Nextel Advertises Lifeline Rates
PULP has noticed that for the first time Nextel has begun advertising a Lifeline and Link-Up service in the Capital Region. While the company received its authorization to offer Link-Up/Lifeline in New York from the FCC in August 2004 (as part of its designation as an Eligible Telecommunications Carrier, or ETC, in several states, including Alabama, Florida, Georgia, Pennsylvania, Tennessee, and Virginia), the only surprise is the lag time.
According to the Nextel website, eligible Lifeline customers in New York can save up to $13.50 per month off of a $29.99 service plan. Those who live on Tribal Lands may only need to pay $1.75 per month for the same service.
Four Wireless Providers in New York Must Offer a Lifeline Rate for Low Income Consumers
Nextel is not alone. In fact, American Cellular, Dobson Cellular (soon to be part of AT&T), Nextel Partners, and Sprint PCS have all received their ETC status in New York. Nextel appears to be the first of the group to actually advertise its Lifeline service in New York.
In order to receive its ETC designation, Nextel and the other companies demonstrated to the FCC:
(1) That the FCC had authority to consider its petitions because the state commissions claimed that they lacked jurisdiction. In fact, a letter was sent by the PSC general counsel’s office to the FCC stating that New York lacks jurisdiction over the Nextel petition. Nextel Lifeline PSC Letter.
(2) That it offers, or will offer upon designation as an ETC, the services supported by the federal universal service mechanism. Nextel also certified that, in compliance with the FCC’s Rules, it will make available and advertise Lifeline and Link-Up services to qualifying low-income consumers. Three years later, the advertising has begun, but Nextel had pledged that it was ready to offer these services in 2004.
Consumer Protections
Nextel also promised the FCC that it would follow the CTIA Consumer Code and the commitments laid out in the FCC’s Virginia Cellular Order, including:
(a) annual reporting of progress towards build-out plans, unfulfilled service requests, and complaints per 1,000 handsets;
(b) specific commitments to provide service to requesting customers in the area for which it is designated, including those areas outside existing network coverage; and
(c) specific commitments to construct new cell sites in areas outside its network coverage.
The CTIA Code is not an adequate substitute for the Telephone Fair Practices Act (“TFPA”) consumer protections expected by telephone consumers. See PULP Testimony to NYS Assembly.
Nextel went on to pledge to the FCC: (1) that it offers and will continue to implement E-911 access; (2) that it will comply with any minimum usage requirements required by applicable law (Nextel also stated that local usage is included in all of its calling plans); (3) that it will provide access to interexchange services, and is not required to offer equal access to those services; (4) that it offers the supported services using either its own facilities or a combination of its own facilities and resale of another carrier’s services (Nextel stated that it intends to provide the supported services using its existing network infrastructure); and (5) that it is committed to specific methods to advertise the availability of the supported services and the charges for the services using media of general distribution.
Limited Services Available With Wireless Lifeline
So, what does reduced rate wireless Lifeline service include in addition to savings of $13.50 per month? On Nextel’s Lifeline application form, it states that the Lifeline service itself includes 200 anytime minutes and unlimited night and weekend minutes, which may be used for local or long-distance calls. Lifeline service also includes Voice Mail, Call Waiting, Caller ID, Numeric Paging, Roaming, and Three-Way Calling at no additional charge. Lifeline subscribers may also purchase a reduced-cost Lifeline phone. Nextel Lifeline Application
There are some limitations, however. The application also states that Lifeline service is available in limited (but, unidentified) geographic areas and is only available for one wireline or wireless phone line per household. In addition, data services and other enhanced services or features, international long distance, and access to “900” numbers are not available to Lifeline subscribers. Another limitation is that Lifeline service plan minutes are only available for calls within Sprint Nextel coverage areas
Further, some customers may be charged a service deposit based on the applicant’s credit history. The service deposit may be avoided, however, by choosing an account spending limit (“ASL”) of $75 or less.
Access to emergency services by dialing 911 is not subject to any account usage limitation. The Nextel website failed to mention that wireless E-911 is not available in all geographic areas.
As for Link-Up, Nextel will pay one-half of the $36 service activation fee. Eligible residents of Tribal lands may receive an additional credit of up to $70 to cover 100% of the service activation or installation charges. Applicants may also receive a deferred schedule (of up to one year) for payment of the discounted charges for commencing service.
Open Questions
Will wireless Lifeline increase Lifeline enrollment, which has fallen in recent years? Will landline Lifeline customers switch to take advantage of the mobility benefits or will they reject wireless Lifeline due to the E-911 or service availability gaps? Will the New York PSC or the State Legislature extend state TFPA telephone consumer protections to users of wireless phones now that they are becoming substitutes for conventional landline service? Stay tuned.
-- Lou Manuta
Staff Attorney
Wednesday, October 24, 2007
Saturday, October 20, 2007
PSC Asked to Investigate Grid's "Grand Plan"
Grid's "Grand Plan"
National Grid is withholding service to applicants who owe money for service to closed accounts if a prior written payment agreement on the old account was not paid in full when the account was closed. The utility has been insisting upon an up front payment of $1,000 ("one grand"), or the entire balance owed if the amount is less than one grand, and has been refusing to negotiate for a lower amount based on the applicant's ability to pay. See New Barrier to Utility Service: National Grid's "One Grand" Demand, PULP Network October 2, 2007.
As a result, low income applicants for utility service are unable to meet the impossible demands of National Grid and live in dark homes, sometimes for weeks, without utility service, increasing the risk of loss of life. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households See also, Mom sought state help before fatal fire, describing recent Pennsylvania deaths while utility service was off.
This is squarely in conflict with the state legislature's declaration in the Home Energy Fair Practices Act ("HEFPA") Section 30 that residential service is to be provided by the state's utilities without unreasonable qualifications and without lengthy delays. HEFPA Section 31 requires applicants for service who owe the utility for prior service to closed accounts to be given the opportunity to repay "any amounts" owed for service to a prior account in a deferred payment plan, with a maximum down payment of half the amount due or the cost of three months' service, whichever is less. Further, HEFPA Section 37 requires that all deferred payment plans must be "fair and equitable" and negotiable based on the customer's financial circumstances, and HEFPA Section 43 gives authority to the department of public service staff to resolve disputes over the appropriate terms of repayment plans.
Petition Asks PSC for Relief
On behalf of applicants denied utility service by National Grid under its "Grand Plan" (as the company names it in a recent denial notice) PULP petitioned the state Public Service Commission on October 17, 2007, to investigate the practices of the utility. The petition seeks an interim order directing a halt to the practice of demanding large payments as a condition of service, pending completion of an investigation and conclusion of the case. The petition asks for a one-Commissioner order granting interim relief pending full action by the Commission.
In addition to interim relief, the petition seeks an investigation by the PSC, a declaration that the challenged practices are unlawful, remedial relief for applicants who have been denied since implementation of the "Grand Plan," and a rate reduction if the evidence shows systematic denial or delay of service to applicants based on unreasonable and unlawful conditions. The relief requested includes a minor $25 per day payment to wrongfully denied applicants. That remedy has not been adjusted for inflation since 1981.
Bad Advice From Grid: Ask Welfare to Pay Old Bills for Accounts Closed More than Four Months Ago
Instead of providing service, National Grid has been telling applicants who lack the "grand" demanded for service to apply for welfare assistance.
The state welfare assistance program for utility customers now contained in Section 131-s of the Social Services Law was enacted together with the Home Energy Fair Practices Act in Chapter 895 of the Laws of 1981. It will cover utility arrears for a needy person not now on public assistance, and can provide a loan if the person's income is above the welfare income eligibility levels. The program will only pay an amount equal to the utility bills for the four months immediately preceding the month of application. Upon receiving notice of that payment, Section 65-b of the Public Service Law requires the utility to provide service, even if the four-month amount is less than the total owed.
A person who has not had utility bills for an account in their name in the past four months can be denied the welfare assistance. The welfare scheme simply was never intended to pay old bills for prior service to a closed account, because the HEFPA changes assured that an alternative payment arrangement is available under the Public Service Law to the applicant with arrears for service to a prior account. HEFPA requires the utility to offer a DPA to an applicant who owes money from a prior closed account, and thus the welfare offices may deny aid on the theory (if not the reality) that a payment agreement with the utility should be available to the applicant as an alternative to public assistance.
In addition, the federally funded HEAP crisis assistance program provides emergency benefits only in situations where the applicant for HEAP is the "customer of record" with an energy vendor. An applicant for utility service is not a customer.
As a result of Grid's "Grand Plan," utility service to low income applicants and their households is denied or delayed because they are unable to pay the large up-front amounts insisted upon by Grid as a condition for service, and they cannot receive public assistance. In some situations, another household member may be able to apply for and receive service, but this is not always possible, for example, when there is no other adult in the household.
National Grid apparently claims that despite HEFPA Section 31, which establishes a deferred payment plan option for applicants to repay "any amounts due for service to a prior account in his or her name," it can refuse to offer a plan if the applicant had defaulted on a prior payment plan when the prior account was closed. Section 31, however, does not limit the availability of a deferred payment plan.
In 1981, when HEFPA and the companion SSL 131-s welfare program were enacted the PSC Chairman submitted a memorandum in support recognizing that the new safety net of HEFPA combined with the limited public assistance program was designed to overrule prior requirements of full arrears payment as a condition of service. Also, in a report, the PSC Chairman observed that HEFPA had removed "unrealistic restrictions on obtaining utility service." The statutory deferred payment provisions coupled with the limitation of welfare assistance to the most recent four months, along with other HEFPA provisions such as a prohibition on termination of service for stale bills, encouraged utilities not to let customers unable to pay fall far behind and accrue large arrears. Instead, utilities could pursue termination of service for arrears that would be within the scope of the four-month welfare payment. Also, such early action might identify needs for referral to weatherization services or other social services needed by the household to help manage their bills.
