Verizon Service Quality Continues to Lag; Company Proposes Solution

According to the latest report from the New York State Public Service Commission (“PSC”) , Verizon’s service quality remained poor during the fourth quarter of 2009 . While its customer trouble report rate (the number of service troubles reported by customers per 100 access lines) remains strong, the company repaired out-of-service situations within 24 hours only 48.8 percent of the time (the requirement is 80% restoral in 24 hours) and submitted more Service Inquiry Reports (250) in 2009 than it did in 2007 and 2008 combined. The PSC also found that Verizon has not met its Answer Time standard (80% of calls answered within 30 seconds) in more than two years. Somehow, the PSC Press Release announcing this decision proclaimed “Verizon Meets Most Performance Standards” .

Granted, Verizon has lost half of the access lines it had only eight years ago – at about 52,000 access lines a month – and its largest competitors (wireless providers and the voice service offered by the cable companies) not only are not subject to any of these service quality requirements, they are currently exempt from the state’s consumer protections and do not pay the same taxes and assessments as Verizon. This unlevel playing field has resulted in a skewed marketplace, where tax avoidance replaces service quality or service offerings as a means to support competitive advantage.

See Has the New York PSC Found a Way to Assess Wireless Providers?, and Cable VoIP Phone Providers to Start Collecting E-911 Surcharge.

Verizon does believe it has a solution to at least part of its service quality issues – change the standards themselves. Currently, when Verizon is unable to access necessary facilities in order to complete a repair (due to the customer or the property owner denying access) and when the customer requests Verizon to repair a trouble not the next day, but several days later, these are counted against the company in calculating its out-of-service 24 hours repair rate. PSC Staff indicated that it will offer for public comment in the near future a proposal to remove these situations from the measurements. Chairman Brown agreed, observing that the out-of-service and other repair metrics should be prioritized where the customer does not have alternative communications options, meaning that if a Verizon customer has a cell phone, it would be OK if they had to wait a few extra days to get their landline service repaired. He took this position despite the fact that accessing emergency services through 911 does not work the same for these “intermodal” competitors as it does for Verizon, if it works at all.

Is this really the direction we want to move in?

Lou Manuta

FCC Releases Less-than-Useful Broadband Deployment Data

This month, the FCC its “High-Speed Services for Internet Access Status Report” for the period ending December 31, 2008. Not only does this document report on data which is over a year old, it tracks broadband as connections over 200 mbps in at least one direction. At that speed, not only is broadband availability grossly over-reported, downloading graphics or video streaming are not going to happen, but somehow this antiquated definition continues to haunt the FCC.
In any event, the report shows that New York State has over 7.4 million broadband connections, including 1.1 million DSL, 4.1 million cable modem, and 1.7 million mobile wireless devices. That puts NY on the same level as Texas and Florida, far behind California, but well-ahead of other populous states like Illinois, Michigan, New Jersey, and Pennsylvania. DSL lines grew in NY from 737,000 in 2005 to 1.1 million in 2008 and cable modem grew from 2.2 million in 2005 to 4.1 million in 2008. Of these figures, 86.2% is residential and 13.8% is business. The report concludes that 79% of New Yorkers have DSL available to them and 99% have cable modem available, calculating a subscribership ratio of .72, trailing only Maine, Massachusetts, New Hampshire, and New Jersey.

Under the Stimulus Plan, the federal government has committed $350 million to map broadband providers by census tract. Until that data is complete and the new minimum standard of 768 mbps is employed (which is still low for most purposes, such as for streaming video), it is questionable what this new report brings to the table. For PULP, since between 79% and 99% of New Yorkers have access to broadband, why do only 72% subscribe? Of course, once more accurate and modern data is considered, that percentage is sure to decrease. How can we better ensure more people can afford broadband and are aware of its benefits?

PULP has proposed a stopgap solution – in the absence of any effective national or state broadband affordability program – to stimulate better utilization of existing utility low income rate discounts, so that those now on budgets seemingly too tight to afford broadband could create enough headroom to subscribe. This would be combined with an intensive digital literacy program. Large numbers of New York households are eligible for utility rate discounts for telephone and energy services, but only a small proportion of those eligible are reached by the utilities. For example, there about 1.3 million readily identifiable Food Stamps households which qualify for substantial telephone service discounts through Lifeline, but participation hovers around only 644,000 (including wireless Lifeline customers) . In addition to working to expand participation in the existing utility discount programs, PULP also proposed to develop a model for achieving affordable broadband service similar to the Lifeline discount telephone service program and model consumer protections to help prevent households from losing the service.

Unless programs like those proposed by PULP are implemented, broadband subscribership will never approach anything resembling universal coverage and we’ll be stuck with speeds better suited for e-mail rather than downloading the latest movie or an online course textbook.

Lou Manuta

Oceangate Submetering on Hold Pending PSC Review of Tenant Petition for Stay and Impact Assessment

When submetering is proposed by owners, it is common that tenants are misinformed and misled to believe that submetering will be offset by rent reductions and will only affect adversely those who are energy wasters, which is not true. The PSC often approves submetering without reliable information about the eventual impact on tenants, and after sham notice from the owner to the tenants. Tenants often learn far too late in the game what the real impact will be. In several situations, tenant petitions to correct a bad situation after submetering has been implemented have been deemed by the PSC to have been filed too late, despite flagrant violations of law and the minimal, unenforced tenant protections ostensibly required by the PSC in its orders allowing submetering.

The process of submetering typically lasts years, from application of the landlord to the PSC for waiver of the general prohibition against submetering, to installation of meters with NYSERDA subsidies to landlords, approval by DHCR, and implementation after a "shadow billing" period required by DHCR and HUD. The stages of the process typically involve actions by several state agencies, e.g., the PSC, DHCR, and NYSERDA, and in some instances, the federal Department of Housing and Urban Development (HUD).

The North Bay Tenants Association filed a Petition with the PSC in January 2010 seeking to halt implementation of submetering of their electrically heated apartments at Oceangate, a large development in Coney Island, Brooklyn. The North Bay Tenants' Association is represented by PULP.

Submetering at Oceangate was approved by the PSC in 2007 and was only now nearing implementation in 2010, but DHCR had not yet acted, tenant leases had not been modified to obtain informed tenant consent to rates, terms and conditions of the landlord's electric service, and "shadow" electric bills for submetered service had not yet been issued. The owner is simultaneously seeking a rent increase from DHCR and approval by DHCR of its submetering plans, including waiver by DHCR of HUD submetering requirements that apply to the federal subsidy program for Oceangate. HUD requires its prior approval, amendment of regulatory documents, reasonable adjustment to rents and utility allowances so that tenants who use electricity reasonably will not be harmed, notice to tenants and tenant consent to new leases before submetering may begin and a six month shadow bill period before actual charges are made.

The tenants' Petition filed with the PSC includes a claim that there must be an environmental assessment under SEQRA of the impacts of the project including possible displacement effects on low income households if there is a mismatch between rent adjustments and the utility bills, as is common. See Oceangate Tenants Ask PSC and DHCR to Halt Submetering and Conduct Environmental Impact Assessment Under SEQRA, PULP Network, January 28, 2010.

The PSC established a schedule for submission of papers and briefing, requiring the owner to respond to the tenants' petition by Feb. 22.

