm (2011).

After Hurricane Sandy resulted in electric service interruption to many thousands of customers, poor and nonpoor alike, a Moreland Commission was convened.  The Utility Project and AARP submitted a report questioning the deregulatory style of Public Service Commission, which relies on "performance regulation" to reward cost cutting, which has no performance standards for major storms, which maintains revenues at the same level even when service is off, and which defers for later recovery from customers all costs of major storms. As with major storms, utility revenues are unaffected by the 80,000 or so annual service terminations for collection purposes, due to the "revenue decoupling" mechanism promoted by environmentalists to guarantee the same utility revenues regardless of the amount actually used, and there is no performance "metric" to measure and discourage the interruption of service as a bill collection tactic.

In the recent Central Hudson/Fortis merger case, the Utility Project objected to approval of the merger and a rate plan extension without improvement of low-income rates and investigation of Central Hudson's practices regarding the interruption of service for bill collection purposes, submitting data showing that shutoffs have risen from 4,688 in 2005 to 13,687 in 2012, and that the percentage of customers shut off rose from 1.89% in 2005 to 5.99% in 2012.

In the Con Edison rate case now underway, the Utility Project is raising the issue of undue reliance on service interruption as a bill collection measure. See Utility Project Files Testimony in Con Edison Rate Case, Seeking Improved Low Income Rates, Reduced Service Interruption to Collect Bills, Improved Storm Cost Recovery Measures, June 2013.  See also, Testimony of Nancy Brockway, a former Commissioner of the New Hampshire Public Service Commission, who stated in her rate case testimony:
[R]ates charged by a Con Edison electric and gas are too high and too volatile for many low-income families. Second, with regard to the use of service interruption as a collection tool, the Company relies too much on this practice and not enough on better practices for engaging with payment-troubled customers who lack the resources to pay in full and on time. Third, steps should be taken to expand the reach and effectiveness of the low-income affordability program.
Usually quick to invoke confidentiality of customer information, in this situation Con Edison appears to be taking inoculatory PR measures to justify the interruption of service that preceded the fire and deaths:  According to a CNN report,
"The account had a significant amount of arrears -- well into the thousands of dollars," Consolidated Edison spokesman Allan Drury told CNN.   "We try to avoid turning service off to customers. We'll put them on payment plans to work with them to avoid turnoff, but this account had substantial arrears."  
The situation, where service was off while the customer sought public assistance, is similar to a 2005 incident  involving the death of a New York City child in a fire started by a candle while power was shut off. It was reported that the customer had made payment arrangements sufficient to be reconnected, the reconnection was scheduled for the next day, but the 2005 fire occurred during the intervening night:
  • "[A] Con Ed spokesman ... confirmed electricity to the apartment had been cut off at 1:45 p.m. Monday. Two hours later, [the customer] appeared at a local Con Ed branch to pay $700 - almost half the outstanding bill. [A]n order to restore electricity within 24 hours was issued two hours later. Tragically, it was not in time - firefighters responded to the scene of the fatal fire at 10:45 p.m."
Questions that should be answered in any investigation include:
  • Did Con Edison comply in all respect with the Home Energy Fair Practices Act when it terminated electric service to the customer?  See Lawsuit Involving Death of Velma Fordham Settled by National Fuel
  • Did Con Edison have a written deferred payment agreement (DPA) with the customer that was broken by the customer, or was it unwritten?  The HEFPA statute requires DPAs to be signed by both the company and the customer.  Utilities frequently enter into oral, unwritten agreements with customers.  As noted by the PSC, "However, 16 NYCRR § 11.10(a)(1) requires the utility to offer a written deferred payment agreement, signed "by both the utility and the customer," prior to terminating service for nonpayment. Therefore, a customer who defaults on a verbal deferred payment agreement remains eligible for deferred payment terms, as per 16 NYCRR § 11.10(b)(1)." 
  • If there was a written DPA that was broken, was it negotiated based on the customer's individual financial circumstances, as contemplated by Section 37 of the Public Service Law?
  • Did Con Edison shut the customer off for breach of an "oral" DPA?  The deregulation minded Public Service Commission gave its OK to unwritten oral DPAs and countered objections with the promise that if a customer broke an oral DPA they would still have the chance to keep service with a new written DPA.  See Utilities Must Offer Written, Negotiable Payment Agreements Before Terminating Electric or Natural Gas Service, August 2008. But Con Edison is known to threaten shutoffs for breach of an oral DPA.  
  • Did the utility provide aid to the customer in accessing public assistance for utility arrears? 
  • Did the bills include excessive charges for ESCO service, purchased from the ESCO by Con Edison and demanded from the customer under threat of shutoff?  
  • Did the customer have phone service to communicate and negotiate with Con Edison, which has been allowed by the PSC to close most of its walk-in service centers?  
  • Does Con Edison have effective liaison with public assistance agencies, and why does it leave power off after public assistance is assured?
  • Should Con Edison be required to make same-day reconnections when payment is guaranteed by HRA?
  • Were some of the arrears for which the customer was terminated stale, transferred from other persons, backbilled, reversal of shared meter charges, or incurred prior to other public assistance payments under Social Services Law 131-s that should have precluded repeat terminations to collect old arrears?
  • Could another adult person in the household have opened a new account in their name?
  • Did the customer have access to legal assistance to forestall the shutoff or pursue bankruptcy remedies?
Gerald A. Norlander