Grid's referral of denied applicants to welfare offices abuses the welfare system and taxpayers because the welfare program was intended to be a last resort and was never designed to aid the company in collecting old bills and bad debt from prior closed accounts. Indeed, when utility rates are set by the PSC, the rate level is set so as to make a reasonable allowance for bad debt and uncollectibles.
Emergency HEAP Situation Unclear
The federally funded Home Energy Assistance Program ("HEAP") begins November 1, 2007. The HEAP program is inadequately funded by the federal government, is not supplemented by New York State, and closes in the Spring when federal funds are exhausted.
New York's HEAP Plan contains a "crisis assistance" component called "Emergency HEAP" to resolve the home energy crises of individuals who meet all income eligibility standards and other program requirements. Because deferred payment plans should be available under HEFPA to persons now being denied utility service under the National Grid "Grand Plan" due to old bills from long closed accounts, however, there really should be no "emergency" or "crisis" to consider addressing with Emergency HEAP or any other welfare program.
Further, state OTDA regulation 18 NYCRR 393.4(d)(1) contains a requirement that limits Emergency HEAP payments to those who are the "customer of record" with "an account in their name with an energy vendor." Persons denied utility service by National Grid under the "Grand Plan" are not the "customer of record" as defined under the welfare regulations cited above, because they do not now have an account in their name. Also, a person denied utility service under the "Grand Plan" is an "applicant" and not a "customer" as defined in the regulations of the Public Service Commission at 16 NYCRR 11.2(a)(2).
It is possible that some counties administering the 100% federally funded HEAP program may respond sympathetically to a person denied utility service by National Grid by proffering an Emergency HEAP payment. Under the vendor agreements negotiated between the utilities and OTDA, however, utility vendors are given the option to refuse an Emergency HEAP payment. As a result, it is not clear whether Emergency HEAP grants could solve the problem. Moreover, the limited funds available under the federal LIHEAA program should be conserved to meet this winter's home heating needs, not to help utilities collect bad debt for years past which can be addressed with a deferred payment plan.
Insensitivity to Low Income Customer Predicaments
Some of the applicants denied service under the "Grand Plan" owe large amounts for closed accounts for unaffordable natural gas service. National Grid introduced more volatile natural gas rates with unpredictable spikes in recent years. These often cannot be absorbed by low income customers, who live from check to check and often lack savings. Many people may have lost service and closed accounts, perhaps moving to new situations with utilities included. Now, sometimes years later,when their situations change and they need service again, they cannot obtain it because of Grid's "Grand Plan." Compounding the problem, National Grid
Before the Home Energy Fair Practices Act (HEFPA) was enacted, New York's utilities had harsh policies that often led to hardship, sometimes with tragic consequences. See PULP's HEFPA History web page. In 1981 HEFPA required the provision of service to applicants who owe the company money if they agree to pay back the arrears through a deferred payment agreement. There is no bar to a new agreement or disqualification of applicants who had an unpaid DPA that was terminated when their old account was terminated and a final bill was rendered for all outstanding charges.
HEFPA does allow a current customer's service to be terminated if he defaults on a signed payment agreement. If the customer cannot afford to pay the arrears, and is not eligible for a renegotiated payment plan based on a change of financial circumstances. It is then that he may be able to obtain a 4-month welfare payment, to forestall the termination or restore recently terminated service. Also, if a current customer has been terminated for nonpayment in the past six months, the utility can require a deposit. In this manner, HEFPA balanced the rights of applicants and utilities in a way that favors the timely provision of service to all residential applicants, even those who owe the company for past service to previously closed accounts.
Implications for the Current Long Term Rate Plan
National Grid is enjoying the benefits of a lengthy rate plan in which it can keep the benefits of improved practices, cost reductions, and revenue enhancements, instead of cost savings or increased revenue being taken into account through more frequent recalibration of rates. The petition alleges that National Grid's "Grand Plan" is a means to enhance revenue during the long-term rate plan at the expense of needy applicants for service, in violation of the expectation that the utility would extend service to applicants in accordance with law, and asks the PSC to make a downward rate adjustment.
DPS Staff Acquiscence to Grid's "Grand Plan"
Some staff of the Department of Public Service (DPS), which is overseen by the PSC, apparently have supported implementation of Grid's "Grand Plan," as in the case of National Grid's initiation of harsh and illegal deposit policies several years ago. The Public Service Commission, however, is not bound by informal acquiescence of any DPS Staff to a utility rule or practice that has been changed informally without filing new tariffs approved by the Commission. As the Commission stated in the deposit case
Withholding of Service Without Notice?
In some instances denied applicants do not have written notices of denial of service, which is required by law. Notice must include a detailed statement of the reason for denial, a precise statement of what must be done to qualify for service, and notice of the PSC Hotline number, 1-800-342-3355. These notices must be provided if service is not provided within three days of an application
Denied Applicants may Join in Petitioning the Commission
Individuals denied service under the National Grid "Grand Plan" have received service after joining in the proceeding. For further information and possible intervention in the case contact PULP at 1.800.255.7857.
National Grid is withholding service to applicants who owe money for service to closed accounts if a prior written payment agreement on the old account was not paid in full when the account was closed. The utility has been insisting upon an up front payment of $1,000 ("one grand"), or the entire balance owed if the amount is less than one grand, and has been refusing to negotiate for a lower amount based on the applicant's ability to pay. See New Barrier to Utility Service: National Grid's "One Grand" Demand, PULP Network October 2, 2007.
As a result, low income applicants for utility service are unable to meet the impossible demands of National Grid and live in dark homes, sometimes for weeks, without utility service, increasing the risk of loss of life. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households See also, Mom sought state help before fatal fire, describing recent Pennsylvania deaths while utility service was off.
This is squarely in conflict with the state legislature's declaration in the Home Energy Fair Practices Act ("HEFPA") Section 30 that residential service is to be provided by the state's utilities without unreasonable qualifications and without lengthy delays. HEFPA Section 31 requires applicants for service who owe the utility for prior service to closed accounts to be given the opportunity to repay "any amounts" owed for service to a prior account in a deferred payment plan, with a maximum down payment of half the amount due or the cost of three months' service, whichever is less. Further, HEFPA Section 37 requires that all deferred payment plans must be "fair and equitable" and negotiable based on the customer's financial circumstances, and HEFPA Section 43 gives authority to the department of public service staff to resolve disputes over the appropriate terms of repayment plans.
Petition Asks PSC for Relief
On behalf of applicants denied utility service by National Grid under its "Grand Plan" (as the company names it in a recent denial notice) PULP petitioned the state Public Service Commission on October 17, 2007, to investigate the practices of the utility. The petition seeks an interim order directing a halt to the practice of demanding large payments as a condition of service, pending completion of an investigation and conclusion of the case. The petition asks for a one-Commissioner order granting interim relief pending full action by the Commission.
In addition to interim relief, the petition seeks an investigation by the PSC, a declaration that the challenged practices are unlawful, remedial relief for applicants who have been denied since implementation of the "Grand Plan," and a rate reduction if the evidence shows systematic denial or delay of service to applicants based on unreasonable and unlawful conditions. The relief requested includes a minor $25 per day payment to wrongfully denied applicants. That remedy has not been adjusted for inflation since 1981.
Bad Advice From Grid: Ask Welfare to Pay Old Bills for Accounts Closed More than Four Months Ago
Instead of providing service, National Grid has been telling applicants who lack the "grand" demanded for service to apply for welfare assistance.
The state welfare assistance program for utility customers now contained in Section 131-s of the Social Services Law was enacted together with the Home Energy Fair Practices Act in Chapter 895 of the Laws of 1981. It will cover utility arrears for a needy person not now on public assistance, and can provide a loan if the person's income is above the welfare income eligibility levels. The program will only pay an amount equal to the utility bills for the four months immediately preceding the month of application. Upon receiving notice of that payment, Section 65-b of the Public Service Law requires the utility to provide service, even if the four-month amount is less than the total owed.
A person who has not had utility bills for an account in their name in the past four months can be denied the welfare assistance. The welfare scheme simply was never intended to pay old bills for prior service to a closed account, because the HEFPA changes assured that an alternative payment arrangement is available under the Public Service Law to the applicant with arrears for service to a prior account. HEFPA requires the utility to offer a DPA to an applicant who owes money from a prior closed account, and thus the welfare offices may deny aid on the theory (if not the reality) that a payment agreement with the utility should be available to the applicant as an alternative to public assistance.
In addition, the federally funded HEAP crisis assistance program provides emergency benefits only in situations where the applicant for HEAP is the "customer of record" with an energy vendor. An applicant for utility service is not a customer.
As a result of Grid's "Grand Plan," utility service to low income applicants and their households is denied or delayed because they are unable to pay the large up-front amounts insisted upon by Grid as a condition for service, and they cannot receive public assistance. In some situations, another household member may be able to apply for and receive service, but this is not always possible, for example, when there is no other adult in the household.
National Grid apparently claims that despite HEFPA Section 31, which establishes a deferred payment plan option for applicants to repay "any amounts due for service to a prior account in his or her name," it can refuse to offer a plan if the applicant had defaulted on a prior payment plan when the prior account was closed. Section 31, however, does not limit the availability of a deferred payment plan.