On February 19, 2010, attorneys for Oceangate filed a letter with the PSC requesting more time to respond to the tenants' Petition. The letter confirms an understanding -- apparently reached in ex parte discussions with PSC staff -- that in no event will the owner issue bills or expect payment for any charges for submetered electricity prior to June 1, 2010.

For more background information, see PULP's webpage on submetering.

Town House West Tenants Seek PSC Ruling to Clarify Tax Issues in Setting Rates for Submetered Electric Service

The Town House West Tenants Association today filed a Petition for a Declaratory Ruling with the New York Public Service Commission to decide the proper treatment of taxes in their landlord's method of calculation of rates for submetered electric service.

When a New York City landlord resells electric service to tenants, a per kilowatt hour rate is developed based on the total monthly charges for bulk service to the building (which the owner pays to Con Edison based on Con Edison's master meter reading), and then the owner charges each tenant for the kilowatt hour usage based on the landlord's reading of the tenant's submeter. The amount of the Con Edison bill not covered by aggregate tenant billings is paid by the landlord, as it would involve charges for common areas, parking lot lighting, the landlord's HVAC system, and so forth.

Con Edison bills to the landlord typically would include amounts added to the Con Edison rates for New York State Sales Tax, New York City Sales Tax, and MTA surcharges. Under the landlord's petition to submeter at Town House West, the rate for submetered service passes through any taxes included in the landlord's Con Edison bill. This was approved by the PSC, without discussion, in its submetering order for Town House West Apartments.

Residential customers are exempt from the State Sales Tax and the MTA tax. Also, they are being charged New York City Sales Tax as a surcharge on their bills. Under various tax rulings, it appears that the landlord can obtain exemption, credit, or refund of taxes paid by the landlord in the Con Edison bill, and can obtain a credit or refund of City Sales Tax if it was paid twice - once on the Con Edison bill of the landlord, and by the tenant through the separate surcharge.

The Petition for a Declaratory Ruling seeks a clarification that the landlord should not be including any taxes in the computation of the tenant submetering rate for which exemption, credit, or refund is available to the landlord.

See PULP's web page on submetering for more background information.

Update
See Power Companies Overcharging Some Co-ops & Condos: How to Stop Them
Habitat Magazine, 02-01-2010, discussing availability of tax refunds to owners of residential buildings who purchase utility service in non-residential service classifications.

Nebraska Supreme Court: State Can Assess 911 Fee on TracFone Wireless Services

On February 12th, the Nebraska Supreme Court issued an opinion which upheld the state's right to require TracFone to pay its 911 assessment on its wireless services.

Nebraska had created three preapproved methods to collect the surcharge:

a) The wireless carrier divides the total earned prepaid wireless telephone revenue received by the wireless carrier within the monthly reporting period by fifty dollars and multiply the result by the surcharge amount;

b) The wireless carrier collects on a monthly basis the surcharge from each customer's active, prepaid account. A customer with two or more active, prepaid accounts is assessed a separate surcharge for each active, prepaid account; or

c) A wireless carrier remits the surcharge upon the activation of the active prepaid account and upon each replenishment of additional minutes purchased by the prepaid customer.

The Nebraska Public Service Commission also provided an opportunity for prepaid wireless carriers to devise their own contribution methodology.

TracFone proposed to collect a surcharge from each customer to whom it directly sold prepaid wireless service, in an amount equal to one percent of the purchase price. TracFone estimated that the average wireless customer spends approximately $50 per month on wireless service and pays a 50 cent surcharge; therefore, a one percent surcharge on TracFone customers was, according to TracFone, comparable. TracFone explained that unlike other wireless service providers, TracFone could not deduct a surcharge directly from the customer's account balance, because the customer's prepaid account balance was stored in the customer's telephone, in the possession of the customer. TracFone also noted that it would be unable to collect a surcharge from customers who did not have a positive balance on the collection date, and that customers would be able to evade the surcharge by waiting until after the collection date to recharge their balances. The Nebraska Commission rejected TracFone's proposed alternative. The Commission noted that only 10 to 15 percent of TracFone's revenues are attributable to direct sales, with the remaining sales made by independent retail stores.

TracFone submitted a second proposal. This time, TracFone proposed to collect a one percent surcharge on every retail sale of TracFone service. TracFone would collect the surcharge on purchases made directly from it, and when service was purchased from an independent retail vendor, the vendor would collect the surcharge and give it to TracFone, which would in turn remit the surcharge for 911. The Commission rejected TracFone's second proposal, reasoning that it did not have jurisdiction over retail vendors who were not telecommunications carriers. TracFone was then ordered to use one of the three approved methods and challenged the ability of the Commission to require it to collect the 911 assessment.

TracFone argued that if a wireless carrier, such as TracFone, is unable to collect a surcharge directly from a customer, the Legislature intended for neither the carrier nor the customer to pay it. The Court found that this position is contrary to the stated intent of the 911 Act, and to a commonsense reading of the statutory language. The Court held that "TracFone's choice of business model does not give it license to throw up its hands and pay nothing. Instead, the surcharge should be collected from a wireless carrier's prepaid customers `whenever possible.' When that is not possible, a `comparable' surcharge will be assessed by the Commission, and the duty to remit that surcharge is the carrier's responsibility." Thus, TracFone could not avoid paying the 911 assessment.

Lou Manuta

Water Shutoff Issues Boil Over in Syracuse

According to the February 18, 2010 Post-Standard, City of Syracuse officials have a policy that after an owner whose house in in foreclosure stops paying water bills, the City "won’t take payments from a tenant once water has been shut off." A City Water Department rule states that

Applications for service to premises occupied by a tenant shall be made by the owner of the premises, who shall be responsible for all water, sewer, and garbage service to said premises.

This week, tenants organized to protest the policy of not serving tenants after the owner defaults. See Syracuse Tenants Protest City Water Shutoff Policies, PULP Network, February 17, 2010. Apparently the City relented and is putting the water on for awhile, but only until the tenant moves.

We believe a tenant should not be rendered homeless because of municipal water department policies that bar service to tenants or impose unreasonable conditions of service. A tenant should able to obtain water service from a municipal utility, despite a restriction in its ordinances, because there is a common law duty of a utility to serve the public without discrimination on just and reasonable rates, terms and conditions of service.

Moreover, because the municipal utility is a public institution, its rules and practices must pass muster under the equal protection clause of the Constitution. Denying water or shutting off water to those who are not owners of property is arbitrary and irrational. Even if a tenant defaults in payment, the City has recourse against the owner to collect the unpaid bill. Allowing the tenant to take service gives the City two parties it can collect from. Also, conditioning service upon the tenant paying the owner's bill for past service is unreasonable and unconstitutional. See Auburn N.Y. Municipal Water User Opposes City's Motion to End Litigation Over Constitutionality of Termination and Denial Practices, PULP Network, January 12, 2010

Today, the Post Standard Editorial Board recommended change in the Syracuse policies. See Water Shutoffs: Syracuse right to move to protect tenants, Feb. 19, 2010.

Due to a statutory gap, although private water utilities are subject to HEFPA, and municipal gas and electric utilities are subject to HEFPA, municipal water utilities are exempt. See City Water Customers Need HEFPA Protections, PULP Network, October 23, 2009. Under HEFPA, a tenant at premises where service is threatened due to an owner's default gets notice and an opportunity either to take service in his own name or to pay on the owner's bill for current (not past) service, and under the Real Property Law, the tenant can deduct those payments on the owner's water bills from rent. Also HEFPA provides for notice and a hearing prior to service termination, and notice to tenants prior to termination.

