FCC Claims "Reasonable and Timely" Broadband Deployment

On June 12, 2008, the Federal Communications Commission issued its Fifth Report examining the availability of advanced telecommunications capability to all Americans, as required by §706 of the Telecommunications Act. The Report, as did the Fourth Report in 2004, finds that “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.”

According to the Fifth Report, the number of high-speed lines in the U.S. has increased from 27.7 million in December 2003 to 100.9 million in June 2007. With regard to residential subscribers, the Commission’s data indicate that the number of high-speed lines increased from 26 million in December 2003 to 65.9 million as of June 2007. The Commission uses the term “high-speed” to describe services with over 200 kbps capability in at least one direction, a speed that is slow in comparison to current broadband technologies. For a discussion of the definition of “broadband” access and the FCC’s methodologies for collecting broadband data, see FCC Expands Broadband Data Collection but Sidesteps Affordability Concerns.

While at first glance these numbers appear to moving in the right direction, the U.S. deployment rate among residential customers, the end user cost, and the “dollar per mbps” value all lag other countries. In his separate dissenting statement to the Report, Commissioner Michael J. Copps had the following insights:

The fact is that your country and mine has never had any cognizable national broadband strategy to get the job done. So while broadband deployment is better than when I came to the FCC -- I would surely hope so! -- and the Commission may separately issue a report today showing improvements in broadband deployment, we’ve been working with one hand tied behind our backs, inhibited by the Commission’s dependence on antiquated methodologies and less than rigorous analysis. I’m happy we’re starting to change our benchmarks, but, my goodness, how late it is!

Just consider the fact that our international competitors deploy 25, 50 and 100 mbps broadband speeds at fractions of what it costs here in the United States. If consumers in Los Angeles or Washington pay $40 per month for a 6 mbps connection while those in London or Tokyo pay multiples less for 50 or 100 mbps, just think of the costs and competition burdens this puts on American consumers and businesses.

Surely broadband has created many good new jobs in the United States. But, you know -- and I haven’t seen any statistics on this -- it wouldn’t surprise me that our lack of a real broadband strategy has helped out-source tens of thousands of jobs, probably more, rather than keeping them right here at home. Again, I don’t know that this is true, but the fact that we can even raise such a question ought to scare us all.

Commissioner Jonathan S. Adelstein added in his separate statement:

Yes, more people have adopted broadband in recent years. But they have adopted broadband faster in other countries with which we compete. Just because a car speeds up doesn’t mean it wins the race, especially if other cars speed up faster. This report fails to admit that while we have improved, other countries have improved at a faster rate, so we are actually falling behind.

* * * *

The report unconvincingly attempts to dismiss the international broadband penetration rankings. The fact is the U.S. has dropped year-after-year. This downward trend and the lack of broadband value illustrate the sobering point that when it comes to giving our citizens affordable access to state-of the-art communications, the U.S. has fallen behind its global competitors. We do not wrestle with the question of broadband value, or price per megabit, for which our citizens pay far more than those in many other countries. According to the ITU, the digital opportunity afforded to U.S. citizens is not even near the top, it is 21^st in the world. Recent OECD data show the U.S. ranked 11th in the world in price per megabit. Other reports show U.S. consumers pay nearly twice as much as Japanese customers for connections that are twenty times as slow. This is more than a public relations problem, it’s a major productivity problem.

As a result, it is more than just a little bit disingenuous to claim that “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.” Where is the national broadband strategy?

Lou Manuta

Wages of 30% of New Yorkers Do Not Cover Minimum Needs

A recent report of the Fiscal Policy Institute prepared for Gov. David Paterson's "Economic Security Cabinet," which is looking at the plight of low-income families, shows that wages of 30% of New Yorkers in working families do not cover basic household needs.

Those basic needs, of course, include essential home energy and utility services - typically electricity, telecommunications, and natural gas or other heating fuels. These costs are imposing heavy burdens on low income households.

Since the recent closure of the Home Energy Assistance Program (HEAP) in May, PULP is hearing of more instances of utility customers who simply cannot make ends meet, who are facing termination of utility service due to large overdue bills. Utility low income rates and other programs, and state financial assistance programs, provide substantial assistance, but are flawed and need to be strengthened, particularly in light of rising prices. See High Natural Gas Prices Signal Trouble Next Winter for Low Income Customers.

Fortunately, the Governor's "Economic Security Cabinet" includes the Chairman of the Public Service Commission. See Governor Includes Public Service Commission in Economic Security Cabinet. The PSC needs to step up to the plate to help stem the growing affordability gap for low income utility consumers. There is much the PSC could do:
1. Improve utility low income rates of electricity and natural gas, with larger rate reductions and broader participation. See Utility Rate-Making to Meet the Needs of Low and Fixed Income New Yorkers

2. Rejuvenate New York's telephone Lifeline program which has lost more than 400,000 participants in recent years, who no longer receive rate reductions worth about $12 per month. See Assembly Passes Bill to Expand Low-Income Telephone Lifeline Assistance.

3. Expand and improve low income energy efficiency programs. See PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs.

4. Vigorously enforce the Home Energy Fair Practices Act to advance the state policy of continuous service without unreasonable qualification.

5. Establish incentives for utilities to reduce service interruption as a collection tactic

For further information about town hall meetings of the Economic Security Cabinet and its other activities, see the New York State Economic Security Forum.

Campaign for Fair Electric Rates Urges Reform of Wholesale Electricity Markets

The Campaign for Fair Electric Rates is a new coalition effort focused on educating the public regarding the failure of the wholesale electricity markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs) to adequately protect consumers. FERC has authorized organized cartel-type spot markets in an effort to simulate a competitive market environment for the sale of wholesale electricity.

Electricity rates in the states like New York, which allowed utilities to sell their power plants so that their rates are no longer under state regulation, have experienced higher prices, as can be seen by this comparison from Power in the Public Interest (Click on graph to enlarge):



In New York, most electric power must now be bought by retail utilities in wholesale markets, where FERC, the federal regulator, relies on markets and market rates to set prices.

The difference between electricity prices in RTO states and others that did not deregulate is increasing, according to McCullough Research, which has examined the contention that the higher prices are due to fuel costs. See Why Are Electricity Prices in RTOs Increasingly Expensive?

White Plains Landlord Submetering Electricity Without PSC Approval

Riverstone Residential Group, by its own account “the nation's largest independently owned real estate management firm,” is charging tenants for natural gas service based on the total amount of gas consumed at the building and the square footage of the tenants' apartments, together with a monthly administrative charge. PULP is representing a White Plains, NY tenant who claims this is in violation of N.Y. Pub. Serv. Law §§ 66 (14) and 65 (6). See Landlords Charging Tenants for Utility Service? The tenant's petition to the PSC is pending.

In the course of PULP’s investigation of the landlord’s resale to tenants of natural gas it was discovered that the landlord has also been submetering electricity to its 311 apartments without Public Service Commission approval. PSC regulations and utility tariffs prohibit submetering of electricity unless a specific order of the PSC has authorized it.

On April 11, 2008, Riverstone Residential filed a petition with the PSC, belatedly seeking approval to continue submetering, conceding that it never received approval to submeter electricity at One City Place. In the petition, Riverstone characterized its reselling of electricity without PSC permission for the past 3 ½ years as an "administrative oversight."PULP assisted the tenant to intervene in the proceeding and to file comments with the PSC on Riverstone Residential’s petition.