Thursday, October 24, 2013

PSC Extends Time for Public Comment on Central Hudson Nominee for "Golden Shareholder"

The New York State Public Service Commission, for procedural reasons, has issued a Notice Extending The Period For Commission Consideration Of The Proposed Holder Of A “Golden Share”
 in the Central Hudson/Fortis merger case.  The Commission previously issued an order approving the merger, which has been consummated.  The Commission has not ruled on pending petitions for rehearing and investigation whether the utility has earned in excess of the intended return and there should be rate reductions.  Comments on the "Golden Share" issue will continue to be accepted until Nov. 15.  

The history of holding company ownership of regulated utilities is replete with instances in which utility affiliates, and their customers, suffered from negative financial events affecting other holding company affiliates or the holding company parent. The most famous of these was the collapse of the utility holding company empire of Samual Insull in the 1930's, which may have prompted Congress to enact the Public Utility Holding Company Act of 1935 (PUHCA).  PUHCA regulated and effectively discouraged interstate and international utility holding companies, and promoted local utilities more responsive to local communities under full state regulation, as Central Hudson was.  Indeed, Central Hudson was once owned by the Niagara Hudson holding company and was required to be divested in the 1940's by the SEC, which administered PUHCA. PUHCA was repealed in 2005, over the objection of consumer, environmental, union and credit rating groups, and replaced with a far weaker law.  Subsequently, the pace of mergers and acquisitions of local utilities by interstate or international holding companies has increased.

The "Golden Share" is a corporate structure tool intended to help "ring fence" a regulated utility by preventing a holding company parent from taking its regulated utility subsidiary into voluntary bankruptcy or reorganization, where its assets could be liquidated, contracts could be abridged, and rates could be raised to generate more cash to cover liabilities. Where the holding company parent controls selection of the utility subsidiary's directors, the directors could vote to file for bankruptcy, but for the creation of a special "Golden Share" of preferred stock which has voting power to block a voluntary bankruptcy decision by the board.

At issue is who should hold the "Golden Share"?

In explanations of the Central Hudson/Fortis merger plan, the "Golden Share" mechanism was touted as the antidote to possible voluntary bankruptcy of the local utility which would protect customers and New York State even though control of the local utility is transferred out of the state and country.  Central Hudson's nominee for holding the "Golden Share" to protect consumers and the State is not a public official, such as the State Controller or Secretary of State, but rather is a corporate services company based in New Jersey.  Their proposed contract is with Central Hudson, and it contains no direct instruction for the Golden Shareholder to act in any particular way in voting on a corporate resolution to go bankrupt.  Nor is there any fiduciary accountability created by law or contract. Instead there is a vague statement that the "Golden Share" holder will protect interests under the public service law.  As the Utility Project pointed out in its Opposition to Central Hudson's Nomination of the "Golden Shareholder," and in its pending Petition for Rehearing, Rate Investigation and Temporary Rates, interests under the public service law include those of the utility.  In actuality, the nominee proposed for "Golden Shareholder" has no public service duty a New York State public officer would have.  Also, there is no ascertainable fiduciary duty placed on the private "Golden Share" holder to vote in any particular way, and thus there can be no real assurance that the shareholder nominee will actually protect the state of New York or customers of Central Hudson.