PULP Expresses Concerns with State HEAP Program, Proposes Improvements,Transparency and Public Scrutiny of Utility Vendor Agreements

The HEAP program uses federal dollars to address home energy needs of low-income households, with states allowed to design program details after involving the public in the program design. In February 17, 2010 Comments to the state Office of Temporary and Disability Assistance ("OTDA") on the development of the State Home Energy Assistance Plan ("HEAP") for 2010 - 2011, PULP pointed out significant shortcomings in protecting households Congress intended to benefit from the program.

PULP's comments urged that the State HEAP Plan for the next winter season address the following issues which lead to hardship for some of the households it is intended to assist and frustration of the statutory purposes of the program:

(1) The HEAP Vendor Agreement with the regulated utilities must be made publicly available and its key terms included in the State HEAP Plan. The current Vendor Agreement is not available for comment and is not submitted to the federal Housing and Human Services for approval along with the State HEAP Plan. It contains provisions affecting eligibility for emergency payments and use of HEAP funds which are privately negotiated between OTDA and the utilities.

For example, the current Vendor Agreement does not require the utility to credit payments so as to reduce bills for the current winter season and allows utilities to credit regular HEAP payments to arrears that are the subject of deferred payment agreements. It also permits the utility to "either accept or decline regular and/or emergency HEAP benefits authorized on behalf of an applicant for utility service." As a result, the utility decides whether the emergency will be resolved.

(2) Regular HEAP payments should go to the current season bills and should not be applied to amounts in abeyance or to arrears that cannot be the basis for termination of service. The Vendor Agreement with the distribution utilities and the State HEAP Plan should include unambiguous language that HEAP payments received must be applied to charges for the current heating season, unless the customer requests a different allocation. Currently, regular HEAP payments may be applied by the utilities to reduce deferred payment agreement balances from prior years that can not be grounds for termination while the customer makes timely installment payments. As a result, this year many Regular HEAP recipients saw no reduction at all in their current month's payment obligations in the winter season.

(3) Utilities should not have an opportunity to reject an Emergency HEAP payment approved for a customer. Some utilities have a history of occasionally rejecting Emergency HEAP payments approved for some customers and disconnecting these customers, or leaving them without service, despite the very real consequences that can result. We cited to a customer's death by hypothermia which followed National Fuel Gas's violation of the Home Energy Fair Practices Act coupled with rejection of an Emergency HEAP payment. See NFG Not Penalized for Woman Freexing to Death, Lawsuit Involving Death of Velma Fordham Settled by National Fuel. This is allowed and encouraged by the current OTDA Vendor Agreement.

(4) OTDA should investigate whether propane dealers are charging more to HEAP customers than to non-HEAP customers. PULP has become aware that some propane dealers are charging a premium on the per-gallon price of propane to HEAP customers, sometimes adding nearly 80 cents to a gallon of propane. No HEAP customer should pay more than a cash customer, under the federal statute, LIHEAA, and Section 7(C) of the current HEAP Plan.

(5) OTDA should be required to provide statistics regarding the size of the eligible HEAP population and the number of eligible households receiving a grant. On its webpage, OTDA provides an annual "households served" report, but does not compare this information to the current universe of eligible households throughout the state. The State HEAP Plan should compare the number of households receiving HEAP benefits with the number of HEAP-eligible households and include measures designed to reach eligible households not receiving assistance. Without this information, the public cannot readily assess how successful OTDA is reaching the eligible population of low-income households, or measure the effectiveness of program outreach.

(6) The HEAP application should provide an opportunity for applicants to automatically enroll in utility low income rates. The current application for HEAP includes a question regarding whether OTDA can share the applicant's name with their local telephone provider as part of the automatic enrollment process for Lifeline discount telephone service. However, the utility that provides service to the customer seeking HEAP assistance may have its own low income rate but not know that the customer is eligible for HEAP, which typically is among the programs that trigger eligibility for a low income rate. For example, the utility may not receive a HEAP vendor payment when the the applicant 's HEAP is for non-utility fuel delivery. The HEAP application would be a useful vehicle to establish an automatic enrollment process for HEAP customers to be able to receive the low income rate from their utility.

The draft State HEAP Plan will be available for public input - except for the utility Vendor Agreement - later this year.

Lou Manuta

Syracuse Tenants Protest City Water Shutoff Policies

Syracuse United Neighbors Announces Protest of City Water Shutoff Practices

For more information:

Phil Prehn--community organizer

315-476-7475 phil@sunaction.org

SUN Press Event Regarding City’s Water Shut Off Of Innocent Tenant Due To Landlord Default

Syracuse United Neighbors (SUN) will gather at the corner of W. Colvin Street and Midland Ave.. at 11:00 AM Thursday, February 18th to make a statement about the city’s policy of shutting off water service to houses with delinquent water bills--even if the only person suffering is an innocent tenant when a landlord defaults on payments.

The tenant will be available to tell his compelling story of how he has been punished by the city, his water turned off since Monday, despite his offer to the city to make the payments that the delinquent landlord has walked away from.

In the snowiest big city in America, it is a crime for a city to callously terminate the water service of tenants that have played by the rules--paying their rent and security deposits--and forcing them to either pay other people’s bills or be forced to move to a habitable apartment.

SUN is demanding two things:

1) Immediate restoration of the tenant’s water service

2) A commitment from the Mayor and Common Council to create an alternative hearing and payment structure that will eliminate the need to turn off an innocent tenant’s water service.

Who Will Benefit from Federal Subsidy of Nuclear Power Renaissance?

Steve Peace, a former California State Senator and impresario of the Killer Tomato cult movies, called father of the California electricity industry restructuring urged by Enron, (and who later denied paternity), has the following comments on the news that the federal government will now be committing billions of dollars to support new nuclear power plants in the South.

The December 1995 California PUC Order restructuring the state’s utility industry, bifurcated the traditional generation and distribution roles of regulated utilities. The federal alternative energy programs, under which Obama’s nuclear funding is administered does not account for these changes. As a result, even if California lifted its moratorium, there is no practical way to structure financing for such a highly capital intensive project.****

California taxpayers and rate payers will contribute billions of dollars to help provide cleaner, cheaper power … and jobs in largely southern states and receive no collateral benefit.

It is hard to be critical of California politicians for avoiding the energy issue given the incredible amount of just plain inaccurate assumptions they have to contend with. The PUC has even removed its December 1995 Order from its web site, contributing to the myth that it was the legislature that directed restructuring by passing AB1890 the following year. I get it. I lived it.

I went to Washington in 2000 to present to FERC the evidence of market manipulation. They ignored me. That did not surprise me. They were in Enron’s philosophical pocket. Staff and commissioners worshipped former FERC leader and Enron chairman Ken Lay. But, what was shocking to me was Enron’s ability to manipulate public opinion and cower California politicians. It was here that I learned two tough lessons: that truth had no intrinsic power and that California had no clout in the federal government.****

Solar and wind are great but, the ugly truth is that they are solutions measured in “megawatts”. Unfortunately, the challenge ahead of California is measured in “terawatts”. No debate will have more consequence, environmentally and economically, to California’s future. We ought to at least be a party to the discussion before more California money goes to other states that are at the table.