In 1981, when HEFPA and the companion SSL 131-s welfare program were enacted the PSC Chairman submitted a memorandum in support recognizing that the new safety net of HEFPA combined with the limited public assistance program was designed to overrule prior requirements of full arrears payment as a condition of service. Also, in a report, the PSC Chairman observed that HEFPA had removed "unrealistic restrictions on obtaining utility service." The statutory deferred payment provisions coupled with the limitation of welfare assistance to the most recent four months, along with other HEFPA provisions such as a prohibition on termination of service for stale bills, encouraged utilities not to let customers unable to pay fall far behind and accrue large arrears. Instead, utilities could pursue termination of service for arrears that would be within the scope of the four-month welfare payment. Also, such early action might identify needs for referral to weatherization services or other social services needed by the household to help manage their bills.
Grid's referral of denied applicants to welfare offices abuses the welfare system and taxpayers because the welfare program was intended to be a last resort and was never designed to aid the company in collecting old bills and bad debt from prior closed accounts. Indeed, when utility rates are set by the PSC, the rate level is set so as to make a reasonable allowance for bad debt and uncollectibles.
Emergency HEAP Situation Unclear
The federally funded Home Energy Assistance Program ("HEAP") begins November 1, 2007. The HEAP program is inadequately funded by the federal government, is not supplemented by New York State, and closes in the Spring when federal funds are exhausted.
New York's HEAP Plan contains a "crisis assistance" component called "Emergency HEAP" to resolve the home energy crises of individuals who meet all income eligibility standards and other program requirements. Because deferred payment plans should be available under HEFPA to persons now being denied utility service under the National Grid "Grand Plan" due to old bills from long closed accounts, however, there really should be no "emergency" or "crisis" to consider addressing with Emergency HEAP or any other welfare program.
Further, state OTDA regulation 18 NYCRR 393.4(d)(1) contains a requirement that limits Emergency HEAP payments to those who are the "customer of record" with "an account in their name with an energy vendor." Persons denied utility service by National Grid under the "Grand Plan" are not the "customer of record" as defined under the welfare regulations cited above, because they do not now have an account in their name. Also, a person denied utility service under the "Grand Plan" is an "applicant" and not a "customer" as defined in the regulations of the Public Service Commission at 16 NYCRR 11.2(a)(2).
It is possible that some counties administering the 100% federally funded HEAP program may respond sympathetically to a person denied utility service by National Grid by proffering an Emergency HEAP payment. Under the vendor agreements negotiated between the utilities and OTDA, however, utility vendors are given the option to refuse an Emergency HEAP payment. As a result, it is not clear whether Emergency HEAP grants could solve the problem. Moreover, the limited funds available under the federal LIHEAA program should be conserved to meet this winter's home heating needs, not to help utilities collect bad debt for years past which can be addressed with a deferred payment plan.
Insensitivity to Low Income Customer Predicaments
Some of the applicants denied service under the "Grand Plan" owe large amounts for closed accounts for unaffordable natural gas service. National Grid introduced more volatile natural gas rates with unpredictable spikes in recent years. These often cannot be absorbed by low income customers, who live from check to check and often lack savings. Many people may have lost service and closed accounts, perhaps moving to new situations with utilities included. Now, sometimes years later,when their situations change and they need service again, they cannot obtain it because of Grid's "Grand Plan." Compounding the problem, National Grid
- Lacks meaningful low income rate plans such as those of other National Grid companies in Massachusetts to make service more affordable
- Closed all its New York walk-in customer service offices where customers could negotiate payment agreements
- Reduced its staff who provide services to persons with payment difficulties
- Appears not to have empowered its representatives to negotiate fair and equitable payment agreements based on financial circumstances of applicants
- Withheld service in some instances without providing notices of possible commission remedies
- Misadvises people regarding the availability of public assistance and
- Is reverting to harsh pre-HEFPA tactics that endanger the public.
Before the Home Energy Fair Practices Act (HEFPA) was enacted, New York's utilities had harsh policies that often led to hardship, sometimes with tragic consequences. See PULP's HEFPA History web page. In 1981 HEFPA required the provision of service to applicants who owe the company money if they agree to pay back the arrears through a deferred payment agreement. There is no bar to a new agreement or disqualification of applicants who had an unpaid DPA that was terminated when their old account was terminated and a final bill was rendered for all outstanding charges.
HEFPA does allow a current customer's service to be terminated if he defaults on a signed payment agreement. If the customer cannot afford to pay the arrears, and is not eligible for a renegotiated payment plan based on a change of financial circumstances. It is then that he may be able to obtain a 4-month welfare payment, to forestall the termination or restore recently terminated service. Also, if a current customer has been terminated for nonpayment in the past six months, the utility can require a deposit. In this manner, HEFPA balanced the rights of applicants and utilities in a way that favors the timely provision of service to all residential applicants, even those who owe the company for past service to previously closed accounts.
Implications for the Current Long Term Rate Plan
National Grid is enjoying the benefits of a lengthy rate plan in which it can keep the benefits of improved practices, cost reductions, and revenue enhancements, instead of cost savings or increased revenue being taken into account through more frequent recalibration of rates. The petition alleges that National Grid's "Grand Plan" is a means to enhance revenue during the long-term rate plan at the expense of needy applicants for service, in violation of the expectation that the utility would extend service to applicants in accordance with law, and asks the PSC to make a downward rate adjustment.
DPS Staff Acquiscence to Grid's "Grand Plan"
Some staff of the Department of Public Service (DPS), which is overseen by the PSC, apparently have supported implementation of Grid's "Grand Plan," as in the case of National Grid's initiation of harsh and illegal deposit policies several years ago. The Public Service Commission, however, is not bound by informal acquiescence of any DPS Staff to a utility rule or practice that has been changed informally without filing new tariffs approved by the Commission. As the Commission stated in the deposit case
The record suggests that the company disclosed its plan *** to the Department and was never specifically told it could be illegal; the record also shows that the company never specifically asked the Department if the policy was legal. In arguing that the company had good cause to deny utility service to residential customers under the *** policy, Niagara Mohawk and Staff rely on the Department's silence, which, in our view, is not a strong position from which to argue good faith or due diligence.Thus, even though the staff of the utility regulator have gone along with a utility's practices, the PSC itself is not bound by their acquiescence.
Withholding of Service Without Notice?
In some instances denied applicants do not have written notices of denial of service, which is required by law. Notice must include a detailed statement of the reason for denial, a precise statement of what must be done to qualify for service, and notice of the PSC Hotline number, 1-800-342-3355. These notices must be provided if service is not provided within three days of an application
Denied Applicants may Join in Petitioning the Commission
Individuals denied service under the National Grid "Grand Plan" have received service after joining in the proceeding. For further information and possible intervention in the case contact PULP at 1.800.255.7857.
Wednesday, October 10, 2007
Lou Manuta Joins PULP Staff
PULP is pleased to announce that Louis Manuta, Esq. recently joined our staff. Lou has been a practicing attorney and legal editor since 1989 when he graduated from the National Law Center at George Washington University in Washington, D.C. He relocated to New York's capital region in 1995 after several years in Washington, DC covering local loop, wireless, and satellite communications issues before the Federal Communications Commission.
Immediately prior to joining PULP, Lou was an attorney in the telecommunications practice group at the Herzog Law Firm in Albany, NY. Previously, Lou was Vice President-Regulatory Counsel for the NYS Telecommunications Association where he was responsible for advising, coordinating, and representing telecommunications industry positions before State and Federal regulatory agencies and other external organizations, and he provided counsel to member companies regarding matters affecting their business operations. He joined NYSTA in August 1998 as the Director -- Regulatory Policy and was named Vice President in 2003.
Lou has been a member of the New York State Bar and the Federal Communications Bar Association since 1990. He has represented clients before the Public Service Commission, the Federal Communications Commission, other state agencies, and in the federal and state courts.
Lou was born and raised on Long Island and received his Bachelors Degree Magna Cum Laude in Communications/Political Studies from Adelphi University.
Immediately prior to joining PULP, Lou was an attorney in the telecommunications practice group at the Herzog Law Firm in Albany, NY. Previously, Lou was Vice President-Regulatory Counsel for the NYS Telecommunications Association where he was responsible for advising, coordinating, and representing telecommunications industry positions before State and Federal regulatory agencies and other external organizations, and he provided counsel to member companies regarding matters affecting their business operations. He joined NYSTA in August 1998 as the Director -- Regulatory Policy and was named Vice President in 2003.
Lou has been a member of the New York State Bar and the Federal Communications Bar Association since 1990. He has represented clients before the Public Service Commission, the Federal Communications Commission, other state agencies, and in the federal and state courts.
Lou was born and raised on Long Island and received his Bachelors Degree Magna Cum Laude in Communications/Political Studies from Adelphi University.
Thursday, October 04, 2007
New York Restructuring: It Was About Price
New Yorkers Pay More for Electricity
Today, New York electric consumers pay more than those in states that continued conventional state utility regulation. More troubling, the gap between New York and the states that did not drink the restructuring Kool-Aid is widening, making New York less competitive in the national economy.
This is illustrated in an October 1, 2007 report by Marilyn Showalter, for Power in the Public Interest. See Electricity Price Trends in New York Compared to Trends in Price-regulated States, based on EIA data through June 2007.
Marilyn Showalter is a former Chair of the Washington State Utilities and Transportation Commission (WUTC) and former President of NARUC, the national association of state utility regulators. She also served as chief clerk of the Washington State House of Representatives and as legal counsel to the governor of Washington. She is a graduate of Harvard College and Harvard Law School. Her report shows how New York customers are paying far more for electricity than customers in states that did not try to deregulate. In the traditionally regulated states, utilities did not sell their power plants and thus they are less dependent on buying energy in essentially deregulated federal wholesale markets.