The comments note that Riverstone’s failure to obtain submetering approval may have placed Con Edison in the position of violating Commission regulations and its own tariff, which prohibit the utility from supplying electricity for submetering purposes without Commission approval, and exposes both Con Edison and Riverstone Residential to fines under PSL § 25(2).

The tenant-intervenor asked the Commission to follow its February 22, 2008 precedent in Petition of Solow Management Corp, where the Commission approved an “after-the-fact” submetering application only upon the condition that the submeterer refund to its tenants all of the money it had charged them for submetered electricity during the period when it did not have Commission approval to submeter.

National Grid Misses Point with its Low Income Program

National Grid recently proposed modifications to its low income “AffordAbility Program,” which provides assistance to certain residential consumers with arrears owed to the company. PULP reviewed the proposals, along with the Department of Public Service Staff and the NYS Consumer Protection Board, and filed Comments with the Commission on June 2^nd expressing our concerns with National Grid’s band-aid approach to helping low income consumers.

The AffordAbility Program
Under the current iteration of the AffordAbility Program, a low income customer with arrears and otherwise subject to termination of service is placed on an initial 12 month payment agreement. Under the terms of the agreement, the customer is responsible to pay a percentage of their total average monthly bill (95 percent for electric-only customers and 92.5 percent electric and gas customers). The remaining incremental bill amounts are deferred -- and added -- to the customer’s total arrears.

Customers completing 12 monthly payments and who receive a federal Home Energy Assistance Program (“HEAP”) grant, which is applied to their National Grid arrears, receive forgiveness of 50 percent of their total arrears, up to $250.

The company also refers all participating customers to NYSERDA’s Empower NY Program for energy saving education tips and energy efficient light bulbs. NYSERDA then works with the customer on weatherization and possible appliance replacement. A second reduction is applied to a customer’s monthly bills for weatherization services and the amount of that reduction is deferred and added to the customer’s total arrears. The Weatherization Deferral is intended to “frontload” the expected energy savings associated with the efficiency services provided by NYSERDA.

National Grid’s Proposals
The Program, which serves about 3,780 customers annually, has about a 50 percent default rate. As a result, National Grid decided it is time to revisit the program design. Generally, the proposed changes would convert the Program’s current annual arrears forgiveness credit to a monthly credit, eliminate the Weatherization Deferral to participants’ arrears balances, and limit participation in the Program to 24 months.

These changes will improve the Program and will provide additional benefits to the company’s low income customers who participate in it. For example, under the proposals, customers would receive $20 in arrears forgiveness for every month they participate in the Program (as opposed to the $250 benefit currently awarded only to participants who are able to make every monthly payment over a 12 month time period). Considering the current high default rate, PULP believes the changes, which would provide benefits contemporaneously with the monthly bills, might encourage or assist some participants to remain with the Program.

PULP’s Concerns with the AffordAbility Program
That said, PULP remains concerned that the Program offers little in the way of real bill reduction and, in order to participate, customers must agree to provide the full amount of every HEAP dollar they receive to National Grid during their time in the Program and for these payments to be used exclusively to pay down arrears.

The intent of the HEAP program is primarily to assist qualifying energy users in meeting current household energy needs, not to retire a portion of arrears that may have accrued from past years. The express purpose of the federal Low Income Home Energy Assistance Act is to assist eligible low income households “primarily in meeting their immediate home energy needs.”

Using HEAP payments for the current heating season is also contemplated in the Vendor Agreements reached between the utilities (including National Grid) and the New York State Office of Temporary and Disability Assistance, which specifically state “HEAP benefits will be credited to the customer’s current account.” PULP urged the Commission to examine more closely the appropriateness of having HEAP payments applied in this manner.

PULP also noted that the price of natural gas is rising and energy burdens for low income National Grid gas customers may increase substantially in the next heating season. See High Natural Gas Prices Signal Trouble Next Winter for Low Income Customers. The design, scope, and scale of the AffordAbility Program and its benefits simply are not adequate to address current energy burdens of National Grid's low-income customers, much less increased burdens.

In future rate proceedings, such as National Grid’s recent request to boost its natural gas delivery rates by 33 percent, National Grid’s low income programs will need to be revised to address more fully the growing energy burdens of its low income customers, to make service affordable, and to avoid additional hardship. The AffordAbility Program, even with the modifications proposed by National Grid, does not even begin to address the larger picture.
Lou Manuta

Wholesale Electricity Capacity Market Results Attacked by PA, MD, DE and NJ Utility Commissions and Utility Consumer Advocates

Background
Eschewing the traditional filed rate regulation system set up in 1935 by the Federal Power Act, FERC has allowed wholesale sellers of electricity to charge "market-based rates" for energy, capacity, and ancillary services. These rates are set privately either by unfiled contracts or in FERC-approved private markets run by RTO and ISO utilities such as the New York Independent System Operator. The NYISO since November 1999 has run day-ahead and "real time" spot markets for energy, in addition to taking over coordination of physical dispatch and operation of the bulk power grid from the New York Power Pool, and runs capacity markets too.

This experiment was begun when deregulation was the rage in the late 1990's. Electricity "restructuring" was adopted by fifteen states, including New York, and the District of Columbia. A major piece of the model was for the traditional utilities to sell their power plants, which were under state regulation, to new owners who would compete in a wholesale market, under FERC regulation, and for the traditional utilities to form holding companies patterned after Enron, with less regulated ventures such as retail ESCOs, wholesale trading companies, merchant power ventures in other jurisdictions, and telecom companies. Since the demise of Enron in 2001, no state has followed this path, and some, like Virginia and New Mexico, turned back to full state regulation rather than rely on the essentially deregulated federal wholesale markets.

The RTO and ISO Capacity Markets
States and utilities gave up their traditional planning processes, and went for a market substitute -- capacity markets -- the idea of which is to signal the market value of new power plants (or demand side substitutes), by requiring utilities that directly serve customers to pay existing owners of generating plants an amount they demand in an auction for basically just being there, in addition to the price of energy and ancillary services that they received in the spot markets.

Existing owners of low cost generation already reap very large rewards because the cartel-like RTO and ISO markets pay all sellers the same amount, which is the market clearing price, without regard to the cost of producing the energy. On top of that, they receive the capacity payments from load-serving entities that are required to buy capacity in NYISO auctions to meet their expected needs. The notion was that if supply is short and capacity prices go up, someone will decide, based on the price signal of how good it is to be in the power generation business, to meet the need with a new solution, e.g., a new power plant.

NYISO Capacity Markets: Billions Paid, Little Built
The track record of the NYISO capacity markets is that they have added significantly to the cost of electricity without achieving much in the way of meeting future needs. See Cornell Professor Gives Low Marks to NYISO Electricity Markets. According to Professor Timothy Mount,

the [NYISO] LICAP market has been an expensive and an ineffective way to maintain generation adequacy. In 2005 and 2006, customers paid over $1 billion/year in the LICAP market in NYC and merchant investors were still reluctant to commit to specific in-service dates for new generating units that have already received licenses for construction. This amount of money is enough to finance over 12,000 MW of new peaking capacity at a capital cost of $80/kW/Year (from Table A1 in the Appendix), and this amount of additional capacity would more than double the installed generating capacity in NYC. At this point, it is likely that New York City or state agencies will need to be more proactive before it is too late and reliability is sacrificed

A 2007 New York City Bar Committee Report on Electricity Regulation in New York acknowledges the failure of the NYISO capacity markets to induce adequate supplies of power at a time when new power plants are generally considered to be necessary for reliability and reasonable prices, particularly in downstate areas:

the only truly merchant plant built in New York City since 1999 has been KeySpan-Ravenswood’s 250 megawatt (“MW”) project. Orion Power also invested approximately $25 million in restarting a retired unit at the Astoria Generating Station. Otherwise, all major new plants have been either built by the New York Power Authority (“NYPA”) or under long-term contract to the Consolidated Edison Company of New York, Inc. (“Con Edison”) or the Long Island Power Authority. Outside New York City, however, plants have been constructed on a merchant basis.