Obama's nuclear power initiative deals another blow to California taxpayers, California Independent Voter Network, February 16, 2010.

For more on the federal move to underwrite construction of new nuclear power plants see A Comeback for Nuclear Power, N.Y. Times, Feb. 16, 2010.

Has the New York PSC Found a Way to Assess Wireless Providers?

A fascinating decision from the New York State Public Service Commission (“PSC”) released on February 4, 2010 regarding whether the PSC could direct a wireless provider, Sprint PCS, to negotiate an interconnection agreement with a non-incumbent local exchange carrier (“CLEC”) and whether it could set a reciprocal compensation rate for the exchange of local (intra-MTA) traffic. At the heart of this case is section 5(6) of the Public Service Law (“PSL”), which precludes PSC jurisdiction over wireless service until there is a determination to end the suspension. Could the PSC do what was asked by the CLEC as long as section 5(6) is still in place? The answer was yes.

While section 5(6) is intended to prevent the PSC from regulating wireless service until it conducts a hearing and determines that the time has come to lift the prohibition on regulating wireless service, the state (and counties) already assess taxes on wireless service and collect E-911 fees to support the emergency response centers. While it is clear that the PSC can not, currently, require a wireless company to file a tariff and set specific rates for services as it can with landline local exchange carriers (“LECs”), the question before it was more subtle: could the PSC set rates for the termination of intrastate CLEC-wireless traffic? Under a recent decision of the FCC regarding T-Mobile, the FCC clarified that the states’ general authority to regulate rates for intrastate wireless traffic is not limited, except that LECs cannot impose compensation obligations pursuant to state tariffs. They can, however, have state-enforced intercarrier compensation rates contained in interconnection agreements negotiated with wireless providers.

Even though it recognized the importance of this FCC decision, Sprint PCS still argued that the PSC’s actions were precluded by section 5(6). The PSC found that its authority under PSL section 97(3) to establish just and reasonable rates where two or more telephone companies are interconnected superseded the prohibition in section 5(6) regarding wireless service and that federal law had already determined that intra-MTA traffic is indeed local traffic and reciprocal compensation is due.

“Therefore,” the PSC held, “while we are not precluded under PSL from establishing a rate for the termination of wireless traffic to LEC networks, under federal law in order for the rate to be just and reasonable it must also be mutually available to both parties. We will, therefore, proceed in establishing a just and reasonable rate for the termination of wireless traffic under PSL §97(3) which will be mutually available to both parties, and direct the parties to enter into negotiations and report back to the Commission within 60 days on how they plan on incorporating that rate into an traffic exchange agreement in accordance with the . . . FCC’s pricing standards.”

So, the PSC determined that establishing a reciprocal compensation rate between a CLEC and a wireless provider for the exchange of local traffic does not violate PSL section 5(6)’s prohibition of regulating wireless service. Does that mean that while section 5(6) is in place, the PSC can begin to assess wireless providers for regulatory assessments (payments made by landline providers to support the PSC’s operations, currently set at one-third of one percent of intrastate revenue) or for Targeted Accessibility Fund (“TAF”) assessments, which are paid by landline providers and support Lifeline, the relay service for the deaf, and E-911 access? These assessments – like the reciprocal compensation rate – are also not the types of tariffed rates or terms and conditions of service which are contemplated by the section 5(6) suspension.

With wireless and VoIP providers now capturing about half of the intrastate voice market, the PSC is only collecting about half of the regulatory assessment dollars it should be receiving from voice providers. Additionally, TAF contributors have seen their rate double in the past few years because only 50 percent of the market participates to support these vital programs. With this decision, the PSC may have opened the door to leveling the playing field for voice providers in New York. See Utility Regulatory Assessments: The Time Has Come to Include VoIP and Wireless. PULP Network, January 29, 2010.

Lou Manuta

Hazel Towers Tenants Ask PSC Again for Stay and Outside Audit of Submetering After New Overcharges

Background
The saga of ineffective PSC regulation of submetered electric service provided to tenants at Hazel Towers is in its second year. The PSC did not on individual tenant complaints of overcharges, rampant violation of HEFPA, and noncompliance with the PSC's prior Order allowing submetering at Hazel Towers. After individual complaints were brushed aside, the Hazel Towers Tenants Association (HTTA) filed a complaint in 2008 with the PSC seeking investigation and a stay of submetering. When nothing happened in response to that complaint, handled by the PSC's Office of Consumer Services (OCS), HTTA filed a Petition with the PSC in 2009. See

• A Year Passes with No PSC Decision on Submetered Tenant Complaints of HEFPA Violations and Overcharges, PULP Network, April 09, 2009,
• Hazel Towers Tenants Association’s Petition for Investigation and Remediation of Noncompliance with Prior Order for Vacatur or Modification of Order Establishing Terms and Conditions of Submetered Electric Service at Hazel Towers and for a Stay, May 6, 2009,
• PSC Seeks Comments on Petition of Hazel Towers Tenants to Halt Submetering, PULP Network, June 16, 2009,
• PSC Secretary Finds No Evidence of Delay in Handling Hazel Towers Tenant Complaints Regarding Submetering, PULP Network, July 28, 2009,
• Hazel Towers Tenants File Reply to Owner's Request to Dismiss Petition Seeking to Halt Submetering, PULP Network, August 18, 2009,
• Motion to Recuse OCS Hearing Officer for refusing to consider issues raised by Hazel Towers complainants, August 17, 2009

The OCS Initial Determination Based on the Owner's Self-Reported Overcharges
On August 21, 2009, the PSC Office of Consumer Services (OCS) issued its Initial Determination on the 2008 HTTA complaint. The Initial Determination revealed that OCS simply asked the owner of Hazel Towers to examine its charges in selected months to see if they exceeded charges for the same amount of usage by a customer served directly by Con Edison. The owner reported that its charges indeed had exceeded the upper limit in the selected months by more than $20,000. In the Initial Determination, OCS dutifully directed that the self-reported overcharges be refunded to tenants.

At the time, we expressed deep skepticism about the rigor of the lengthy OCS "investigation" of the complaint that relied on one-sided ex parte submissions from the owner.

In its more than one year of investigation, the OCS did not conduct its own audit of books and records to determine if the owner properly calculated charges. Instead, the OCS initial determination relies on the owner's self-reported admissions of overcharges in excess of the Con Edison rate, in selected months, through 12/03/2008. This may seriously understate the magnitude of overcharges. For example,

• Did the landlord mark up the cost of service but stay below the rate cap in some months?
• Has the landlord selectively omitted some months of overcharges in excess of the rate cap?

Indeed, OCS acknowledged in another case that one of the Hazel Towers tenants was overcharged by $325.42 -- yet the partial data from the landlord OCS now relies on in the Tenant Association case shows only $95 in overcharges to that same tenant over the same period, indicating a very substantial "misunderestimation" of overcharges. If that case is typical, the actual overcharges could be more than three times the amount that has been acknowledged to date.
* * * *
Thus far, the clear lesson of this case seems to be that landlords may disregard with impunity all provisions of a PSC submetering order which relate to tenant-customer protections. If and when tenants complain, submeterers can address violations at their leisure in ex parte communications with OCS.

Hazel Towers Tenants to Receive $20,000 Credits of Landlord's Overcharges for Submetered Electric Service, PULP Network, August 26, 2009.