Public comments can be electronically filed at the Public Comment tab at the PSC website page for the Central Hudson/Fortis merger.

Gerald A. Norlander

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Friday, October 18, 2013

ALJs Rule that Refund Statute May Apply in National Fuel Gas Rates Proceeding

 In the pending proceeding to review natural gas rates of National Fuel Gas Distribution Company, the New York Public Service Commission set temporary rates subject to refund prospectively from the date of its order. In addition, in light of apparent over earnings in the past, the PSC asked the Administrative Law Judges to examine whether a rarely used statute authorizing refunds of past utility earnings in excess of the intended return applies to the case.  See PSC Power to Order Refund of Earnings Above Authorized Return at Issue in National Fuel Case, October 7, 2013.

The Utility Project and Department of Public Service Staff filed briefs supporting application of the refund statute in this case.  The Utility Project brief provides a detailed analysis of how deferred costs for pension and retirement costs, which ultimately are paid by customers, built up over the same period when National Fuel was overearning.  National Fuel filed a statement opposing application of the law and alternatively limiting it, and a reply brief in response to Staff and the Utility Project on October 16, 2013.

In a short Ruling Concerning the Applicability of PSL 66(20) on October 18, 2013, the Judges ruled that the refund statute may be applied, and said a fuller opinion will be issued. The judges sought input by October 29 from the parties regarding whether to adopt a  litigation schedule for the refund of past earnings issue that would be different from the current litigation timetable for the rate case.  That schedule calls for National Fuel to file testimony and exhibits regarding rates on November 1, 2013.  A decision would be reached by the Commission, at the earliest, in August 2014.

Gerald A. Norlander

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Thursday, October 17, 2013

PSC Denies Time Warner Petition to Expand Times when Phone Service May be Interrupted for Bill Collection Purposes

At its October 17, 2013 session, the New York State Public Service Commission denied the Petition of Time Warner Cable Information Services, LLC, to enlarge the times when phone service can be interrupted for bill collection purposes.  The Public Utility Law Project of New York, Inc. filed initial comments in the case generally opposing most of the relief sought by Time Warner in its petition, and supplemental comments.

Time Warner asked the Commission in Case 13-C- 0193 to expand shutoff times to include Saturdays and evenings until 9 PM.  This required waiver of the Commission's Telephone Fair Practices Act Regulations, which limit the days and times when phone service can be shut off.  According to the Commission Press Release,
“We are saying ‘no’ to Time Warner’s request to waive our rules regarding when it would be authorized for suspensions and terminations of its telephone customers,” said Commission Chair Audrey Zibelman. “The Commission’s rules applicable to Time Warner are consistent with the hours of operation of the Commission’s consumer call center which receives consumer complaints’ and requests for assistance. To ensure telephone consumers’ rights are protected, especially core customers such as the elderly and disabled, it is essential customers are afforded the opportunity to contact our call center if their telephone service is threatened with a potential suspension or termination.” 
Time Warner also sought a waiver of Commission regulations requiring service repair quality reports, arguing that competition and the ability of customers to switch telephone service providers now makes reporting of service repair time and other data unnecessary.  The Utility Law Project pointed out in its comments that the ability to switch providers is not an adequate substitute for enforcement of minimum service quality standards, and that even if one believes real competition makes service quality regulation unnecessary, phone service is oligopolistic and not truly competitive.

The Commission Press Release indicates PSC acceptance of Time Warner's argument:
Finally, the Commission conditionally granted Time Warner’s request for a waiver of its monthly service quality reporting requirements because, in Time Warner’s case, the need for regulatory action to ensure timely repairs for voice service has diminished due to the prevalence of competitive alternatives and the ability of residential and business customers to move to a different service provider. 
The Commission did require six months of reporting to establish a baseline of service quality data for future reference and comparison, and the Press Release indicates that "[i]f the data meets Commission staff approval, the company’s request for a waiver of certain service quality 
reporting requirements may take effect."  Thus, the Commission appears to have delegated to its staff, which has generally favored deregulation, the final say whether there will be meaningful enforcement of minimum service quality standards for Time Warner's home phone customers.