See City Bar Committee Issues Report on Electricity Regulation in New York. To that, one might add, the owner of the largest merchant power plant constructed outside of New York City went bankrupt, and other merchant power plants have been shut down by owners who deny having any obligation to serve. Over the past decade, the Power Authority of the State of New York became the de facto builder or financier of last resort due to the failed reliance on NYISO capacity markets and the private merchant power sector.

Pennsylvania, New Jersey, Delaware and Maryland Commissions: Fed Up and Can't Take it any More
Fed up with the results of the PJM capacity markets in their area, and impending new capacity payments, state utility regulatory commissions of Pennsylvania, New Jersey, Delaware and Maryland filed a complaint against PJM last week with FERC seeking to prevent huge future capacity payments totalling $12 Billion under market rules previously approved by FERC. See
Electricity Said to Be Too Costly; Consumer Advocates Say Plant Expansion Hasn't Happened.

Joining in the complaint were the Division of Rate Counsel in the New Jersey Office of the Public Advocate, as well as state utility consumer advocates from Maryland, the District of Columbia, Ohio, and Pennsylvania; the Public Power Association of New Jersey; the PJM Industrial Customer Coalition; the Southern Maryland Electric Cooperative Inc, (SMECO); Blue Ridge Power Agency; Allegheny Electric Cooperative; American Forest and Paper Association; Portland Cement Association; Duquesne Light Company; and the United Stated Department of Defense and other affected Executive Agencies.

• The Pennsylvania Public Utilities Commission press release estimates that the state's consumers will be charged $5 billion for capacity payments to generating companies that have no commensurate duty to create more supply.
  
• The New Jersey Board of Public Utilities press release indicates that New Jersey consumers will be paying $2.3 Billion for unreasonable capacity charges in the coming years.
  
• The Maryland Public Service Commission press release estimates that the results of the recent PJM capacity auction will, if not voided, cost Maryland consumers $2 Billion.
  

The 211 page compaint alleges that implementation of flawed auction results is leading to unjust and unreasonable rates in violation of Federal Power Act requirements "because it has produced excessive capacity prices, has failed to prevent suppliers from exercising market power, and has not produced benefits commensurate with its costs," and asks FERC to reset the prices.

FERC has generally refused, short of court order, to review and reset unreasonable rates privately set by sellers to whom it has granted the "privilege" of charging "market-based rates," even when those rates have been affected by price manipulation. See Consumer Groups File Supreme Court Amicus Briefs in Electricity Market Rate Case.

Early Termination Fees

The virtues of deregulation, free markets, customer sovereignty, and choice of provider are constantly extolled by advocates of utility competition. Yet it seems that one of the first things these new industry entrants do is try to "lock up" customers and deter their switching to another provider for better prices or service. And, they try to enlist the help of regulators to provide regulation friendly to them and hostile to consumer interests.

This effort of the utility industry to obtain friendly regulation is not new, and is not really surprising. The nature of the competitive utility service is pretty much the same, no matter who provides it. In a really competitive commodity market with undifferentiated products, when there is surplus capacity, prices tend to drop down toward marginal cost, reducing profits. To prevent that, these "competitive" companies may

• conduct huge advertising campaigns to "brand" their service in order to attract customers based on non-price factors,
  
• use ever-changing and confusing pricing plans that make apples-to-apples price comparisons difficult if not impossible to make,
  
• merge, reducing supply options and the number of major providers to less than a handful, increasing the opportunities for oligopolistic pricing and gaming behavior so that without overt collusion, all major providers arrive at similar prices and practices that benefit them, and
  
• try to retain customers by imposing financial penalties if they switch providers.
  

A favorite tool used to deter switching is the early termination fee (ETF), often foisted upon consumers in the take-it-or-leave-it boilerplate long term contracts of competitive energy and telecom service providers. Another is the automatic renewal clause, by which a customer must affirmatively cancel service within a short time frame. If the window of opportunity to stop the service is missed, the customer again finds herself in a long term contract for another year or more.

Consumer groups are resisting ETFs. For example, in California class action litigation, plaintiffs are challenging the rationales offered by wireless phone providers for their ETFs:

[I]n the first of a series of class-action lawsuits in California state court against national cellular carriers, plaintiffs suing Sprint Nextel Corp. are attempting to undercut industry's long-held argument that ETFs levied on subscribers who break contracts early are necessary to recoup costs associated with subsidized handsets.

In his opening statement in the trial of the class-action lawsuit against Sprint Nextel, plaintiffs' lawyer Scott Bursor outlined to the jury how he intended to show that ETFs have another purpose altogether.

"We will prove that the early termination fee was marketing based, marketing created, and marketing driven," said Bursor, according to a court transcript. "We will prove that the ETF had nothing to do with the cost of any phone. We will prove that the ETF had nothing to do with the cost of any promotions. We will prove that the ETF had nothing to do with the cost of acquiring new customers. We will prove that the ETF had nothing do with any cost at all."

Bursor then proceeded to say plaintiffs would show the ETF was embraced as an arbitrary penalty "just to try to stop people from leaving. We will prove that Sprint never expected that it would be able to collect these terminations fees."

Bursor and other plaintiffs' lawyers will likely press the same line of argument in pending class actions against Verizon Wireless (which could have to shell out nearly $1 billion in ETF refunds), AT&T Mobility and T-Mobile USA Inc. in the Alameda County Superior Court. At least one other major ETF lawsuit is said to be advancing in the New York court system.

This should be an interesting case!

In litigation brought by NASUCA, the National Association of State Utility Consumer Advocates, of which PULP is a member, telecom companies and the FCC lost their bid to preclude states from exercising their statutory powers to exercise jurisdiction over "other terms and conditions" of telecom services such as wireless and interstate long distance, rates for which are under FCC jurisdiction. See the 1996 opinion of the Court of Appeals for the Eleventh Circuit in NASUCA v FCC. Although New York could exercise jurisdiction over non-rate terms and conditions of wireless telecom providers, it has not yet done so. See PULP's web page on wireless issues.

What is the response of the devotees of deregulation and competition to the growing pressure from states and consumers to curb ETFS and other overreaching by the new telecom and energy utilities?

They demand utility-friendly regulation!

These advocates of deregulation and free markets are now asking regulators to fix rates for ETFs -- without addressing reasonableness of any other terms, conditions or rates.

Such single-issue ratemaking, it were allowed, would shield ETF rules from judicial scrutiny under the "filed rate doctrine," which limits court review when rates have been approved by regulators. For example, Verizon Wireless recently asked the FCC to approve ETF rates in an apparent effort to preempt any state regulation of ETFs and to head off court action. See Consumer Groups Fight Verizon Early Termination Plan.

Similarly, in a case pending at the New York PSC, the PSC recently proposed to set rates for ETFs in ESCO contracts, suggesting @200, and asked parties to comment on this question:

3. Should early termination fees for residential
customers be limited to: (a) a flat amount (e.g.
$200); (b) an amount based upon a set fee per
month multiplied by the number of months
remaining on the contract (e.g. $8 x 20 months =
$160); or (c) some other variation?