The HTTA requested an Informal Hearing at OCS to review the matter. See Hazel Towers Tenants Association Seeks Review of PSC Submetering Decision, PULP Network, October 30, 2009. In their October 27, 2009 Statement for the informal hearing, the HTTA makes the following claims:

• The ID erroneously approved a defective, proposed lease rider to govern the rates, terms and conditions of submetered electric service;
• Complaint procedures changed without notice and still violate HEFPA;
• The ID was tainted by ex parte contacts with the submeterer and its counsel who made submissions upon which the ID was based without notifying PULP, as counsel to HTTA;
• The ID erroneously permits submetered customers to be billed for electric service without the prerequisite compliance with the Public Service Commission's Submetering Order;
• The ID erred in approving unaudited charges and only making "spot checks" for rate cap violations where there was evidence of widespread overcharges;
• The ID erred in approving a defective, proposed Notification of Rights and Procedures;
• The owner charged a late payment fee of $25 instead of the 1.5% per month provided by Con Edison's tariff;
• The owner's proposed termination procedures are not in compliance with the Home Energy Fair Practices Act;
• The owner failed to provide the low income electric rate to eligible tenants and failed to notify them of the availability of a low-income rate;
• Tenants with arrears were not offered a written deferred payment agreement, were not offered budget billing, and were not offered quarterly billing for elderly customers;
• The owner did not reduce the tenants' regulated rent as stipulated by the Commission Order and by the New York State Division of Housing and Community Renewal (DHCR);
• Lack of transparency and rate disclosure that would allow comparison between submetered charges and what Con Edison would charge;
• Failure to audit all charges where there was evidence of widespread overcharges;
• Failure to phase in submetering with tenant consent when leases are renewed, and not all at once.

New Claims of More Overcharges
Recently, the HTTA complained of further overcharges on their electric bills.

The HTTA notified the OCS on January 14, 2010 and demanded further investigation. Also, on February 2, 2010 HTTA filed a Supplement to their Petition to the PSC, again asking the PSC to stop the submetering, and to require an independent outside audit of the owner's method of bill calculation and overcharges. Since then,

• The owner has not responded to or refuted HTTA's submission of new evidence of overcharges
• OCS has not responded to HTTA regarding the new evidence of overcharges
• The owner has not responded to the Supplemental filing with the PSC, and
• The PSC has not asked the owner to respond to the supplemental filing.

As the HTTA supplemental filing with the PSC observes, apparently the only thing the owner has done right is to change its law firm and retain Harris Beach, the law firm of a former PSC Chairman, for its superior knowledge of the PSC's "inner workings."
********************************
Update
In 2013, the PSC issued its final decision regarding the submetering complaints of the Hazel Towers Tenants Association. See:

PSC Warns Landlords to Follow Submetering Orders Allowing Sale of Electric Service to Residential Tenants

********************

Follow PULP on Twitter

ESCO Claims Locking in its 28% Higher Rate is "Smart" and "Practical"

Residential natural gas customers in the Capital Region received a mailing from the Energy Service Company (ESCO) Vectren Source in recent days urging them to switch their service from Niagara Mohawk/National Grid to Vectren for significant savings on natural gas. Customers who switch to ESCOs pay the ESCO for gas they consume and still pay Niagara Mohawk/National Grid for the "delivery" aspect of service.

The advertising from Vectren states that "In these challenging economic times, it's a smart, practical decision to lock into this low rate because it is guaranteed for the next 12 months, regardless of what happens in the energy markets." The locked-in rate is $0.85 per therm.

The casual reader might conclude that it is "smart" and "practical" to buy from Vectren at a "low rate." They might not realize that 85 cents/therm is actually a very high price these days, significantly more than what National Grid is currently charging. Unfortunately, Vectren does not compare the current cost of gas from the utility, and does not provide a link to the Niagara Mohawk/National Grid gas rate chart so that customers can compare and make an intelligent price comparison.

Currently, Niagara Mohawk/National Grid is charging $0.66316 per therm. Thus, Vectren is charging 28% more than the utility. Put differently, a customer using 100 therms who switched to Vectren this month would pay more than $18 per month more.

How "Smart" is That?
Vectren does not share any information that might support its claim that it would be "smart" and "practical" for consumers to lock in Vectren's 85 cent/therm price now, paying 28% more.

Natural gas prices typically reach their peak in wintertime. Niagara Mohawk/National Grid gas prices have, in the past, exceeded the "low rate" offered by Vectren. For example, National Grid charged $0.90173 per therm in March 2009. On the other hand, Niagara Mohawk/National Grid's prices have held fairly steady in the low to mid sixty cents per therm range since October 2009. Prior to that, the rate in September was only $0.39238/therm, less than half the Vectren "low rate" of $0.85/therm

While it is always difficult to predict future energy prices, there are much larger than usual quantities of gas in storage, according to the EIA Natural Gas Weekly Update for February 4, 2010

Working gas inventories are 199 Bcf higher than year-ago levels and 150 Bcf above the 5-year average level (2005-2009). Working gas in storage continues to exceed historical levels and year-ago levels for this time of year in each of the three storage regions.

It is true that current NYMEX Henry Hub natural gas futures prices are signaling higher wholesale natural gas prices by next winter, but if prices decline, as they usually do after wintertime, and if Niagara Mohawk/National Grid buys and stores significant amounts of gas in advance for next winter, it seems rather unlikely that even with higher wholesale prices next winter, Niagara Mohawk/National Grid's price for gas in the next twelve months would exceed 85 cents/Therm. With current Vectren prices at nearly 20 cents more than the National Grid February 2010 rate, wholesale prices would have to spike a lot more than markets are currently signaling before any savings will be found by switching to Vectren.

In its advertising pitch, Vectren does not tell consumers why it thinks locking in its 20 cent higher price now would be "smart" or "practical."

On top of that, should a customer realize they made a poor decision after the three day "rescission period," they will be hit by Vectren with a $125 early termination fee if they try to break their contract in the first year. Of course, the customer may not even know they have been overpaying for natural gas until they receive their first bill from National Grid with the Vectren charges included. The contract also automatically renews for additional 12 month periods, but the early termination fee does not go away or even get pro-rated. At the end of the one year period, the contract automatically renews at an unstated new price, a formula based on NYMEX market prices with an unspecified "adder." Moreover, should Vectren decide to sell its customers to another entity, they can do so for whatever reason without the customer's consent.

Perfectly Legal?
A story from Ohio illustrates a common experience faced by customers who switch to ESCOs:

Maury Nehr signed up for a fixed-rate natural-gas contract and expected his heating bills to drop. Instead, the Northeast Side resident found bigger bills.
"They told me there were no extra charges," he said of the solicitor from Vectren Source, a gas marketing company.
Nehr says he was misled, and he has company.
**** Nehr, 54, can't afford to make the wrong choice for natural gas. His only income is his disability check, and he lives in a modest duplex.
His plan with Vectren costs about $20 per month more than he would have paid Columbia Gas of Ohio.
He didn't realize he faced extra charges, such as a gas transportation fee and sales tax -- and a $125 cancellation fee to withdraw before the term's end.
"I'm angry," he said. "I feel like I was deceived."
He filed a complaint with the PUCO and was told by the agency that Vectren had followed the law.

See Some Feel Scammed by Gas Contracts, Columbus Dispatch, March 15, 2009.