A New York Times article, A New Push to Regulate Power Costs, also summarized the national trend: electricity prices in states that adhered to the deregulation model, like New York, are not only higher than they were before the experiment began, but also higher in relation to the majority of states that did not follow their example.
The First Goal of New York's Restructuring was Lower Retail Prices
Confronted with this reality - prices did not go down with deregulation, and the price gap between New York and other states is widening - a former New York PSC Chairman was recently quoted as saying lower prices are not the only goal of deregulation. See Push on for Energy Policy: 3 Former Heads of PSC Tell Independent Power Producers a State Plan Is Needed.
It is true that other goals were stated when the PSC adopted its "vision" of "unbundling" and deregulating wholesale and retail generation service in 1996, (see below), but the number one goal was to reduce New York electricity prices that were high in relation to other states
After most of the utilities agreed to restructure, and as ownership of their power plants was being shifted to new wholesale utilities who would sell at market rates allowed by FERC, the 1998 State Energy Plan also stated an expectation that the rate differential between New York and other states would narrow:
No state deregulated electricity like New York did since the demise of Enron in 2001 drew attention to the flawed scheme of deregulated federal wholesale markets. Since then, a number of states halted their plans to deregulate. Other states that had enacted laws requiring divestiture of power plants, like Connecticut, have recently passed new laws to authorize utilities to build or acquire power plants as a way to bring more of the generation costs of electric service back under state regulation. This reduces the need to buy electricity at wholesale market prices inflated by design and gaming.
Rate Differences Within New York: Customers of a Vertically Integrated Utility Did Best
Within New York state, customers of the utilities that most enthusiastically implemented the PSC vision saw their bills rise and become unpredictable. In contrast, residential customers of RG&E, a utility that kept most of its power plants, and thus remains the most traditionally regulated, enjoy the lowest bills. See Excelsior! Con Edison Residential Rates Spike (Again).
There is no legal barrier that prevents a utility from building a power plant, as Con Edison did with its East River steam/electric "repowering" project several years ago. RG&E has announced plans to retire an old coal plant and build a new 330 MW plant, and to improve several of its old hydro plants, raising their output by 9 MW. Deregulation proponents are now asking the PSC to require divestiture or prevent RG&E from repowering old power plants, so customers of that utility too would have to buy electricity at inflated prices established in the deregulated federal markets.
The New York PSC adopted a policy to flow NYISO spot market rates through to all customers, eventually, starting first with the largest customers. The results for industrial customers in the PPI Report show how this has caused their rates to soar as the policy was implemented. Again, this is due to faulty design and possible gaming of the spot markets, in which sellers with energy that costs less to produce can always get paid the top dollar demanded, which may be for the most costly, least efficient plant.
It's Market Design, Not Gas Prices
In response to Marilyn Showalter's study, deregulation proponents - mainly the deregulated wholesale utilities and traders - claim New York's rising electricity prices are simply tracking previously unanticipated increases in prices for natural gas and oil. See Energy Deregulation Too Costly, Study Shows New Yorkers Pay More for Electricity Now than under Regulated System, Says Advocacy Group Director.
Those fuels, however, only account for about 34% of New York's electricity production. According to NYSERDA data, the majority of New York's electricity supply is from sources that produce electricity at costs far lower than natural gas or oil fired power plants. This includes
Sellers of lower cost energy receive the maximum clearing prices set in the NYISO markets for much more expensive power plants. As a result, with deregulation, the benefit of low cost electricity shifted from New York's consumers to producers and traders.
Industrial customers, once the major "consumer" supporter of deregulation, are defecting as the prices they pay in the deregulated states go up. See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed. It is now mainly the producers and traders who continue to bombard the public and press with spurious claims of that deregulation is succeeding. It is, for them.
Other Goals
As mentioned above, lower price was the first goal of deregulation, and there were other objectives. New York has not done so well on the other restructuring goals, either. The other goals articulated by the New York PSC when it adopted the "vision" promoted by Enron were
In 1996 the New York Public Service Commission (PSC) adopted policies favoring electricity price deregulation. The major trade off for utilities was that in exchange for selling their power plants to new owners, as desired by the PSC, the utilities were allowed to form holding companies and to have long term "performance" rate plans. Rates would be set at a "macro" level rather than based on detailed scrutiny of costs, and the companies could retain savings achieved by cost cutting in operations. The PSC approved "rate/restructuring" agreements for each utility. In November 1999, the New York ISO (NYISO) was formed to create a FERC-approved "organized" market for spot market sales and purchases. Now the majority of wholesale energy in the state is sold or influenced by prices in that essentially deregulated market. See NYISO Costs Skyrocket, Benefits Questioned.
In 2004, the PSC still believed in a transition to a situation where eventually all customers would face spot market pricing:
Utility consumer advocates generally oppose reliance on spot market pricing:
In 2006 the New York PSC commenced a new case to consider how retail utilities should acquire electricity and natural gas for their customers. That case is underway. Meanwhile, some New York utilities are continuing to implement plans adopted years ago to increase their reliance on short term spot markets to purchase energy for their retail customers in the coming years.
Time for a New Plan
Other states that restructured are considering major changes after the failed experiment with deregulation. See PSC Study: Michigan's Electric Utilities Should Return To Regulated Market Structure. The three former New York PSC commissioners mentioned in the article above were right to call for a new energy planning initiative for New York State. The last state energy plan issued in 2002 relied heavily on a deregulatory approach. See Disconnected Policymakers.
Energy Plan "Updates" to the 2002 plan have been issued by NYSERDA based on information voluntarily provided by industry sources. In its 2006 "update" report, NYSERDA stated
Today, New York electric consumers pay more than those in states that continued conventional state utility regulation. More troubling, the gap between New York and the states that did not drink the restructuring Kool-Aid is widening, making New York less competitive in the national economy.
This is illustrated in an October 1, 2007 report by Marilyn Showalter, for Power in the Public Interest. See Electricity Price Trends in New York Compared to Trends in Price-regulated States, based on EIA data through June 2007.
Marilyn Showalter is a former Chair of the Washington State Utilities and Transportation Commission (WUTC) and former President of NARUC, the national association of state utility regulators. She also served as chief clerk of the Washington State House of Representatives and as legal counsel to the governor of Washington. She is a graduate of Harvard College and Harvard Law School. Her report shows how New York customers are paying far more for electricity than customers in states that did not try to deregulate. In the traditionally regulated states, utilities did not sell their power plants and thus they are less dependent on buying energy in essentially deregulated federal wholesale markets.
A New York Times article, A New Push to Regulate Power Costs, also summarized the national trend: electricity prices in states that adhered to the deregulation model, like New York, are not only higher than they were before the experiment began, but also higher in relation to the majority of states that did not follow their example.
The First Goal of New York's Restructuring was Lower Retail Prices
Confronted with this reality - prices did not go down with deregulation, and the price gap between New York and other states is widening - a former New York PSC Chairman was recently quoted as saying lower prices are not the only goal of deregulation. See Push on for Energy Policy: 3 Former Heads of PSC Tell Independent Power Producers a State Plan Is Needed.
It is true that other goals were stated when the PSC adopted its "vision" of "unbundling" and deregulating wholesale and retail generation service in 1996, (see below), but the number one goal was to reduce New York electricity prices that were high in relation to other states
Market forces overall are expected to produce, over time, rates that will be lower than they would be under a regulated environment. As we move toward competition, our expectation is that rates overall will be reduced.Opinion 96-12 at p. 26. It was this "vision order" that paved the way for the New York PSC and utilities to implement restructuring by requiring the utilities to file plans to conform with the "vision." PULP's opposition to divestiture and deregulation of new providers was not heeded. Subsequently, the legislature undid the PSC effort to deregulate new retail gas and electric companies.
After most of the utilities agreed to restructure, and as ownership of their power plants was being shifted to new wholesale utilities who would sell at market rates allowed by FERC, the 1998 State Energy Plan also stated an expectation that the rate differential between New York and other states would narrow:
Future electric generation prices should move closer to the national average since over time competition will likely eliminate most market distortions, leaving only regional anomalies for state-to-state price differences. Thus, changes in generation prices should have no more impact on New York's competitive position than comparable changes in other states.Now, however the situation is worse. The gap between New York electricity prices and those of other conventionally regulated states is widening.
No state deregulated electricity like New York did since the demise of Enron in 2001 drew attention to the flawed scheme of deregulated federal wholesale markets. Since then, a number of states halted their plans to deregulate. Other states that had enacted laws requiring divestiture of power plants, like Connecticut, have recently passed new laws to authorize utilities to build or acquire power plants as a way to bring more of the generation costs of electric service back under state regulation. This reduces the need to buy electricity at wholesale market prices inflated by design and gaming.
Rate Differences Within New York: Customers of a Vertically Integrated Utility Did Best
Within New York state, customers of the utilities that most enthusiastically implemented the PSC vision saw their bills rise and become unpredictable. In contrast, residential customers of RG&E, a utility that kept most of its power plants, and thus remains the most traditionally regulated, enjoy the lowest bills. See Excelsior! Con Edison Residential Rates Spike (Again).
There is no legal barrier that prevents a utility from building a power plant, as Con Edison did with its East River steam/electric "repowering" project several years ago. RG&E has announced plans to retire an old coal plant and build a new 330 MW plant, and to improve several of its old hydro plants, raising their output by 9 MW. Deregulation proponents are now asking the PSC to require divestiture or prevent RG&E from repowering old power plants, so customers of that utility too would have to buy electricity at inflated prices established in the deregulated federal markets.