See March 8, 2008 PSC Notice Inviting Comment, and ESCO Marketing Practices Subject of New PSC Proceeding.

PULP opposed this proposal to give ESCOs a filed rate ETF "club" without any evidentiary hearing on costs or reasonableness of the ETF charges, and without regard to reasonableness of rates and other terms and conditions of ESCO service. See PULP Files Reply Comments on the PSC’s Proposed ESCO Marketing Standards.

Home Heating Oil Prices Remain High

After winter demand for heating oil slackens and before peak summertime demand for gasoline, home heating oil dealers typically lock in prices for the next heating season. According to a recent AP news report, prices for home heating oil were double in May 2008 what they were in 2007.

This is not a good sign for New Yorkers who heat their homes with oil.

Last winter, customers may have benefited if they filled their tanks with lower cost oil before the full impact of price increases hit, or they may have had a contract that locked in a price or capped the maximum price. If oil prices stay high through the summer, prices during the 2008 - 2009 winter season might even be worse, creating more problems for low income households whose incomes have not kept pace with rising prices.

PULP Files Reply Comments on the PSC’s Proposed ESCO Marketing Standards

PULP has submitted reply comments in the PSC proceeding regarding new standards applicable to Energy Service Companies ("ESCOs") operating in the state. In the comments, PULP rebutted arguments and claims of ESCOs

• that early termination fees should be permitted when customers switch back to the distribution utility or to another ESCO for service
  
• that ESCOs should be exempt from regulatory assessments
  
• that ESCOs should be allowed to switch a customer's account from a utility or other ESCO based on their having obtained a request from a third party non-account holder without the express consent of the customer, and
• that ESCO complaint statistics issued publicly by the PSC should not disclose categories of complaints regarding any particular ESCO.

For further information, see ESCO Marketing Practices Subject of New PSC Proceeding and PULP's Initial Comments.

High Natural Gas Prices Signal Trouble Next Winter for Low Income Customers

Since January 2008, natural gas prices have continued to rise. Here is a chart from Apache Corp., a major independent producer of natural gas and oil, showing the price rise at Henry Hub in Louisiana. Click on the chart to enlarge it.



New York prices are even higher, due to transportation costs. This signals trouble for electricity customers this summer (see NY City Wholesale Electricity Prices May Rise 89% Due to Market Design and Higher Natural Gas Prices), and more trouble next winter for customers who heat with natural gas.

There are indications that the recent runup of natural gas prices, 57% thus far in 2008, may not recede. See Global Demand Squeezing Natural Gas Supply. Many natural gas customers are on the edge now, with large unpaid account balances built up during last winter or even previous winters that have not been paid off. If they are hit with high bills they cannot afford, and break a written payment agreement with their utility, they are subject to termination of service.

Incomes of low income households in New York have not kept pace with rising costs in recent years. See Pulling Apart in New York: An Analysis of Income Trends in New York State. The current surge in energy prices is making their energy burdens, already high, unaffordable. See The Economics of Low Income Energy Assistance in New York: No Wonder They Call Economics the "Dismal" Science.

National Grid recently filed new rates that would, if approved by the PSC, increase delivery rates by 33%, That, coupled with expected price increases for the gas, will increase energy burdens for the poor. The company proposes to reduce rates $5 per month for about 50,000 customers who receive HEAP, beginning a year from now, obviously insufficient.

Reform of the utility, public assistance, and HEAP systems for dealing with low income utility customers is necessary. To list just a few steps that should be taken

• Utilities need to adopt better low income rate programs.
• The PSC must vigilantly enforce consumer rights under HEFPA. For example, see PSC Nullifies National Grid's $1,000 "Grand Plan" Requirement for Utility Service.
• The PSC should establish performance standards that would discourage termination of service as a collection tactic. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households.
• The PSC should strive to set more stable and predictable rates because fragile low income household budgets cannot withstand unexpected retail price surges of the type encouraged in recent years to promote competition
  
• Additional funding for HEAP and reform of its benefit structure is needed. See PULP Urges HEAP Program Reforms.
• OTDA should update public assistance heating allowances which have not been reset since 1988
• Administrative restrictions created by OTDA for the emergency utility assistance program should be eliminated.

NY City Wholesale Electricity Prices May Rise 89% Due to Market Design and Higher Natural Gas Prices

In a May 15 2008 Summer Market and Reliability Assessment report by FERC staff, FERC Commissioners were advised (slide 6) that this summer wholesale market prices for electricity in New York City may exceed last summer's prices by 89%. Driving this increase is the major increase in the price of natural gas (slides 7 - 8). The effect of the natural gas price increase is amplified by the design of NYISO wholesale electricity markets promoted by the New York Public Service Commission and FERC which pay all sellers the same price even if, as in the case of electricity produced from wind, water, uranium and coal, the cost of production has not risen in tandem with natural gas prices.

At a May 21 webcast meeting of the New York Public Service Commission, New York PSC staff indicated that, based on recent NYMEX data,

the electric market energy prices this summer could be 55 to 66 percent higher compared to last summer's actual electric market energy prices. Therefore, the trend is for higher electric market energy prices for the 2008 summer period compared to last summer.

See webcast minute 54 - 58, transcript p. 40. The lower New York PSC estimate may reflect different data sources used by FERC, an averaging of expected New York City price increases with upstate New York, or other factors.

The effect on retail rates will depend on a number of factors, including the utility, features of its retail rate plan, and its energy purchasing and hedging practices which are considered trade secrets. In addition, the impact may depend on the customer's rate classification (e.g., industrial, commercial, residential) and whether the customer has fixed or variable rates.

In general, to effectuate its 1996 "vision" of a deregulated power generation sector, the PSC promoted the eventual flow through of functionally deregulated NYISO prices to all customers, starting with larger industrial and commercial customers first, and with a more gradual introduction of such pricing to small commercial and residential customers. See Disconnected Policymakers. [Other states that restructured are encouraging utilities to retain or build power plants under state cost of service regulation [to avoid purchases from sellers with market-based rates allowed by FERC], and to make necessary purchases using a diverse portfolio of energy supply sources, with a mixture of long term contracts, that relies as little as possible on the volatile spot market prices].

The effect on retail residential rates of these large wholesale spot market price increases will depend on several factors. Some utilities like Con Edison and Orange & Rockland have been allowed by the PSC to buy much of their power at NYISO spot market prices, perhaps 40%. Also, some of their long term contracts may be indexed to NYISO spot market prices or fuel price indexes. As a result, prices of some of their off-spot market purchases may also increase significantly. These utilities most closely implemented the PSC and Enron-promoted restructuring model, and soon after the advent of the NYISO spot markets were allowed by the PSC to change their rates every month to pass through the effects of their recent wholesale energy purchases. This shifted market risk in the flawed electricity markets to consumers. See Consumers in Peril, Why RTO-Run Electricity Markets Fail to Produce Just and Reasonable Electric Rates, APPA, 2008.

Con Edison has indicated that this summer its residential customers may see increases of "only" 13%. Summer Juice Bill to Give Jolt. Con Edison residential rates spiked significantly in July 2007, so the large expected price increase for the summer of 2008 might be on top of a prior record spike. See Excelsior! Con Edison Residential Rates Spike (Again), PULP Network, September 6, 2007.

Upstate residential utility customers will not face the increases likely to affect customers of Con Edison and Orange & Rockland. RG&E maintained the benefit of low cost power generation by not selling some its power plants, and offers a fixed price so customers who chose that rate option will see no increase this summer. NYSEG residential customers who chose a fixed rate plan will see no increase. National Grid is in a long term rate plan that stabilized rates for residential customers.