The New York PSC has specifically allowed ESCOs to impose early termination fees to deter disappointed from switching back to regular utility service. Thus, a challenge to the fee is unlikely to succeed.

Although some might think that an ESCO is engaging in fraudulent or deceptive practices when claiming that a fixed rate 28% higher than current rates is a "low rate," it is theoretically within the realm of possibility for the Vectren rate to be lower than the Niagara Mohawk/National Grid rate at some point in the next year. It might take hurricanes or energy market disruption, but it could happen.

Also, New York courts have held that the fraudulent and deceptive practices law, General Business Law § 349, is not meant to protect the gullible and uneducated. The PSC's "light" regulation of ESCOs may actually provide them with defenses when practices are challenged in court. Advertisers of utility service are allowed to engage in "puffery" in convincing customers to buy, so long as the terms of a contract are eventually divulged (in the contract boilerplate) and when the terms and conditions are on file at the PSC. See Using the ‘Reasonable Consumer’ Rule in Deceptive Practices Litigation, New York Law Journal, Dec. 28, 1998. As a result there is inadequate protection of consumers, particularly the elderly other vulnerable people desperate for energy bill savings who are preyed upon by ESCOs using high pressure sales tactics.

The Need for PSC Action
The New York PSC continues to tout shopping for competitive energy providers as a consumer remedy to high utility rates, without evidence that customers are better off over time when they switch to ESCOs. PULP has addressed the value of ESCO service in recent postings. See

• Value of ESCO Service Questioned,
• ESCO Advertises 9.75% Tax Savings on Delivery Service, and
• ESCOs Cost More -- A Familiar Experience.

The Vectren mailing further illustrates that the New York PSC "retail access" regime for "competitive opportunities" requires more supervision, more transparency, and more consumer protection if the goal is to foster healthy competition over price and value added, rather than stimulate slick advertising and traps for unwary consumers.

The reality is that consumers cannot shop their way out of high utility costs, and their best option for saving money on natural gas is to try to use less, through conservation measures or greater energy efficiency.

Lou Manuta

Austin, Texas Automatically Enrolls Low-Income Customers for Reduced Utility Rates

The Austin, Texas publicly owned electric utility, Austin Energy, offers significantly reduced rates to low-income consumers. It has adopted a system for efficient, automatic enrollment of customers who qualify for the reduced rates by reason of their receipt of other public benefits. See City of Austin Takes Extra Steps to Assist Low Income Utility Customers, Austin Energy, Feb. 9, 2010. Austin Energy is the nation’s 9th largest community-owned electric utility, serving more than 388,000 customers and a population of more than 900,000.

For more information on enrolling low-income customers in utility discount rate programs see PULP's website page on automatic enrollment.

Comments to OTDA on Next Year's HEAP Plan Due February 17, 2010

The New York State Office of Temporary and Disability Assistance (OTDA) has issued a notice inviting public input on development of the State Plan for New York's Home Energy Assistance Program (HEAP). Under the federal Low Income Home Energy Assistance Act (LIHEAA) states are given great leeway to design their programs, but they must do so with public participation in the process. The purpose of the federal grants is "to assist low-income households, particularly those with the lowest incomes, that pay a high proportion of household income for home energy, primarily in meeting their immediate home energy needs."

According to the OTDA Notice inviting public comment:

Written, faxed or e-mailed comments on the development of the 2010-2011 New York Home Energy Assistance Program State Plan will be accepted from February 3, 2010 through no later than close of business, February 17, 2010.

Written comments should be addressed to:

NYS Office of Temporary and Disability Assistance
HEAP Bureau
40 North Pearl Street, 11C
Albany, New York 12243

Faxed comments should be sent to:

NYS Office of Temporary and Disability Assistance
HEAP Bureau
(518) 474-9347 or to (518) 474-5281

E-mailed comments should be sent to:
NYSHEAP@dfa.state.ny.us

Later in the year, OTDA will issue a State Register Notice under SAPA and publish its draft HEAP plan for public comment and then finalize it for submission by the Governor to HHS.

In past years, a HEAP Block Grant Advisory Committee consisting of representatives of other state agencies, e.g., the PSC and Office for the Aging, representatives of energy providers, such as utilities and oil dealers, representatives of low income weatherization groups, and consumer advocates provided additional expertise and input to OTDA on design and implementation of the HEAP Plan.

OTDA did not schedule an Advisory Committee to discuss the 2009-2010 OTDA draft HEAP plan.

In his proposed budget for 2010-2011, Governor Paterson proposes to eliminate the HEAP Advisory Committee in the name of cost cutting. The Advisory Committee members receive no additional compensation from the state for their participation. The Governor also has asked the legislature to waive the statutory requirement requiring the allocation of 15% of HEAP funds for low-income weatherization. See Governor Paterson Proposes Elimination of HEAP Weatherization Funding, PULP Network, PULP Network, January 28, 2010.

The current New York State HEAP Plan is here.

OTDA's summary of comments received from the public in development of the current plan are not posted at its website. PULP's comments filed last year are here.

For more information about HEAP, see PULP "Winter Extra" Guide to HEAP Now Online, PULP Network, November 12, 2009.

PSC Sets Schedule for Consideration of Oceangate Tenants' Petition to Halt Submetering

On February 9, 2010, the New York PSC established a schedule for consideration of the petition of the North Bay Tenants Association to halt implementation of electricity submetering at Oceangate, a large complex of former Mitchell Lama apartment buildings in Coney Island, Brooklyn.

The PSC Notice Establishing Pleadings Schedule directs the owner, Starrett Oceangate LLC/Oceangate Associates, LP, to file papers by February 18, 2010, addressing

the relevance and application of the Commission’s Order Denying In Part and Granting In Part Petitions For Rehearing and Establishing Further Requirements in Case 08-E-0836, et al. (issued September 17, 2009), and any subsequent Orders regarding submetering.

The Commission Order referred to stopped submetering at four Manhattan apartment complexes, and is discussed at PSC Stops Submetering at Four Buildings, Sets Conditions to Address Tenant Concerns, PULP Network, September 17, 2009.

The PSC also indicated its expectation that

In its response, the owner should also address and submit information consistent with ordering clause 3 of said Order, and provide supporting information including, but not limited to, monthly apartment level data regarding electric usage and electric charges that would have been assessed if submetering had been implemented, and an identifier indicating whether the household in each apartment is income-eligible for the Home Energy Assistance Program.

Also, the PSC stated in the scheduling order that

Failure to satisfactorily submit all such information could result in the Commission’s issuance of a stay of its previous submetering approval.

It is anticipated that the parties will submit comprehensive pleadings addressing all issues raised in the January 28, 2010 Petition to Stay, Rehear, Vacate or Modify. Additionally, the parties should identify any and all issues and information the Commission should consider reaching its determination.

The North Bay Tenants Association and others will have until February 25, 2010 to reply to the submission of the owner. The North Bay Tenants Association is represented by PULP.

For background, see Oceangate Tenants Ask PSC and DHCR to Halt Submetering and Conduct Environmental Impact Assessment Under SEQRA, PULP Network, January 28, 2010.

Also, see PULP's website page on submetering.