The New York PSC adopted a policy to flow NYISO spot market rates through to all customers, eventually, starting first with the largest customers. The results for industrial customers in the PPI Report show how this has caused their rates to soar as the policy was implemented. Again, this is due to faulty design and possible gaming of the spot markets, in which sellers with energy that costs less to produce can always get paid the top dollar demanded, which may be for the most costly, least efficient plant.
It's Market Design, Not Gas Prices
In response to Marilyn Showalter's study, deregulation proponents - mainly the deregulated wholesale utilities and traders - claim New York's rising electricity prices are simply tracking previously unanticipated increases in prices for natural gas and oil. See Energy Deregulation Too Costly, Study Shows New Yorkers Pay More for Electricity Now than under Regulated System, Says Advocacy Group Director.
Those fuels, however, only account for about 34% of New York's electricity production. According to NYSERDA data, the majority of New York's electricity supply is from sources that produce electricity at costs far lower than natural gas or oil fired power plants. This includes
- 25% from nuclear,
- 14% from hydro,12% from coal,
- 13% imported (much of which is Canadian hydro or produced from coal in other states)
Sellers of lower cost energy receive the maximum clearing prices set in the NYISO markets for much more expensive power plants. As a result, with deregulation, the benefit of low cost electricity shifted from New York's consumers to producers and traders.
Industrial customers, once the major "consumer" supporter of deregulation, are defecting as the prices they pay in the deregulated states go up. See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed. It is now mainly the producers and traders who continue to bombard the public and press with spurious claims of that deregulation is succeeding. It is, for them.
Other Goals
As mentioned above, lower price was the first goal of deregulation, and there were other objectives. New York has not done so well on the other restructuring goals, either. The other goals articulated by the New York PSC when it adopted the "vision" promoted by Enron were
- Increasing Customer Choice (See Think Twice Before Switching Utilities)
- Continuing Reliability of Service (See Power Outage Mystery, Queens Power Outage Update)
- Continuing Programs That are in the Public Interest
- Allaying Concerns About Market Power (See Did Electricity Market Manipulation Cost New York Consumers $157 Million in the Summer of 2006? and NYISO Scarcity Pricing Events)
- Continuing Customer Protections and the Obligation to Serve (See the effort of new utilities to circumvent HEFPA)
In 1996 the New York Public Service Commission (PSC) adopted policies favoring electricity price deregulation. The major trade off for utilities was that in exchange for selling their power plants to new owners, as desired by the PSC, the utilities were allowed to form holding companies and to have long term "performance" rate plans. Rates would be set at a "macro" level rather than based on detailed scrutiny of costs, and the companies could retain savings achieved by cost cutting in operations. The PSC approved "rate/restructuring" agreements for each utility. In November 1999, the New York ISO (NYISO) was formed to create a FERC-approved "organized" market for spot market sales and purchases. Now the majority of wholesale energy in the state is sold or influenced by prices in that essentially deregulated market. See NYISO Costs Skyrocket, Benefits Questioned.
In 2004, the PSC still believed in a transition to a situation where eventually all customers would face spot market pricing:
Based on the current state of the competitiveness of the electric market, it is our view that, for the largest commercial and industrial customers, their commodity rates should reflect spot markets and existing hedges should be allowed to expire without being renewed. We will continue to monitor the state of the market for other customer classes and as the markets continue to mature, we expect that the hedges providing price volatility protection for these customers will be allowed to expire as well.Statement of Policy on Further Steps Toward Competition in Retail Energy Markets, Aug. 25, 2004.
Utility consumer advocates generally oppose reliance on spot market pricing:
The Default Service Provider shall not simply pass through wholesale spot market rates for the energy or gas commodity portion of Default Service, and shall be required to take prudent measures to provide least cost service and assure long term rate stability, through various means including but not limited to competitive bid, bilateral contract, or provider-owned generation or suppliesNASUCA Resolution on Competitive Provision of Electricity and Natural Gas, 2001.
In 2006 the New York PSC commenced a new case to consider how retail utilities should acquire electricity and natural gas for their customers. That case is underway. Meanwhile, some New York utilities are continuing to implement plans adopted years ago to increase their reliance on short term spot markets to purchase energy for their retail customers in the coming years.
Time for a New Plan
Other states that restructured are considering major changes after the failed experiment with deregulation. See PSC Study: Michigan's Electric Utilities Should Return To Regulated Market Structure. The three former New York PSC commissioners mentioned in the article above were right to call for a new energy planning initiative for New York State. The last state energy plan issued in 2002 relied heavily on a deregulatory approach. See Disconnected Policymakers.
Energy Plan "Updates" to the 2002 plan have been issued by NYSERDA based on information voluntarily provided by industry sources. In its 2006 "update" report, NYSERDA stated
Although Article 6 expired on January 1, 2003, NYSERDA, acting on behalf of the former Energy Planning Board, requested this information on a voluntary basis in an attempt to maintain an accurate and complete record of information and data in anticipation of the future re-authorization of the planning process. As compliance of major energy suppliers with this voluntary request has waned considerably, NYSERDA will cease to request voluntary compliance.It appears from the statement above that without new statutory authority, NYSERDA may lack the scope of information and tools needed even to assess the situation accurately. There has been no legislative reauthorization of a comprehensive energy planning process for the state.
Tuesday, October 02, 2007
New Barrier to Utility Service: National Grid's "One Grand Demand"
The One Grand Demand
In recent weeks, PULP's Helpline received calls from low income consumers involving denials of utility service by National Grid because they owed money from prior accounts, sometimes closed years ago. National Grid demanded large DPA down payments of as much as $1,000.
In each of the instances we learned of, Grid's "one grand demand" was far beyond the financial means of the applicant. Further, National Grid refused to negotiate the amount of the up front payment demanded for service, even when charitable groups offered assistance that would partially meet the demand.
As a result, households go without electric service. For example
National Grid referred the customers to the local welfare office, where they were denied emergency utility assistance.
The utility assistance safety net created in Social Services Law § 131-s provides a grant equal to the past four months service for current customers or those recently terminated. It is not designed to cover old arrears or to use public money when the applicant for service has a remedy under the Public Service Law, i.e., a fair and equitable DPA tailored to one's financial circumstances. See the PULP Help Center web pages on public assistance for utility emergencies and utility Deferred Payment Agreements.
HEFPA Requires Affordable DPAs for Applicants
Before the Home Energy Fair Practices Act (HEFPA) was enacted in 1981, utilities could insist upon full payment of arrears from prior accounts before providing service, even when it was impossible for the customer to pay the entire arrears. See PULP's web page reviewing HEFPA History.
HEFPA changed all that.
The law declares that continuous utility service is in the public interest and necessary for the public health and welfare. HEFPA requires utilities to offer deferred payment agreements (DPAs) to enable applicants for utility service retire old arrears from prior accounts over time with affordable payments. The DPA includes an agreement to pay current bills on time plus installment payments on the arrears. Breach of an existing DPA by a current customer is grounds for termination of service, unless the customer can obtain a new DPA with lower payments based on a change of financial circumstances.
Further, regulations of the Department of Public Service require utilities to negotiate fair and equitable DPAs to as little as nothing down and $10 per month, based on the applicant's financial circumstances. The Department of Public Service also is also required to resolve disputes between utilities and applicants over the terms of a fair and equitable DPA.
The apparent rationale of National Grid to demand the "one grand" up front payment from an applicant for service is a section of HEFPA that allows the utility to terminate service to a current customer who has broken a DPA. National Grid apparently maintains that an applicant, who defaulted on a DPA previously when he or she was a customer, can never get a new DPA. The PSC regulations, however, clearly differentiate between applicants for service and current customers. The cessation of service to a customer for defaulting on an existing DPA does not preclude a DPA for an applicant who has not had service within the past 60 days, and who has not broken an existing DPA. Applicants who were recently terminated for non payment can be required to make a deposit.
National Grid's rigid "one grand demands" amount to a refusal to negotiate a fair and equitable DPA.
A Pattern of Undermining HEFPA Protections
National Grid's "One Grand Demand" is an effort to roll back the effects of HEFPA legislation intended to protect applicants for utility service and the public health and welfare. It is resulting in denial of service contrary to the intent of the legislature when it adopted HEFPA. This is not the first time. Several years ago, National Grid denied service to more than one thousand applicants by demanding deposits in situations not allowed by HEFPA. PULP opposed that move successfully, the PSC did not adopt harsher deposit rules proposed by the utility and DPS staff during the litigation, and Grid was directed by the PSC to take corrective action.
Conclusion
Section 31 of the Public Service Law expressly recognizes that some applicants for service will owe the utility for prior service. The law expressly provides the solution for those who cannot afford to pay arrears in full: a negotiable DPA that is a fair and equitable arrangement based on the customer's ability to pay for old arrears.
National Grid appears to be creating new, unreasonable barriers to utility service to some applicants with old arrears, contrary to the purpose of HEFPA. In addition to family hardship and frustration of the public policy of the state favoring continuous utility service, it is quite possible we will see new tragedies as a result. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households
Persons denied service by National Grid may call the PSC Hotline at 1-800-342-3355 for assistance in negotiating a fair DPA. In some instances, the staff of the Department of Public Service has supported National Grid in its demands for more money than applicants can afford. If calling the PSC Hotline does not solve the problem applicants denied utility service, they, or their advocates, may call PULP at 1-800-255-7857 for further information.
In recent weeks, PULP's Helpline received calls from low income consumers involving denials of utility service by National Grid because they owed money from prior accounts, sometimes closed years ago. National Grid demanded large DPA down payments of as much as $1,000.