The Commission also granted Time Warner's request to limit distribution of residential white page directories to those customers who request them, and to waive Commission rules regarding allocation of undesignated partial payments from customers facing disconnection among various services, such as phone, broadband, and cable TV. Time Warner was allowed to have a "two bucket" system in which undesignated payments are allocated first to preserve phone service, and then to a second bucket of charges for all other services.  As a consequence Time Warner may be able to block customers from receiving phone plus cable tv or phone plus broadband services unless outstanding charges for both cable tv and broadband are paid.  The Commission rules that were waived generally allowed customers to choose which service they wish to preserve with partial payments and allow blocking of only unpaid services.

An order will be issued later explaining the Commission's reasoning.

Prior posts:

New York PSC to Consider Impact of Changing Technology on Phone Consumer Protection, 10/15/2013

Utility Law Project Opposes Time Warner Petitions for Waiver of Consumer Protection Rules on Telephone Shutoffs, Billing Practices, Customer Service Standards, 8/6/2013

Gerald A. Norlander

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Tuesday, October 15, 2013

New York PSC to Consider Impact of Changing Technology on Phone Consumer Protection

The advent of alternative technological platforms for the provision of phone and other telecom services has generated consumer protection issues now on the agenda at the New York Public Service Commission for its October 17, 2013 meeting.

The Time Warner Petition to Relax Customer Protection Rules for VoIP Cable Phone Service
For years, cable TV providers have provided home phone service, typically over the same coaxial cable used for television and broadband.   With some exception, notably the need for external electric supply, cable phone service (Voice over Internet Protocol, or VoIP) is  relied upon by consumers as the functional equivalent of landline service. Until very recently it has not been regulated.

Indeed, as more conventional phone service migrates to internet technology, there is increased effort to escape all state regulation under the questionable notion that use of alternative technology can take service out of reach of regulation, or that the transition from monopoly to multiple providers made state regulation unnecessary.  As stated by the Colorado Governor several years ago when vetoing a VoIP deregulation bill:
As this progression from landlines to VoIP occurs, Colorado cannot be left without the power to regulate such an important technology. Should the need arise, regardless of movement at the federal level, the PUC must have the latitude and authority to regulate the price, quality of service, and availability of VoIP in order to prevent significant harm to the consumers of this State.
Colorado Governor Vetoes VoIP Deregulation Bill, June 11, 2010.

Earlier this year, Time Warner conceded its VoIP home phone service is fully subject to state utility regulation. Time Warner swiftly petitioned the PSC for waiver of certain consumer protection rules, in PSC Case 13-C-0193.  See Hello? Hello? Hello? Hel...  Time Warner looks to make it easier to shut non-payers' phones off,  By Larry Rulison, Albany Times Union Aug. 27, 2013.

The Public Utility Law Project of New York filed comments in opposition to the waiver petition, opposing the relaxation of customer protections and customer service standards, and supplying information obtained in discovery regarding service terminations.  The Project also filed supplemental comments.

Case 13-C-0193 is on the October 17 PSC Consent Agenda and so the action being taken in the case will not be discussed at the meeting.
Photo illustration by Jeff Boyer / Times Union
See Albany Times Union Editorial: Protect phone customers, October 10, 2013.

The Verizon VoiceLink Case - Substituting Wireless "VoiceLink" for Copper Landline Service
 In Case 13-C-0197 Verizon filed a new tariff with the PSC that would have allowed it permanently  to replace traditional twisted pair copper landline phone service with its VoiceLink wireless service on the western part of Fire Island rather than repair the landlines damaged during Hurricane Sandy related storms.

Where Sandy did the most damage on Fire Island

 In addition, Verizon's tariff as filed would have allowed deployment of wireless phone service in other areas where the utility found it to be a cost effective alternative to repairing landlines.  Similar action was taken by Verizon in New Jersey.
Hurricane Sandy devastated this barrier island community of multimillion-dollar homes, but in Peter Flihan’s view, Verizon Communications has delivered a second blow: the telecommunications giant did not rebuild the landlines destroyed in the storm, and traditional telephone service here has now gone the way of the telegraph.  **** The changing landscape has Verizon, AT&T and other phone companies itching to rid themselves of the cost of maintaining their vast copper-wire networks and instead offer wireless and fiber-optic lines like FiOS and U-verse, even though the new services often fail during a blackout.The vision I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper,” Lowell C. McAdam, Verizon’s chairman and chief executive, said last year.
 On a New Jersey Islet, Twilight of the Landline, NY Times Oct. 14, 2013
 The New York PSC opened an investigation and trimmed back the tariff to limit it to temporary VoiceLink service on Fire Island while the broader issues of eliminating traditional copper landline service are examined.