The Untaxed NYISO "Virtual" Market

Background
The New York Independent System Operator (NYISO) is a New York utility, formed as a not for profit corporation at the request of the New York State Public Service Commission (PSC) following its 1996 "vision order" for deregulation. In November, 1999 the NYISO took over the role of the former New York Power Pool to dispatch power in the state's bulk power grid, telling power producers when to start up or shut down their generators to match the load from variable consumer usage in a way that maintains reliability, and operating the high voltage transmission grid. The Power Pool formerly dispatched electricity based on its cost of production, using the lowest cost power available consistent with reliability standards. The NYISO now dispatches power based on market price, i.e., what the sellers with "market based rate" dispensations from FERC demand in spot markets now operated by the NYISO. All energy sellers are paid the same market clearing price in the NYISO markets, regardless of their cost of producing it. All sellers thus benefit if the clearing price is increased.

Although the rates charged by sellers at the NYISO are under FERC jurisdiction, as are the rules or tariffs of the NYISO, the utility is still under the jurisdiction of the PSC for some purposes. These, we believe, include the duty to operate in the public interest of the people of New York, to foster greater transparency in its markets, and to control and remedy the exercise of market power by players in its markets.

The Untaxed NYISO "Virtual" Electricity Market
In addition to markets for energy and capacity, NYISO operates a non-physical, "virtual" market in which speculators can buy and sell positions based on electricity prices in the NYISO day ahead spot market (DAM) and real time spot market. According to the NYISO

Participants effectively buy (or sell) power at the day-ahead price and then sell (or buy) it back at the real-time price without having to actually produce or take delivery of the power.

The virtual market allows participants to arbitrage the difference between day-ahead and real-time prices. Virtual bidding has been shown to increase market efficiency.

A NYISO "State of the Markets" Report for 2008 indicates that "Virtual supply sold in the day ahead market is automatically purchased back from the real-time market. So, the virtual seller earns the quantity of the sale in MWh multiplied by the day-ahead price minus the real-time price."

NYISO says little if anything about the amount of the sales and purchases in its virtual markets in its 2008 annual financial report. Recent NYISO documents indicate that the costs to NYISO of operating the virtual market are not being paid by virtual market participants, but are being passed through to buyers, and ultimately paid by customers.

The New York State Tax Department has issued several advisory rulings - comfort letters to virtual market speculators - which opine that sales in the NYISO virtual market are exempt from the state sales tax. See, for example, NY Adv Op Comm T & F TSB-A-08-(3)S.

The Sales Tax Law, however, very broadly requires state sales tax to be paid on nonresidential electric service:

The amount of the sale price of any property and the charge for any service taxable under this article, including gas and gas service and electricity and electric service of whatever nature . . . .

Virtual market participants could be seen as selling and buying property - a contract or bet on what tomorrow's real time market price will be. Also, virtual transactions could be viewed as a part of electric service as broadly defined in the Tax Law. Indeed, the NYISO claims the transactions perform a valuable service and make its energy markets more efficient. When utilities like Con Edison make financial transactions to hedge electricity prices, the cost of the transactions is included in the retail price of electricity and sales tax is paid on it by consumers. Con Edison's Market Supply Charge tariff includes charges for

all costs incurred and benefits received from financial hedging instruments associated with transactions intended to reduce price volatility to customers (e.g., transaction costs, such as option premiums, costs of providing credit support and margin requirements, and professional fees, and gains and losses associated with such transactions made in the commodities exchanges and with other counterparties)

Con Edison customers pay sales tax when the cost of hedging instruments such as those sold at the NYISO virtual market are passed through to them. At the NYISO, some speculator participants are using the virtual market services directly, and not reselling the service and so should pay sales tax on it. The amount of the dollar value of the transactions in the NYISO virtual market is hard to find. For example, we cannot find any mention of it the NYISO Annual Report for 2008.

* * * *
Participants in the NYISO virtual market include hedge funds such as Centaurus Energy. The head of Centaurus is John Arnold, a billionaire former Enron energy trader. Brian Hunter, an energy trader recently found by a FERC ALJ to have manipulated markets, reportedly "referred to a trader from another firm, John Arnold of Centaurus, as the 'master of moving the close'” on the NYMEX exchange. See page 51 of the ALJ's decision, linked at FERC ALJ Finds Amaranth Trader Manipulated Natural Gas Markets, PULP Network, Jan. 23, 2010.

PSC Tells FCC it Wants to Share Jurisdiction over Future Network, but Does Little Now

As part of its “National Broadband Plan” proceeding, the FCC solicited comments on what the policy framework should be as we transition from a switched-based to an Internet Protocol (“IP”)-based communications network. In its January 27, 2010 comments, the New York State Public Service Commission (“PSC”) emphasized the role the states have “in protecting consumers in the provision of local telecommunications services.”

The New York PSC raised several points which, correctly, outline its position that the current dual regulatory structure it shares with the FCC should continue:

“What is important to understand and contrary to the general tone of the industry comments, is that the states have a role, in partnership with the FCC, in overseeing the transition of the network as it evolves from a PSTN [Public Switched Telephone Network] to an IP network. That partnership will provide a viable, robust, and reliable telecommunications network which will provide for the safety and welfare of the citizenry in addition to supporting competition in the industry.”

“There is merit in the FCC setting certain national policy that provides for uniformity, reliability, viability, and accessibility of networks. On the other hand, states are in a better position to provide oversight, remediate problems, and enforce regulations at the local level. States will remain interested in issues such as carrier of last resort obligations, carrier interconnection, intercarrier compensation, network reliability, and interoperability, just to name a few.”

“In order to ensure that networks remain robust and reliable, the states need tools such as service quality metrics and outage reporting records.”

“[T]he FCC and the states will both have roles in insuring that consumers are protected, that networks remain robust and reliable, and that competition and customer choice flourish – all three in an evolving regulatory environment where regulation will be limited to those areas that require it.”

Yes, state utility commissions are in a unique position to understand the local telecommunications markets in their respective states, but the transition to an IP network will likely eliminate the distinction between “local” and “non-local.” With the current offerings by Voice over Internet Protocol (“VoIP”) providers, such as the voice services offered by the cable companies, and wireless carriers, end user customers pay for a bucket of minutes at a set price. There is no “distance” associated with these minutes and the concept of local, regional, and long distance (and intraexchange, interexchange, and LATA-wide, for that matter) may eventually become a relic of the time in which they were created. The question is, more precisely, if all customers subscribe to some future modified form of “telecommunications service,” which may include data with voice thrown in as an adjunct offering, what role would a state regulatory commission play?

Keep in mind that the PSTN and IP networks are actually a single network, with data and voice traffic sharing the same wires and connections. That said, even using the current intrastate/interstate model, turf wars have arisen over the years between the respective federal/state jurisdictions. What will the jurisdictional distinctions be for the future network? Does a new paradigm need to be invented to continue the necessary concept of dual jurisdiction?

Absolutely not.

Communications will continue to occur between people across the street from each other (intrastate), from Montauk to Buffalo (intrastate), and from New York City to San Francisco (interstate). The concept of local and regional may fall by the wayside, but state boundaries are not anticipated to change. "Safe harbors," or rebuttable presumptions of what portion of a providers services and revenues are intrastate (under state jurisdiction) and what is interstate, (under FCC jurisdiction) should continue.