In each of the instances we learned of, Grid's "one grand demand" was far beyond the financial means of the applicant. Further, National Grid refused to negotiate the amount of the up front payment demanded for service, even when charitable groups offered assistance that would partially meet the demand.
As a result, households go without electric service. For example
- A household with a 14 month old infant was without service because they could not meet the demand for $1000
- A mother with four children was evicted and became homeless when the father halted child support payments. The family was living in a car, and is now in a costly and possibly dangerous motel situation. The mother found an apartment, but is unable to move in because the landlord requires utility service to be on before giving possession. She could not resolve her homeless situation because she could not meet Grid's demand for $1000
- A senior citizen who receives SSI and who is moving to a different apartment where utilities are not included in rent, who has arrears dating back more than six years, was refused service unless he paid at least $1000, which he does not have.
- A disabled amputee with seizures was denied service due prior arrears and could not satisfy Grid's inflexible demand for $1000
National Grid referred the customers to the local welfare office, where they were denied emergency utility assistance.
The utility assistance safety net created in Social Services Law § 131-s provides a grant equal to the past four months service for current customers or those recently terminated. It is not designed to cover old arrears or to use public money when the applicant for service has a remedy under the Public Service Law, i.e., a fair and equitable DPA tailored to one's financial circumstances. See the PULP Help Center web pages on public assistance for utility emergencies and utility Deferred Payment Agreements.
HEFPA Requires Affordable DPAs for Applicants
Before the Home Energy Fair Practices Act (HEFPA) was enacted in 1981, utilities could insist upon full payment of arrears from prior accounts before providing service, even when it was impossible for the customer to pay the entire arrears. See PULP's web page reviewing HEFPA History.
HEFPA changed all that.
The law declares that continuous utility service is in the public interest and necessary for the public health and welfare. HEFPA requires utilities to offer deferred payment agreements (DPAs) to enable applicants for utility service retire old arrears from prior accounts over time with affordable payments. The DPA includes an agreement to pay current bills on time plus installment payments on the arrears. Breach of an existing DPA by a current customer is grounds for termination of service, unless the customer can obtain a new DPA with lower payments based on a change of financial circumstances.
Further, regulations of the Department of Public Service require utilities to negotiate fair and equitable DPAs to as little as nothing down and $10 per month, based on the applicant's financial circumstances. The Department of Public Service also is also required to resolve disputes between utilities and applicants over the terms of a fair and equitable DPA.
The apparent rationale of National Grid to demand the "one grand" up front payment from an applicant for service is a section of HEFPA that allows the utility to terminate service to a current customer who has broken a DPA. National Grid apparently maintains that an applicant, who defaulted on a DPA previously when he or she was a customer, can never get a new DPA. The PSC regulations, however, clearly differentiate between applicants for service and current customers. The cessation of service to a customer for defaulting on an existing DPA does not preclude a DPA for an applicant who has not had service within the past 60 days, and who has not broken an existing DPA. Applicants who were recently terminated for non payment can be required to make a deposit.
National Grid's rigid "one grand demands" amount to a refusal to negotiate a fair and equitable DPA.
A Pattern of Undermining HEFPA Protections
National Grid's "One Grand Demand" is an effort to roll back the effects of HEFPA legislation intended to protect applicants for utility service and the public health and welfare. It is resulting in denial of service contrary to the intent of the legislature when it adopted HEFPA. This is not the first time. Several years ago, National Grid denied service to more than one thousand applicants by demanding deposits in situations not allowed by HEFPA. PULP opposed that move successfully, the PSC did not adopt harsher deposit rules proposed by the utility and DPS staff during the litigation, and Grid was directed by the PSC to take corrective action.
Conclusion
Section 31 of the Public Service Law expressly recognizes that some applicants for service will owe the utility for prior service. The law expressly provides the solution for those who cannot afford to pay arrears in full: a negotiable DPA that is a fair and equitable arrangement based on the customer's ability to pay for old arrears.
National Grid appears to be creating new, unreasonable barriers to utility service to some applicants with old arrears, contrary to the purpose of HEFPA. In addition to family hardship and frustration of the public policy of the state favoring continuous utility service, it is quite possible we will see new tragedies as a result. See Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low-Income Households
Persons denied service by National Grid may call the PSC Hotline at 1-800-342-3355 for assistance in negotiating a fair DPA. In some instances, the staff of the Department of Public Service has supported National Grid in its demands for more money than applicants can afford. If calling the PSC Hotline does not solve the problem applicants denied utility service, they, or their advocates, may call PULP at 1-800-255-7857 for further information.
Tuesday, September 25, 2007
U.S. Supreme Court to Decide Electricity Market Rate Refund Case
On September 24, 2007 the Supreme Court granted a writ of certiorari to review a December 2006 decision of the Court of Appeals for the Ninth Circuit in Morgan Stanley Capital Group v. Snohomish County. The Ninth Circuit held that FERC must consider reasonableness of long term electricity contracts made at a time when the market prices were manipulated.
FERC refused to review the Snohomish contracts for reasonableness and possible refunds based on its interpretation of the "Mobile-Sierra" doctrine established in two prior Supreme Court decisions. The effect of the Mobile and Sierra cases was to limit FERC's power to revise contract rates for wholesale electricity. The issue in the Sierra case was whether the contract rate had become too low, and the seller could not be relieved of its obligations unless the impact of holding the seller to its deal would harm the "public interest."
The contract rates in the Snohomish case, in contrast, were excessive, not too low. Further, the sellers had received market-based rate "authorizations" from FERC. FERC relieves sellers with such authorizations from the statutory duty to file their rates, rate schedules and contracts affecting rates in advance, and only requires abbreviated post hoc quarterly summaries of sales.
FERC's "market-based rate tariffs contain no rates or rate schedules or formula from which the price can be calculated, and allow prices to be what the seller and buyer agree, in private, with no public filing of the rates or contracts before they take effect. This agency waiver of advance filing requirements is not authorized by the language of the Federal Power Act, and was simply made up by FERC. See May the FERC Rely on Markets to Set Electric Rates.
In MCI v AT&T, in the context of analogous deregulatory initiatives by the FCC, the Supreme Court heldthat a federal regulatory agency cannot create alternative systems that ignore a filed rate regulation system created by statute. In other pending litigation, consumer groups have raised the issue whether FERC can dispense with the statutory requirement of advance public filing of wholesale electricity rates and contracts simply because FERC believes the sellers lack market power. See FERC Escapes Court Review of Legal Authority for its Electricity Market Rate Regime , and Consumer Groups Question FERC Market Rates.
When buyers sought relief from unreasonable wholesale market rates for electricityduring the California crisis, FERC threw consumers to the lions, allowing sellers protection under the "filed rate doctrine" that allows only prospective modification of previously established rates (thus thwarting any refunds for prior overcharges) and the "public interest" standard that militates against revision of contract rates. Perversely, the Federal Power Act -- statute designed to protect consumers by subjecting all rates and contracts to public scrutiny, agency review and public accountability -- was turned by FERC's interpretations into one that insulates excessive utility charges from any public or agency scrutiny.
In a 2004 decision in Lockyer ex. rel California v. FERC creating refund remedies for consumers injured by excessive market rates, the Ninth Circuit uncritically accepted a doctrine of the D.C. Circuit Court of Appeals which said that FERC can allow market rates to be charged when the agency deems that sellers lack market power (the ability to drive prices up) . The D.C. Circuit, however, had avoided grappling with the inconsistency of unfiled market prices and longstanding core statutory rate filing requirements. The Ninth Circuit nonetheless allowed refunds for the benefit in Lockyer on a theory that if FERC's initial assessment of sellers' market power turned out to be wrong wrong, and if sellers did not make quarterly reports, FERC could require refunds of excessive charges.
In Snohomish, the Ninth Circuit elaborated on its Lockyer doctrine:
Sellers sought review of the Lockyer decision in the Supreme Court. California argued in its conditional cross-petition that if the case was accepted for review, the Supreme Court should hold that the market rates were subject to plenary review for reasonableness (as opposed to prospective revision barring relief for prior overcharges) because the rates had never been filed as required by the Federal Power Act Section 205. The Supreme Court denied review in the Lockyer case in June 2007, and so the rate filing issue raised by California was not decided in that case.
Sellers in the Snohomish case that will now be heard by the Supreme Court essentially claim that their contracts should not be revised under the Mobile-Sierra doctrine. Examination of the Mobile and Sierra cases, however, shows that the contracts there had been properly filed before they took effect, had been subject to public scrutiny, protest and intervention by interested parties, and had already been reviewable for reasonableness by the regulatory agency.
The Supreme Court's decision in Mobile emphasizes the importance of the public advance filing requirement, a factor not present in Snohomish:
The Morgan Stanley cert petition and associations of energy sellers urged the Supreme Court to undo the remedy for consumers fashioned by the Ninth Circuit by applying the "public interest" standard of review rather than a "just and reasonable" standard, but did not come to grips with a major distinction: the contracts at issue in their case had never been publicly filed at FERC and thus had never been subject to its review for reasonableness and possible revision before taking effect. In contrast, the more stringent standard for contract review developed in the Mobile-Sierra cases came into play only after advance public filing and after the agency had reviewed them for reasonableness.
The Ninth Circuit was right to require FERC to consider refund remedies for excessive charges. Otherwise, it would be possible for unreasonable and illegal rates to burden customers with no remedy from the agency whose mission includes the duty to see that no unreasonable charges are imposed to the eventual detriment of consumers.