Large customers, however, are likely to see increases that will reflect more directly any increases in NYISO spot market prices.

Why do electricity prices go up so much when natural gas-fired generation accounts for only about a quarter of the electricity used in the state? According to a NYSERDA report, there is a diverse mix of fuels for the state's electricity sector:

By fuel type:
Nuclear . . . . . . . . . . . . (26%)
Natural Gas . . . . . . . . . . (25%)
Hydro . . . . . . . . . . . . . . . (18%)
Coal . . . . . . . . . . . . . . . . (13%)
Net Imported Electricity (12%)
Petroleum . . . . . . . . . . . . (4%)
Biofuels . . . . . . . . . . . . . (2%)
Wind. . . . . . . . . . . . . . . . (0.3%)

NYSERDA, Patterns and Trends 1992 - 2006, Jan. 2008. Recently, there has been an increase in the amount of wind generation. In the NYISO markets, all sellers -- even those with much lower cost electricity -- are paid the same price paid to the seller whose output clears the market, which in the New York City market is almost always a natural gas peaking unit during periods of heavy usage.

Natural gas prices have soared since this system was adopted, and recent trends indicate the possibility of sustained higher prices. See Global Demand Squeezing Natural Gas Supply, NY Times, 5/29/09. The value to consumers of a fleet of power plants with diverse fuels was lost when, with encouragement by the PSC, New York's utilities sold their power plants to new owners. Now electricity for customers must be bought at market rates based on the price demanded for the most expensive output at any time. The value of lower cost generation is now reaped by the wholesale market sellers.

In other states, where utilities still hold power plants under full state regulation, their price increases have been less than New York's, which are now second only to Connecticut (another "restructured" state) in the continental states. See Total Average Delivered Retail Electricity Price, New York vs. Regulated States, 1991 - 2007 (PPI) showing that the electricity price gap between New York and other states has increased since the advent of "restructuring" and greater reliance on deregulated wholesale market prices. See also, Decade of Deregulation Felt in Climbing Bills, describing the Maryland experience. No state has adopted a regime similar to New York's since the demise of Enron in 2001. Some, like New Mexico and Virginia, changed their direction and retained ownership of power plants by state regulated utilities, thus avoiding purchases affected by the high federal market prices. Other states, like Connecticut, have reauthorized their utilities to build new power plants that would be under state cost of service regulation.

Bill Would Require PSC to More Closely Scrutinize Telephone Area Code Changes

State Assembly members have filed a bill, A11082, that would require the Public Service Commission to more closely scrutinize the need for telephone area code changes, and to investigate in a public evidentiary process the possibility of avoiding the cost and inconvenience of unnecessary area code changes by reclaiming existing numbers that are unused and thus stranded in sparsely populated areas. The memorandum in support of the bill indicates that it would apply to the pending consideration of a new area code in the current 315 area code region in central New York.

An identical bill was introduced in the Senate, S08506

There are more than 5 million unused numbers currently in the 315 area, but in recent years many local exchange codes with blocks of 10,000 numbers each were allocated to sparsely populated localities in rural areas that would appear to have no need for them. The PSC last month decided to go ahead with plans to create a new area code in the 315 region, denying a request by PULP for an on the record proceeding to examine necessity of the action and the possibility of freeing up redundant blocks of 10,000 numbers now stranded in areas where there is no need for them. See PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes.

In late 2007 the PSC finally halted its practice of giving out numbers 10,000 at a time in rural areas of 315, and implemented a 1,000 number at a time system. In the brief period since implementation of that reform

• the rate of NXX codes issued for the 315 area has fallen drastically, with only one net new NXX assigned in the first quarter of 2008
• some unused NXX codes have been returned by telephone companies and made available to meet needs anywhere in the 315 area
• the number of available NXX codes for use anywhere within the 315 area has risen to 100 from a low of 93 in mid-2007
  
• NANPA extended a projected number exhaustion date, and
  
• an April 2008 NANPA website report does not indicate that the 315 area code is in "jeopardy" of exhausting its numbers.
  

PULP has asked the PSC to reconsider its action and to hold a public hearing to determine if redundant NXX codes allocated in recent years to sparsely populated areas, which may be only slightly used, can be "decontaminated" and reclaimed for use where there is a real need, preventing cost and inconvenience to millions of telephone customers. See PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315.

Assembly Passes Bill to Expand Low-Income Telephone Lifeline Assistance

Background
Telephone Lifeline and Linkup assistance can provide meaningful reductions in the cost of telephone service for low-income persons. For example, the monthly bills of a low-income Verizon Lifeline customer are reduced by approximately $13.50. Linkup can reduce the Verizon charge for a premises visit to install phone service from approximately $91 to $5.

All states were required to provide Lifeline assistance in the federal Telecommunications Act of 1996. Under that statue, the FCC adopted regulations which establish minimum federal Lifeline and Linkup benefits and which give states incentives to supplement the federal. States are allowed to devise their own list of categories of eligible customers. The New York PSC oversees the state Lifeline and Linkup program. The PSC fostered creation of the Targeted Accessibility Fund of New York, Incorporated (TAF) in 1998 to administer the collection and distribution of the state portion of certain universal service programs, including Lifeline, emergency services E911, Public Interest Pay Phones, and the Relay System.

Eligibility for Lifeline and Linkup is based upon the customer's income or receipt of benefits in a list of programs that have an income test. For New York Verizon customers, the assistance programs that currently trigger eligibility for Lifeline and Linkup are:

• Supplemental Security Income (SSI)
• Home Energy Assistance Program (HEAP)
  
• Food Stamps
• Medicaid
• Veteran's Disability or Surviving Spouse Pension
• Family Assistance (TANF)
• Safety Net Assistance
  

PSC Inattention
In contrast to other states, the New York PSC has issued no official regulations defining Lifeline eligibility. Over the course of many years, the PSC has issued several orders regarding the Lifeline and Linkup programs and approved Lifeline and Linkup tariffs of the various telephone companies as they arose in rate cases. As a result, there are different Lifeline eligibility standards and different price reductions for telephone customers in New York state, depending on their telephone company. The Universal Service Administrative Company (USAC) has a web page where one can look up the Lifeline program details of each New York Telephone Company.,

The New York PSC issues no regular reports on universal service issues and Lifeline program enrollment.

New York Lifeline Enrollment Plunging
As a result of changes in the state public assistance laws and the absence of any adjustment of public assistance levels in the past eighteen years, many people are no longer eligible for assistance in programs such as TANF, which confer Lifeline eligibility. It appears that this -- coupled with other important factors -- contributes to the plunging enrollment in New York's Lifeline program. Low-income New York telephone customers are missing out on important Lifeline and Linkup benefits, as demonstrated by the chart below: [Click on Chart to enlarge]

At its peak in 1999, the Lifeline program assisted approximately 746,000 New York customers, not even half of the number of persons financially eligible then. In recent years, the number of Lifeline customers has been shrinking, to about 310,000 at the end of 2007. As a result of the shrinkage since 1999, we estimate that low income telephone customers in New York who once received Lifeline assistance are now paying $60,000,000 per year more than they would if Lifeline enrollment had not declined.