Which brings us back to the PSC’s Comments. They emphasize a salutary desire to continue to protect consumers, to ensure reliable networks, and promote policies which support competitive choice (on both the wholesale and retail levels). However, it is within the PSC’s jurisdiction today to protect wireless consumers but it has not yet acted. It can regulate wireless terms and conditions after holding a hearing to determine whether such a step is necessary, but it has not called for such a hearing. New York can also bring VoIP providers into the fold by, for example, including them in state funds which promote universal service, but has not. VoIP and wireless have combined to take about half of the state’s access lines, leaving the PSC overseeing protection of consumers for only 50% of the state’s intrastate telephone customers. The PSC needs to apply reasonable consumer protections and network reliability standards on all telecommunications providers in New York State or it will be completely left in the cold whenever a “new” network emerges.

Trying to ensure a toe-hold in the future IP network is essential for the PSC, but leveling the playing field and regulating similar services today in a similar fashion must be done in order for the PSC to have a say in the matter once the migration is complete. Changes in the technology used for communications do not lessen the need to protect consumers, and providers should not be able to avoid PSC oversight by hollowing out regulated services which use older technologies and putting customers into new categories of unprotected service.

Lou Manuta

Latest FCC Statistics Reveal Shrinking Telephone Subscribership in New York

This week, the FCC released the latest of its three-times-a-year Telephone Subscribership in the United States report. It contains data from November 2009 and shows that the percentage of households with a telephone in New York now stands at 95.0%. This figure represents a slight decrease from the last set of figures in July 2009 (95.4%) and continues to lag the national average and those of neighboring states. In fact, while the national average remained constant at 95.7%, all neighboring states saw an increase, except for one. Massachusetts increased from 98.2% to 98.4%, as did New Jersey (95.1% to 97.0%), Pennsylvania (97.9% to 98.6%), and Vermont (98.2% to 98.9%). Connecticut did see a decrease from 98.5% to 97.0%. New York State has now fallen behind all of its neighbors (and the national average).

Keep in mind, these statistics include voice service received from a traditional landline phone company, a cable company, and wireless service and so is considered to be all inclusive. When conducting its survey, residents are asked by the FCC

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.

Thus, the migration of customers to cable or cellphone service and "cutting the cord" should not affect the accuracy of the subscribership data. Also, the higher penetration of phone service in every neighboring state suggests that New York needs to focus more on this issue.

Using 2008 numbers, the US Census Bureau estimates that there are nearly eight million households in New York State. If 5% lack telephone service, that translates to 400,000 New York households lacking telephones. By comparison, if New York achieved the 98.9% penetration rate of Vermont, 312,000 more New York households would have telephones than have them today.

This is an unacceptably large number of families that can not reach emergency services or inquire about job openings.

According to the New York State Office of Temporary and Disability Assistance (OTDA), 2009 Food Stamps report there are at least 1.3 million households eligible for Lifeline discount telephone service across the state yet only about 300,000 landline and 344,000 wireless customers are participating in the Lifeline program. The problem has been identified: more than half of those eligible for Lifeline discount telephone service are still not receiving the benefit. While this total is an increase from recent years, the total number of Lifeline benefit recipients today is less than it was a decade ago. The recent improvement is due solely to the inroads made by wireless Lifeline providers during 2009 and not the efforts of OTDA or the New York State Public Service Commission (“PSC”).

Resolving the problem requires a higher level of commitment from the PSC and OTDA than what we have seen to date. As PULP reported in December 2009 , the PSC and OTDA should

(1) Fix the automatic enrollment process between OTDA and the Lifeline providers,

(2) Break down policy barriers that inhibit the provision of the assistance to those whose phone service is provided by a cable company, and

(3) Eliminate tariff barriers which bar Lifeline to customers whose local phone service is included in a bundled package of local and long distance service.

Lou Manuta

FCC Clarifies Lifeline Eligibility and Verification Rules for Wireless Providers, but Creates a Two-tier System

In a February 2, 2010 Order the FCC finally responded to petitions filed back in 2005 by various wireless providers regarding which Lifeline eligibility and verification rules apply to them – the FCC’s or the state’s rules. The FCC determined that even though states – like New York – may have enacted their own Lifeline programs (known as “non-federal default states”), these rules only apply to providers over which the state has jurisdiction. In all other cases, the FCC’s Lifeline requirements apply to the company offering the service. Why is this distinction important?

Only providers which have been designated as Eligible Telecommunications Carriers (“ETCs”) may offer Lifeline discount telephone service and Link-Up connection assistance and receive reimbursement from the federal Universal Service Fund. Where the state has jurisdiction over the provider and decides whether to grant the ETC status, the carrier will also be eligible for reimbursement from any state universal service fund, such as the Targeted Accessibility Fund (“TAF”) in New York State. Once designated, among the other requirements of being an ETC, the ETC is responsible for ensuring that its Lifeline customers are eligible for the benefit and must annually verify that their Lifeline customers continue to be eligible.

Eligible consumers in federal default states are required to certify that their income is at or below 135 percent of the federal poverty guidelines or that they participate in at least one of the following public assistance programs: Federal Public Housing Assistance, Food Stamps, Low Income Home Energy Assistance, Medicaid, National School Lunch Program’s Free Lunch program, Supplemental Security Income, or Temporary Assistance for Needy Families. As a non-federal default state, New York sets its own eligibility criteria; for example, it currently does not recognize Public Housing Assistance or the Free Lunch program, but does include Safety Net Assistance and the Veterans Disability Pension/Veterans Surviving Spouse Pension (although the state’s eligibility programs are not codified in regulation or statute and vary slightly by carrier).

Upon reviewing the petitions (after over four years), the FCC determined “that when a state has mandated Lifeline support but does not impose or enforce its certification and verification requirements on some carriers that operate within that state or on some Lifeline customers who reside within the state, the affected carriers and customers must follow federal default procedures. . . . Without clarification, some carriers may presume that they are not subject to either federal or state certification and verification requirements. In fact, the Commission’s rules contemplate that all ETCs will verify the continued eligibility of their Lifeline customers to ensure that the low-income support mechanism is updated, accurate, and carefully targeted to provide support to only eligible consumers. Verification also is an effective way to prevent fraud and abuse and ensure that only eligible consumers receive benefits. Because the ETCs described herein do not appear to be required by their relevant states to follow state certification and verification procedures, the only alternative means to comply with the Commission’s certification and verification requirements is to require them to follow the federal default rules for certifications and to submit their verification data to USAC [the Universal Service Administrative Company].”

What all this means is that some Lifeline providers in New York, the traditional landline telephone companies, can only add Lifeline customers which fall into certain public assistance programs (such as Safety Net Assistance), but can draw additional support from TAF (which they pay into). Meanwhile, other ETCs, the wireless providers, can draw customers from different eligibility programs (like the School Lunch program), but are ineligible to receive support from TAF (which they do not pay into) and are exempt from state consumer protection and service quality standards. Why should there be two separate Lifeline programs operating in New York? While the wireless providers can tap into arguably a larger pool of eligible customers (with the School Lunch program and Public Housing Assistance), they may not be able to offer as large a discount as their landline competitors because they receive less reimbursement.

The solution? Codify the state’s eligibility criteria to include all of the federal criteria, plus any additional programs (which the state legislature attempted with A.4967 in the previous session). Then, follow the language in section 5(6) of the Public Service Law and have the New York State Public Service Commission make a determination that the time has come to eliminate the jurisdictional suspension over wireless service. Then, encourage all wireless providers, especially those which already received ETC designation from the FCC, to seek ETC status in New York so they would be eligible for TAF reimbursement.

Lou Manuta