Responding to the protest against substitution of the less robust VoiceLink service, Verizon announced that it would install a new wireline fiber optic system, withdrew the portion of the tariff that would have allowed permanent substitution of its wireless VoiceLink for wireline service, and argues the matter is moot. Many comments were received, before and after Verizon's change of position, including those of the Attorney General,  Common Cause/New York, Communications Workers of America, Consumers Union of U.S. Inc., Fire Island Association and AARP, represented by Richard Brodsky, former New York State Assembly Corporations Committee Chairman.

The Utility Law Project filed comments seeking clarification of the regulatory regime for the new wireline fiber system regarding universal service, consumer protection, affordability, and service reliability standards.  PULP also recommended that the Commission review how its relaxed service repair standards are working.  Under those standards the Commission-imposed  financial consequences for poor repair service are only imposed when service metrics are failed with respect to "core" customers who predominantly are those who receive low-income Lifeline  assistance.

The case is on the PSC Agenda for October 17, 2013, for discussion and possible action

Gerald A. Norlander

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Monday, October 07, 2013

PSC Power to Order Refund of Earnings Above Authorized Return at Issue in National Fuel Case

In the pending National Fuel Gas Distribution Company case the New York Public Service Commission  set temporary rates when it found that NFG may be earning more than anticipated when rates were last set in 2007. A proceeding at the PSC is now underway to fix permanent rates, which will be effective as of the date the temporary rates were set.

The Commission observed that in recent years, while National Fuel earned higher returns than the Commission anticipated, at the same time significant costs were deferred, in the expectation that they could be collected from customers in the future, when new rates are set.The Commission stated:
National Fuel’s earnings level indicates that its gas rates may be higher than needed to provide safe and adequate service, particularly in light of the recently allowed ROE and earnings sharing provisions established for other utilities. Further, absent action, National Fuel’s deferral balances may continue to escalate during a period of time that the Company is earning a return in excess of its cost of equity. These circumstances may result in National Fuel customers paying higher rates than are just and reasonable.
The PSC also asked the Department of Public Service administrative law judges to examine whether refunds could be made to customers under a little used provision of the Public Service Law, Section 66(20).  That law gives the PSC power to order refunds when a utility earns more than the profit anticipated when rates were last set.
The statute provides:
Notwithstanding any general or special law, rule or regulation, the commission shall have the power to provide for the refund of any revenues received by any gas or electric corporation which cause the corporation to have revenues in the aggregate in excess of its authorized rate of return for a period of twelve months. The commission may initiate a proceeding with respect to such a refund after the conclusion of any such twelve month period.
The ALJs asked parties to brief the applicability of Section 66(20) to the case.  On September 13, 2013 National Fuel argued in its brief to the ALJs the rarely invoked law should not apply and, alternatively, there should only be a one year look-back period for potential refunds.

Department of Public Service trial Staff argues in its brief that the law does apply, and says "It is up to the Commission to determine where the relevant facts, in combination, compel a finding of past unjust and unreasonable rates such that a refund to customers of excess revenues is necessary as provided for by Article 4 of the Public Service Law."

The Public Utility Law Project of New York, Inc. argues in its brief the statute applies.  The Project also discusses in detail the unusual situation in which deferred pension and OPEB costs, which may be collected from customers in the future, grew rapidly while earnings received by National Fuel were above the anticipated 9.1% return.  The Project argues that rates can be reduced if some of the deferrals are reduced, and for refunding earnings above the authorized return, which are estimated to be approximately $24 million since 2010.

NFG earnings since the last rate case are discussed in the Commission's Order to Show Cause initiating the case:
and in the Commission Order SettingTemporary Rates.  The PSC case file with all the filed papers is here:  13-G-0136  

National Fuel is expected to file a reply to the Staff and Utility Law Project briefs, and the ALJs will then decide whether the refund statute applies.  The exact amount of any refunds would be decided in further litigation.

There is also a court case pending in Erie Co. where NFG is challenging constitutionality of Section 66(20).  PULP is not a party there.  NFGDC v. Public Service Commission, (Erie Co. Sup. Ct. Index No. 20130015148).  

Gerald A. Norlander