Other major factors affecting the enrollment downturn may be Verizon's refusal to provide Lifeline assistance to eligible customers who purchase their local telephone service as part of packages that also include long distance or other services, and the migration of customers to cable telephone service providers who do not now provide Lifeline rate reductions. See Verizon Re-Launches Automatic Enrollment for Lifeline. Also, some customers eligible for Lifeline may have migrated to certain wireless service providers, such as Verizon Wireless, who do not offer any Lifeline rate reduction. See Reduced Rate Wireless Lifeline Service Now Available in New York.

PULP estimates that less than 15% of the telephone customers in New York state who are financially eligible for Lifeline actually receive the benefit today .

Adding Eligibility Categories
One solution to reaching more low income households with assistance to make their telephone service affordable is to increase the eligibility-conferring categories that qualify a customer for the reduced rates. In a 2004 order, the FCC increased categorical eligibility for Lifeline assistance to include recipients of HUD Section 8 housing assistance and the National Free School Lunch Program.

The New York PSC, however, did not follow suit.

Legislative Action
The New York Assembly on May 14, 2008 passed a bill, A02533 designed to address, in part, the severe shrinkage in the number of customers receiving reduced price telephone service.The new bill would establish Lifeline and Linkup eligibility for customers who receive benefits in the following additional categories:

• National School Lunch Program
• New York State Earned Income Tax Credit
• Child Health Plus, Family Health Plus, or other similar health insurance programs
• Additional programs designated by the PSC
  

In an era of rising costs and stagnating incomes for lower income households, the New York PSC, apart from costly but ineffective advertising campaigns, has made no real progress toward making telephone service more affordable to customers eligible for, but not receiving Lifeline assistance. Indeed, the state is losing ground. New York state needs to reverse the downward trend in the number of customers receiving Lifeline assistance, and to establish a goal of providing the benefit of reduced Lifeline rates to all eligible customers. Improving the program will enable households to afford telephone service without hardship.

Should Telecom Customer Migration Rules be Extended to New Carriers?

A request by Time Warner (TW) Telecom to have the PSC’s End User Migration Guidelines extended to new providers, including Voice over Internet Protocol (“VoIP”) and cable companies offering voice service, may open the door to a fresh regulatory landscape in New York.

The End User Migration Guidelines were originally implemented in New York in January 2001 and were greatly expanded in June 2002. The objective of the Guidelines is to ensure that customers can migrate from one competitive local service provider (a “CLEC”) to another and from a CLEC to the incumbent (“ILEC”) without encountering delays, service problems, slamming, or cramming. The Guidelines established general business rules and privacy protocols as well. In fact, the Guidelines have been a major success in aiding customer migration between local carriers and have since been adopted in other states, oftentimes in their entirety.

New types of players providing local telecom services have joined the marketplace since adoption of the Guidelines in 2002. TW Telecom says in its Petition that it is time to consider expanding the applicability of the Guidelines. While the company’s Petition was just filed this week and the Commission has not yet had an opportunity to respond, this could be a helpful step for all consumers since the same uniform set of rules would apply as customers switch from provider to provider regardless of the technology used. Most customers don’t distinguish between switched and IP technologies when selecting a telecom provider and are already permitted to keep their telephone number when they go, for example, from Verizon to Cablevision. Shouldn’t the same migration rules apply as well?

Currently, residential customers seeking to change service providers from the incumbent to a VoIP provider would not be protected by the Migration Guidelines. Unnecessary delays could occur and service could be temporarily lost, without any defined recourse. However, because voice services offered by cable television companies and VoIP services in general are not regulated by the Commission, could they even be brought under the Migration Guidelines’ banner without state legislative authorization or FCC approval? And, if so, could this regulatory change be extended to other areas, such as requiring these new providers to be certificated as CLECs and offer discounted Lifeline service with compensation through the existing federal and state pools?

Regulatory extension of the Migration Guidelines to VoIP and cable voice customers would provide benefits to these new providers because it would add a level of certainty for their potential customers. Once this occurs, however, and a precedent has been set, should the Commission venture further and make the differences between old and new service providers virtually indistinguishable? Permitting reimbursement through the state Targeted Accessibility Fund and the Federal Universal Service Fund for offering Lifeline could be yet another positive development.

Lou Manuta

NY PSC Asks FERC Not to Limit Access to NYISO Market Data

The New York Public Service Commission (PSC) recently filed comments with the Federal Energy Regulatory Commission (FERC) warning that a proposed new FERC rule could limit access to information and market data from the New York Independent System Operator (NYISO) needed by the PSC for its oversight. The NYISO operates private markets for determining wholesale electric rates, set by sellers given "market rate authorization" by FERC, which have been criticized for their high prices and failure to assure adequate future supply. See, e.g., Cornell Professor Gives Low Marks to NYISO Electricity Markets.

The new regulations were proposed as part of a FERC initiative to address four narrow issues involving the "organized" markets it has fostered, viz,

• demand response and market pricing during operating reserve shortages;
• long-term power contracting;
  
• market-monitoring policies; and
  
• the responsiveness of Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) to their stakeholders and customers

The "organized markets" such as the NYISO "day-ahead" and "real time" markets operate under FERC-approved tariffs. They essentially match production with demand and, like a cartel, set the same price for all sellers. In the 15 states that "restructured" their electric utilities a decade ago, and allowed power plants owned by state regulated utilities, these markets now play a major role in determining retail prices, which are no longer based on cost of energy production, and instead are based on the market price.

In an earlier phase of the case, more than forty consumer groups concerned about rising RTO and ISO rates and market manipulation asked FERC to broaden its inquiry to examine whether reliance on the private ISO and RTO utilities and the "organized markets" they operate to set is resulting in the "just and reasonable" wholesale rates for electricity required by law under the Federal Power Act. See Public Power, Industrial and Residential Consumer Groups Demand FERC Review of Organized Spot Markets.

FERC rebuffed the consumer groups in a Notice of Proposed Rulemaking issued on February 22, 2008. FERC refused to widen its inquiry, saying consumers should raise their concerns whether FERC is effectuating the "just and reasonable rate" requirements of the Federal Power Act within the industry-dominated "stakeholder" committee structures of the private ISO and RTO utilities. The ISO and RTO rules tend to marginalize and minimize the weight of consumer interests.

In response to FERC's Notice, the New York PSC filed comments objecting to language in the new rules which could be read to inhibit the flow of information from the NYISO to the PSC except in "enforcement" matters. This could sharply limit information routinely needed by the PSC to investigate and assess, for example, whether sellers are engaging in tactics that drive prices up, prior to any enforcement action. As a result, the ability to get data and information for "enforcement" purposes only could be useless if the PSC could not get access to data for routine analysis and investigation prior to any enforcement decision. The PSC stated:

Federal and state governments should be working in partnership to ensure that markets are working effectively. By refusing to allow state commissions access to this information, the cloud of suspicion by consumers and politicians of the competitive market may continue to grow. In some states, like New York, there have been calls by legislative leaders for the reversal of the competitive market. Consequently, it is vital that state commissions be able to demonstrate that the presence of a competitive market does not disable the state from protecting retail ratepayers and that the state commission is capable of carrying out its statutory obligations in a competitive market.

Even though FERC has jurisdiction to set the wholesale electric rates and rates for bulk transmission, the PSC has jurisdiction and a role to play to enforce the NYISO's state law duty, as a New York electric corporation, to operate and function in the public interest. As part of that function, the PSC can now demand data from the NYISO to ascertain if, for example, market power is being exercised, in a pre-enforcement context. See, e.g., NY Department of Public Service Interim Pricing Report on New York State's Independent System Operator. The PSC rightly objected to any new anti-consumer and anti-state rules that might be read by FERC so as to limit future PSC access to market data and information from the NYISO and its internal market monitoring unit.