The Ninth Circuit's decision could be affirmed by the Supreme Court on an additional or alternative ground more firmly anchored in the language of the governing statute. The deference normally accorded to a wholesale electricity contract arises only after the contract has been filed publicly in advance, subject to public scrutiny, intervention and protest, and FERC review to determine if rates are just and reasonable. Because the Snohomish contract sellers had market rate authorizations, their actual rates, charges and contracts were not publicly filed in advance. Thus, as in any case where the seller has not filed rates in accordance with the law, FERC has power to review them for reasonableness when the excessive charges became apparent and buyers objected, from the date the contract began.
FERC and the sellers have maintained that a screening for market power and a post hoc reporting requirement is sufficient to justify waiver of the statutory public rate filing requirements. The Supreme Court, however, in MCI v. AT&T, rejected such administrative deregulation by the FCC without congressional action to modify the agency's governing statute:
Significantly, after the Supreme Court struck down the FCC's attempt at agency deregulation in MCI v. AT&T , Congress enacted a new statute, the Telecommunications Act of 1996 which took into account changes since the 1930's, recast the duties of utilities, revised the powers of the agency, established standards for relaxation of regulation and reintroduction of regulation. Further, Congress added significant new universal service and consumer protection measures the federal agency either lacked any power to create, or which, in its deregulatory zeal, it had overlooked.
This broader, congressional solution is exactly the result contemplated by the Supreme Court in FPC v Texaco, another case that discussed energy agency departure from statutory requirements:
FERC refused to review the Snohomish contracts for reasonableness and possible refunds based on its interpretation of the "Mobile-Sierra" doctrine established in two prior Supreme Court decisions. The effect of the Mobile and Sierra cases was to limit FERC's power to revise contract rates for wholesale electricity. The issue in the Sierra case was whether the contract rate had become too low, and the seller could not be relieved of its obligations unless the impact of holding the seller to its deal would harm the "public interest."
The contract rates in the Snohomish case, in contrast, were excessive, not too low. Further, the sellers had received market-based rate "authorizations" from FERC. FERC relieves sellers with such authorizations from the statutory duty to file their rates, rate schedules and contracts affecting rates in advance, and only requires abbreviated post hoc quarterly summaries of sales.
FERC's "market-based rate tariffs contain no rates or rate schedules or formula from which the price can be calculated, and allow prices to be what the seller and buyer agree, in private, with no public filing of the rates or contracts before they take effect. This agency waiver of advance filing requirements is not authorized by the language of the Federal Power Act, and was simply made up by FERC. See May the FERC Rely on Markets to Set Electric Rates.
In MCI v AT&T, in the context of analogous deregulatory initiatives by the FCC, the Supreme Court heldthat a federal regulatory agency cannot create alternative systems that ignore a filed rate regulation system created by statute. In other pending litigation, consumer groups have raised the issue whether FERC can dispense with the statutory requirement of advance public filing of wholesale electricity rates and contracts simply because FERC believes the sellers lack market power. See FERC Escapes Court Review of Legal Authority for its Electricity Market Rate Regime , and Consumer Groups Question FERC Market Rates.
When buyers sought relief from unreasonable wholesale market rates for electricityduring the California crisis, FERC threw consumers to the lions, allowing sellers protection under the "filed rate doctrine" that allows only prospective modification of previously established rates (thus thwarting any refunds for prior overcharges) and the "public interest" standard that militates against revision of contract rates. Perversely, the Federal Power Act -- statute designed to protect consumers by subjecting all rates and contracts to public scrutiny, agency review and public accountability -- was turned by FERC's interpretations into one that insulates excessive utility charges from any public or agency scrutiny.
In a 2004 decision in Lockyer ex. rel California v. FERC creating refund remedies for consumers injured by excessive market rates, the Ninth Circuit uncritically accepted a doctrine of the D.C. Circuit Court of Appeals which said that FERC can allow market rates to be charged when the agency deems that sellers lack market power (the ability to drive prices up) . The D.C. Circuit, however, had avoided grappling with the inconsistency of unfiled market prices and longstanding core statutory rate filing requirements. The Ninth Circuit nonetheless allowed refunds for the benefit in Lockyer on a theory that if FERC's initial assessment of sellers' market power turned out to be wrong wrong, and if sellers did not make quarterly reports, FERC could require refunds of excessive charges.
In Snohomish, the Ninth Circuit elaborated on its Lockyer doctrine:
Market-based rate authority provides a meaningful opportunity for prior review and approval of rates under the FPA, an essential prerequisite to the Mobile-Sierra mode of rate review, only insofar as FERC implements and uses an effective oversight mechanism after the market-based rate authorization is initially granted. Only then can FERC meet its statutory duty to ensure that all rates are “just and reasonable.”In effect, the Ninth Circuit said FERC could invent a new system of market rates, and the court invent a remedy when the market rates are discovered to be unreasonable. See More Doubts About FERC's Market Rate Regime From Ninth Circuit.
Sellers sought review of the Lockyer decision in the Supreme Court. California argued in its conditional cross-petition that if the case was accepted for review, the Supreme Court should hold that the market rates were subject to plenary review for reasonableness (as opposed to prospective revision barring relief for prior overcharges) because the rates had never been filed as required by the Federal Power Act Section 205. The Supreme Court denied review in the Lockyer case in June 2007, and so the rate filing issue raised by California was not decided in that case.
Sellers in the Snohomish case that will now be heard by the Supreme Court essentially claim that their contracts should not be revised under the Mobile-Sierra doctrine. Examination of the Mobile and Sierra cases, however, shows that the contracts there had been properly filed before they took effect, had been subject to public scrutiny, protest and intervention by interested parties, and had already been reviewable for reasonableness by the regulatory agency.
The Supreme Court's decision in Mobile emphasizes the importance of the public advance filing requirement, a factor not present in Snohomish:
"This contract was filed with the Federal Power Commission as an amendment to the general supply contracts between Mobile and United, and, with the approval of the Commission, became a part of United's filed schedules of rates and contracts."In the Sierra case, which involved the Federal Power Act, the Supreme Court again emphasized that the contract at issue "was duly filed with the Federal Power Commission."
* * *
In June 1953 United, without the consent of Mobile, filed new schedules with the Commission which purported to increase the rate on gas for resale to Ideal to 14.5 cents per MCF, a rate more closely approximating that for other gas furnished to Mobile by United. Claiming that United could not thus unilaterally change the contract rate, Mobile petitioned the Commission to reject United's filing.
* * *
The Act 3 requires natural gas companies to file all rates and contracts with the Commission (4)(c)) and authorizes the Commission to modify any rate or contract which it determines to be "unjust, unreasonable, unduly discriminatory, or preferential" (5(a)). Changes in previously filed rates or contracts must be filed with the Commission at least 30 days before they are to go into effect ( 4 (d)***
* * *
In construing the Act, we should bear in mind that it evinces no purpose to abrogate private rate contracts as such. To the contrary, by requiring contracts to be filed with the Commission, the Act expressly recognizes that rates to particular customers may be set by individual contracts.
* * *
Recognizing the need these circumstances create for individualized arrangements between natural gas companies and distributors, the Natural Gas Act permits the relations between the parties to be established initially by contract, the protection of the public interest being afforded by supervision of the individual contracts, which to that end must be filed with the Commission and made public.
* * *
The provision of the Natural Gas Act directly in issue here is 4 (d), which provides that "no change shall be made by any natural-gas company in any such [filed] rate . . . or contract . . . except after thirty days' notice to the Commission," which notice is to be given by filing new schedules showing the changes and the time they are to go into effect.
* * *
These sections are simply parts of a single statutory scheme under which all rates are established initially by the natural gas companies, by contract or otherwise, and all rates are subject to being modified by the Commission upon a finding that they are unlawful.
* * *
The basic duties are the filing requirements: 4 (c) requires schedules showing all rates and contracts in force to be filed with the Commission and 4 (d) requires all changes in such schedules likewise to be filed. In addition, 4 (d) imposes the further requirement that the changes be filed at least thirty days before they are to go into effect. It may readily be seen that these requirements are no more than are necessary to implement 4 (e) and 5 (a): the filing requirements are obviously necessary to permit the Commission to exercise its review functions, and the requirement of 30-days' advance notice of changes is essential to afford the Commission a reasonable period in which to determine whether to exercise its suspension powers under 4 (e).
The Morgan Stanley cert petition and associations of energy sellers urged the Supreme Court to undo the remedy for consumers fashioned by the Ninth Circuit by applying the "public interest" standard of review rather than a "just and reasonable" standard, but did not come to grips with a major distinction: the contracts at issue in their case had never been publicly filed at FERC and thus had never been subject to its review for reasonableness and possible revision before taking effect. In contrast, the more stringent standard for contract review developed in the Mobile-Sierra cases came into play only after advance public filing and after the agency had reviewed them for reasonableness.
The Ninth Circuit was right to require FERC to consider refund remedies for excessive charges. Otherwise, it would be possible for unreasonable and illegal rates to burden customers with no remedy from the agency whose mission includes the duty to see that no unreasonable charges are imposed to the eventual detriment of consumers.
The Ninth Circuit's decision could be affirmed by the Supreme Court on an additional or alternative ground more firmly anchored in the language of the governing statute. The deference normally accorded to a wholesale electricity contract arises only after the contract has been filed publicly in advance, subject to public scrutiny, intervention and protest, and FERC review to determine if rates are just and reasonable. Because the Snohomish contract sellers had market rate authorizations, their actual rates, charges and contracts were not publicly filed in advance. Thus, as in any case where the seller has not filed rates in accordance with the law, FERC has power to review them for reasonableness when the excessive charges became apparent and buyers objected, from the date the contract began.