Parties File Statements Supporting Proposed Settlement of Con Edison Queens Outage Prudence Proceeding

The New York State Public Service Commission (PSC) is considering a Joint Proposal for ending the PSC proceeding to review prudence of costs associated with the extended Con Edison outage in Queens beginning July 17, 2006. See Parties Propose Resolution of Con Edison Queens Outage Prudence Proceeding. The signatories to the proposal have filed their statements in support:

• Con Edison

• Department of Public Service Staff

• Consumer Protection Board

• Western Queens Power for the People

• PULP

• Assemblyman Richard L. Brodsky
  

The PSC has established a schedule for further comments and will receive public comment at informational forums and public statement hearings on May 27 and 28 in Queens.

AMPS, a Submetering Company, Withdraws Request for Court Injunction to Shut off Tenant's Electricity

In an apparently unprecedented move, American Metering and Planning Services (AMPS), a company that provides billing and metering service to apartment building owners who submeter electricity to tenants, commenced a lawsuit to collect unpaid charges from a tenant, claiming that AMPS is “entitled to a mandatory injunction requiring . . . access to the subject apartment for the purpose of terminating and disconnecting electrical service thereto.”

AMPS obtained an ex parte Order from a judge of the New York Supreme Court, Bronx County, requiring the tenant to appear in court to show cause why the requested injunction should not be issued. The court papers filed by AMPS did not reveal the existence of a Public Service Commission (PSC) submetering Order, which had granted submetering authority to the tenant's landlord, not AMPS. That order recites a representation of the landlord that “[i]n no case will electricity be shut down in an apartment for a failure to pay electricity.” The order also requires that in no event will the submeterer charge more for service than Con Edison would charge the tenants if they were separately metered residential customers of the utility.

The tenant contacted PULP for assistance. PULP filed a complaint on the tenant’s behalf with the PSC Office of Consumer Services, seeking to resolve disputes over the amount of the bills and to enforce HEFPA. To PULP’s knowledge, the tenant’s complaint to the Office of Consumer Services is the first to ask the PSC to enforce the price cap and HEFPA protections contained in orders routinely issued to grant submetering authority. PULP issued discovery questions to AMPS under the PSC discovery rules.

PULP appeared in court, opposing the requested injunction for access to the tenant's apartment to shut off the electricity, and filed a cross motion to dismiss and a brief, making the following points:

• The submetering company has no capacity to sue, because only companies authorized by the PSC can sell electricity, and the PSC authorized the building owner, not the submetering company, to sell electricity to residential customers at the building;
• The complaint failed to allege that Home Energy Fair Practices Act (HEFPA), contained in Article 2 of the Public Service Law and Part 11 of the PSC’s implementing regulations which prescribe numerous conditions that must be met before a utility can terminate service were satisfied. For example, the notice of termination on its face was defective, failed to proffer a deferred payment agreement (DPA) along with the termination notice; and failed to inform the tenant of the availability of PSC complaint procedures to resolve disputed bills;
• There is no provision in HEFPA that allows a typically unrepresented residential customer to be ordered to appear in New York State Supreme Court to shut off service;
• PSL Section 75 bars any recovery because the complaint seeks to recover charges that have not been fixed by order of the PSC;
  
• The doctrine of “unclean hands” bars equitable relief because the plaintiff failed to disclose to the court that the PSC Order governing submetering in the building was issued on the premise that electric service would not be terminated for nonpayment;
• Because Public Service Law 43.2 provides for a Commission determination of the defendant’s complaint regarding the bills claimed to be due, and the HEFPA violations, the PSC has primary jurisdiction

Before the date for hearing the tenant's cross motion to dismiss, AMPs discontinued the action.

For further information about submetering see PULP's Help Center and web page on submetering.

PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315

The PSC is proceeding with plans either to split the 315 area code region in Central New York into two codes, requiring many customers with 315 area codes to change their numbers, or to create an "overlay" area code for new numbers as they are added that will require callers to dial 10 digits for every call, even for a local call across the street. 315 Options Present Problems: Public Hearings Might Help PSC Determine the Best Area-code Alternative.

In recent years, the PSC allowed competitive telephone companies more than 1.25 million numbers in more than 125 new exchanges in sparsely populated rural areas of the 315 and 518 area codes. See PSC Considering "Area Code Relief" For 315 -- Where Did All The Numbers Go?

PULP requested an investigation whether reclamation and reallocation of telephone numbers and exchanges now stranded in rural areas with an oversupply can obviate the need to create a new area code in the 315 area . See PULP Asks PSC to Investigate Need for New Telephone Area Codes in the 315 Region.

PULP's motion was denied by the PSC in an April 25, 2008 Order. See PSC Denies Request for Open Inquiry and Continues with 315 Area Code Changes.

PULP filed a petition for rehearing today asking the PSC to reconsider its April 25, 2008 order, arguing that even if the oversupply of numbers and exchanges in rural areas had been lawfully allocated, the Commission has ample power to reclaim them in order to avoid the larger inconvenience and cost to consumers of area code changes. Further, PULP points to new evidence indicating that a combination of newly implemented number conservation policies and reclamation of numbers not needed in sparsely populated areas could avert area code changes that will impose cost and inconvenience for many customers.

HEAP Program to Close in May

New York's 2007 - 2008 federally funded Home Energy Assistance Program (HEAP) will close soon. According to the OTDA website

The Regular Benefit component of the 2007-08 HEAP program has been extended to Friday, May 16, 2008 however the Emergency Benefit component has been extended until Friday, May 30, 2008. After May 16th, Applicants must be in an energy emergency situation, which is defined as having less than a 10 day supply of fuel, having utility service terminated, or having utility service scheduled for termination. In addition, applicants must not have enough resources to take care of their emergency themselves.

As of mid-April, the 2007 - 08 HEAP program had provided much needed energy assistance benefits to more than 940,000 New York low-income households this year with its federal funding of approximately $248 million. President Bush has proposed reduced funding for next year's federal LIHEAP program, which provides all the funds for New York's HEAP program. See Bush Proposes LIHEAP Cuts in 2009 Budget.

Next year's HEAP program is likely to begin November 1, 2008. A draft state plan for use of next year's HEAP funding is expected to be released by OTDA for public comment in the next month or so.

When HEAP is not available utility customers who are unable to pay utility bills, whose service has been terminated or is threatened to be terminated, and who have no alternative payment arrangements possible may be eligible for a grant or loan from the local social services department that would cover the most recent four months service. Utilities are required to restore or continue service with the partial payment. For further information see PULP's web page on utility assistance programs. See also the chapter on Public Assistance Allowances for Energy and Utility Costs in PULP's law manual for advocates.

Protection of Customers of Cooperative Utilities Under Power Authority Regulations

Co-op Utilities Are Exempt from Public Service Law Requirements and PSC Oversight
Yesterday we received a question about the rights of customers of Steuben Rural Electric Cooperative. The day before, the utility turned off service to approximately 35 of its customer-members due to unpaid bills. Customers said there had been a printed warning message on a recent bill, but they say they received no separate notice of the actual shutoff. The utility demanded 100% of the amount owed as a condition of restoring service. When customers who could not afford that sought assistance from the local department of social services, a HEAP grant was proffered, but was rejected by the utility, which insisted upon full payment of all arrears.

For most New York utility customers, the Home Energy Fair Practice Act (HEFPA) provides strong procedural and substantive remedies for consumers to protect against abrupt termination of services and harsh collection practices. These protections include advance notice, the right to pay arrears over time under a deferred payment agreement (DPA), the right to contest the correctness of charges through a complaint to the Public Service Commission (PSC), and recourse to the PSC Hotline (800-342-3355), whose staff are empowered to resolve controversies involving termination or denial of service and can direct a utility to provide service or refrain from termination of service.

HEFPA is contained in Article 2 of the Public Service Law. Section 67 of the New York Rural Electric Cooperatives Law provides

Cooperatives . . . . shall be exempt in all respects from the jurisdiction and control of the public service commission of this state and shall not be subject to the provisions of the public service law.

Therefore, HEFPA does not apply to co-op utilities and so PSC complaint and Hotline remedies are not available to co-op utility customers.

Limited Customer Protection Under Regulations of the Power Authority of the State of New York
Are customers of co-op utilities then without any protection from arbitrary shutoffs and harsh practices?

In a word, no.

Cooperatives and small municipal utilities that receive most of their power from the Power Authority of the State of New York (NYPA) are required, under NYPA regulations having the force of law, to provide somewhat weaker protections that resemble those of HEFPA. See 21 NYCRR Parts 451, 452, 457, 459. See also, Lathrop v. Village of Bath, 112 A.D.2d 769 (4th Dept. 1983) (HEFPA deposit limits do not apply to municipal utility receiving its power from the State Power Authority).

The NYPA regulations address termination of service in Part 459:

Any municipality or rural electric cooperative purchasing essentially all of its power requirements from the Power Authority f the State of New York shall incorporate into its service rules and enforce the procedures governing discontinuance of electric service as set forth in sections 459.2 through 459.14 of this Part.

According to NYPA, Steuben Rural Electric Cooperative is one of 47 municipalities and coops that receive a low cost hydropower allocation from NYPA, and has a long term "partnership" arrangement with NYPA for NYPA to provide all its energy requirements. Thus, it appears that the Steuben Rural Electric Cooperative is subject to the NYPA rules and must incorporate them into its own rules.

NYPA Requirements
What do the NYPA rules require regarding the disconnection of service for nonpayment by utilities subject to its rules?

One would never know from searching the NYPA website, which appears to have no ready information regarding protection of residential consumers.

Here are salient features of the NYPA regulations, which are published in volume 21 of the Official Compilation of New York Codes, Rules, and Regulations:

• Section 459.3 requires a separate termination notice and forbids termination “until at least 35 days have elapsed from date payment was due. Additionally, such termination cannot occur until: (1) at least 15 days after written notice has been served personally upon a customer or resident 18 years of age or older; or (2) at least 15 days after the utility mails written notice by a registered or certified letter to the customer at the address at which service is received...."

• Section 459.14 requires the utility to offer DPAs: "Installment plan. No utility shall terminate service unless the utility has first offered a monthly installment plan that is just and equitable. Each utility must offer a just and equitable monthly plan to all customers whose service has been disconnected for nonpayment. To the extent practicable, the monthly installment plan should be based on the customer's ability to pay, past payment history, the amount of indebtedness, and the availability of other resources. The monthly installment plan should require a customer to pay current bills and a portion of past indebtedness and may include a provision for payment of interest on the arrears. Such agreement may provide for a downpayment of the arrears provided that no such downpayment shall exceed one-half of the amount of the arrears or three months average billing, whichever is less. Such agreement may be renegotiated and amended where the customer can demonstrate that there have been significant changes in his or her financial circumstances which have arisen due to conditions beyond the customer's control.

• Section 459.13 requires prompt reconnection of service when the customer pays the bill in full, enters into a DPA, receives a payment from a social services official, or when there is a "direction by the Power Authority of the State of New York.... The direction to reconnect service . . . . will only occur when it reasonably appears, in exceptional circumstances, that there is legitimate dispute about an unpaid portion of the arrears claimed by a utility; where an apparent error in the disconnection of service has occurred, or where a serious impairment to human health or safety seems to exist. . . .

Advance notice alerts the customer of future utility action and the claimed basis for it, which is of constitutional due process significance when a governmentally owned utility, such as the municipal utilities under NYPA regulations. In addition to preparing a defense in the case of error, the notice gives the customer who does owe the utility money time to find resources to pay the bill, negotiate a payment plan, or, if that is not possible, to seek public assistance or HEAP when HEAP is available.

As stated by the Supreme Court in a case requiring notification to customers of their right to appeal decisions to terminate service, “Utility service is a necessity of modern life; indeed, the discontinuance of water or heating for even short periods of time may threaten health and safety. And the risk of an erroneous deprivation, given the necessary reliance on computers, is not insubstantial.”There is no information at the NYPA website regarding how a customer can request intervention by NYPA to correct "an apparent error in the disconnection of service."

Customers of utilities subject to NYPA regulations apparently are not notified of possible recourse with NYPA in the event their utility makes an "apparent error in the disconnection of service...." In at least one instance, it appears that a Steuben co-op customer became homeless as a result of a disconnection without the advance notice required by the NYPA regulations.

There is a strong public interest in minimizing wrongful denials or terminations of utility service, which can have severe repercussions and costs for individuals, families, communities and the general public. Unsafe situations frequently flow from a lack of utility service or use of less safe alternatives. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households In at least one instance a utility's refusal to accept a HEAP payment may have contributed to the death of a customer. See Lawsuit Involving Death of Velma Fordham Settled by National Fuel.

Rejection of HEAP
In the absence of a statutory obligation, the duty of a utility to accept a HEAP payment as sufficient to reinstate service when it does not cover all arrears, for example, by treating it as a downpayment on a new DPA, is governed by a HEAP vendor agreement between the utility and the state agency that oversees HEAP, the Office of Temporary and Disability Assistance (OTDA). OTDA has been allowing utilities not to "acknowledge" a HEAP payment and to refuse to restore service at the utility's option.

PULP has questioned whether the stance of OTDA, which essentially allows utilities to decide which eligible HEAP households will have their crisis resolved, violates the requirement in federal law that a state's crisis assistance plan must actually provide for prompt resolution of emergencies of households eligible for Emergency HEAP. See PULP Urges HEAP Program Reforms.

In addition a utility subject to NYPA regulations may be obligated to restore service or abstain from termination of service when a local social services office proffers a four-month emergency utility assistance grant under Social Services Law 131-s. Section 131-s by its terms applies to "gas corporation, electric corporation or municipality," and does not espressly mention a cooperative. When this law creating the state utility assistance program was enacted as Chapter 895 of the Laws of 1981, it contained a dovetailing provision added to the Public Service Law, PSL § 65-b, which requires utilities (under PSC jurisdiction) to provide service "if the utility corporation or municipality receives, or is entitled to receive, a direct payment or receives a guarantee of payment from a social services district." These payments referred to in PSL § 65-b include those made under Social Services Law § 131-s.

The NYPA regulations, 21 NYCRR Part 459.13 essentially borrow the language of PSL § 65-b, requiring a municipal or cooperative utility to provide service upon "receipt of a commitment of a direct payment or a written guarantee of payment from the local social services commissioner...." So, although there is no explicit reference to Social Services Law 131-s in the NYPA rules, just as there is none in PSL § 65-b, it could be argued that the duty to restore service upon receiving a proffer of a four-month 131-s payment from a social services official should also adheres to utilities subject to the NYPA regulation.

PS, 5/20/08. The Power Authority directed Steuben co-op to restore service to the customer terminated without proper notice, and a court case brought by the customer was settled.