FERC and the sellers have maintained that a screening for market power and a post hoc reporting requirement is sufficient to justify waiver of the statutory public rate filing requirements. The Supreme Court, however, in MCI v. AT&T, rejected such administrative deregulation by the FCC without congressional action to modify the agency's governing statute:
our estimations, and the Commission's estimations, of desirable policy cannot alter the meaning of the [statute]. For better or worse, the Act establishes a rate regulation, filed tariff system ..., and the Commission's desire "to `increase competition' cannot provide [it] authority to alter the well-established statutory filed rate requirements".... As we observed in the context of a dispute over the filed rate doctrine more than 80 years ago, "such considerations address themselves to Congress, not to the courts ....Sellers cannot have it both ways, i.e., escaping initial public and agency scrutiny of unfiled rates for reasonableness while demanding the protection of the filed rate and Mobile Sierra doctrines.We do not mean to suggest that the tariff-filing requirement is so inviolate that the Commission's existing modification authority does not reach it at all. Certainly the Commission can modify the form, contents, and location of required filings, and can defer filing or perhaps even waive it altogether in limited circumstances. But what we have here goes well beyond that. It is effectively the introduction of a whole new regime of regulation (or of free-market competition), which may well be a better regime, but is not the one that Congress established.
Significantly, after the Supreme Court struck down the FCC's attempt at agency deregulation in MCI v. AT&T , Congress enacted a new statute, the Telecommunications Act of 1996 which took into account changes since the 1930's, recast the duties of utilities, revised the powers of the agency, established standards for relaxation of regulation and reintroduction of regulation. Further, Congress added significant new universal service and consumer protection measures the federal agency either lacked any power to create, or which, in its deregulatory zeal, it had overlooked.
This broader, congressional solution is exactly the result contemplated by the Supreme Court in FPC v Texaco, another case that discussed energy agency departure from statutory requirements:
It is not the Court's role, however, to overturn congressional assumptions embedded into the framework of regulation established by the Act. This is a proper task for the Legislature where the public interest may be considered from the multifaceted points of view of the representational process.The actions taken by Congress in the aftermath of MCI v. AT&T included
- requiring all local telephone companies to offer reduced price Lifeline and Linkup service for low income customers
- requiring comparable and affordable telephone rates for customers in urban, rural, and low income areas, and
- requiring low cost internet broadband service for schools and libraries.
Friday, September 21, 2007
Marketizer Revisionism: FERC Reinvents Itself as Overseer of Markets, Abandoning Review of Utility Rates
Traditionally, reasonableness of wholesale electric rates has been determined by some measure of cost and the level of utility profit, neither of which have been matters of much concern to FERC lately. This is because FERC is attempting to substitute competition and markets for price regulation. In essence, FERC prefers to be more like the SEC, which polices the stock markets, generally without concern about reasonableness of the price of any particular stock on any day.
Unlike the SEC, however, Congress requires all utility rates and charges for wholesale electricity and interstate transmission under FERC jurisdiction to be "just and reasonable." The Federal Power Act also declares that any unreasonable utility rates are illegal. Congress charged FERC with the duty to enforce the reasonableness requirement and gave it the power to review utility rates for reasonableness before they are implemented, and to revise current rates prospectively if they become unreasonable.
FERC's shift in emphasis from rate regulation to market oversight was clearly stated in a five-year plan adopted in 2002, which explicitly states its goal is to "foster nationwide competitive energy markets as a substitute for traditional regulation." A key assumption of FERC is that so long as the market cannot be skewed by any single seller, a market rate will be a reasonable rate. This becomes justification for not reviewing the rates and not providing effective refund remedies when a market rate is excessive and unreasonable.
Today, there is growing public and judicial disenchantment with FERC's market rate regime. See More Doubts About FERC's Market Rate Regime From Ninth Circuit.
FERC is now more circumspect and less direct in public statements about replacing traditional regulation with markets and competition than it was in 2002, but the effects of the agency's direction and recent actions remain the same: oversight of utilities and their charges for electric service is being reduced. See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed.
In a recent rule making proceeding, FERC invoked a court decision to support its emphasis on market structure and competition rather than oversight of the level of rates set in the markets:
Interestingly, the snippet FERC quoted from the decision of the Court of Appeals in National Association for the Advancement of Colored People v. FPC, was not adopted by the Supreme Court when it reviewed the case. Instead, in its discussion of the statute's purpose, the Supreme Court said:
FERC's effort to recast the purpose of the Federal Power Act from reasonableness of prices to competition and regulating spot market structure is now being touted by a prominent advocate of deregulated spot markets as a foundation for even greater reliance on wholesale spot markets with even more "scarcity" pricing and fewer limits on market prices ultimately paid by consumers. See Looking for the “Vroom”: A Rebuttal to Dr. Hogan’s “Acting in Time: Regulating Wholesale Electricity Markets”. But no matter whether a utility is "competitive" or monopolistic, and no matter how "workable" the market is, the law still requires all rates and charges to be just and reasonable and subject to review and revision by FERC.
Unlike the SEC, however, Congress requires all utility rates and charges for wholesale electricity and interstate transmission under FERC jurisdiction to be "just and reasonable." The Federal Power Act also declares that any unreasonable utility rates are illegal. Congress charged FERC with the duty to enforce the reasonableness requirement and gave it the power to review utility rates for reasonableness before they are implemented, and to revise current rates prospectively if they become unreasonable.
FERC's shift in emphasis from rate regulation to market oversight was clearly stated in a five-year plan adopted in 2002, which explicitly states its goal is to "foster nationwide competitive energy markets as a substitute for traditional regulation." A key assumption of FERC is that so long as the market cannot be skewed by any single seller, a market rate will be a reasonable rate. This becomes justification for not reviewing the rates and not providing effective refund remedies when a market rate is excessive and unreasonable.
Today, there is growing public and judicial disenchantment with FERC's market rate regime. See More Doubts About FERC's Market Rate Regime From Ninth Circuit.
FERC is now more circumspect and less direct in public statements about replacing traditional regulation with markets and competition than it was in 2002, but the effects of the agency's direction and recent actions remain the same: oversight of utilities and their charges for electric service is being reduced. See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed.
In a recent rule making proceeding, FERC invoked a court decision to support its emphasis on market structure and competition rather than oversight of the level of rates set in the markets:
The Commission’s core responsibility is to “guard the consumer from exploitation by non-competitive electric power companies.”[citing National Association for the Advancement of Colored People v. FPC, 520 F.2d 432, 438 (D.C. Cir. 1975), aff’d, 425 U.S. 662 (1976)]. The Commission has always used two general approaches to meet this responsibility—regulation and competition. The first was the primary approach for most of the last century and remains the primary approach for wholesale transmission service, and the second has been the primary approach in recent years for wholesale generation service.One might observe that in recent years, FERC's "primary approach" of relying on markets to set utility rates results in market manipulation, consumer exploitation, and many billions of dollars of wealth transfer from consumers to essentially deregulated "competitive" generators, marketers and energy traders like Enron. Also, since its enactment in 1935, the Federal Power Act has permitted sellers and buyers to set prices in contracts, so long as the contract prices, terms and conditions were just and reasonable and non discriminatory. FERC has eased up on review without authorization from Congress to change the regulatory system. The major deviation is to eliminate the statutory transparency requirements which require public notice by filing of all rates and contracts affecting rates in advance.
Interestingly, the snippet FERC quoted from the decision of the Court of Appeals in National Association for the Advancement of Colored People v. FPC, was not adopted by the Supreme Court when it reviewed the case. Instead, in its discussion of the statute's purpose, the Supreme Court said:
In the case of the Power and Gas Acts it is clear that the principal purpose of those Acts was to encourage the orderly development of plentiful supplies of electricity and natural gas at reasonable prices. **** 16 U.S.C. § 824a (a) (The purpose of the Power Act is to "assur[e] an abundant supply of electric energy throughout the United States with the greatest possible economy"); Pennsylvania Power Co. v. FPC, 343 U.S. 414, 418 ("A major purpose of the [Power] Act is to protect power consumers against excessive prices"); FPC v. Hope Gas Co., 320 U.S. 591, 610 (The "primary aim" of the Natural Gas Act is "to protect consumers against exploitation at the hands of natural gas companies").Conspicuously absent in the Supreme Court's opinion is any reference to "non-competitive" companies. The statutes require all rates to be reasonable, without regard to whether the seller is "competitive" or "monopolistic." The Supreme Court had just decided a case the year before, in 1974, in which it emphatically rejected any conflation of the notion of a "competitive" market rate with the "reasonable" rate required by law:
Congress could not have assumed that "just and reasonable" rates could conclusively be determined by reference to market price.... This does not mean that the market price of gas would never, in an individual case, coincide with just and reasonable rates or not be a relevant consideration in the setting of area rates...; it may certainly be taken into account along with other factors.... It does require, however, the conclusion that Congress rejected the identity between the "true" [just and reasonable price] and the "actual" market price.Thus, the lower court's emphasis on competition was at odds with longstanding teachings that the statute's purpose is protection of customers from excessive and unreasonable charges. See FERC Commissioner Kelly: The Purpose of the Federal Power Act is to Protect Consumers. Also, FERC's notion of "letting go" regulation of the charges of competitive providers and regulating only those who are monopolistic is at odds with the language of the Federal Power Act and teachings of the Supreme Court which do not allow the agency to forbear regulation of any rates based on its notions of competition. The wisdom of Congress is borne out by the example of "competitive" utilities extracting billions of dollars from consumers by exploiting their market rate waivers from rate review and FERC's blindness to market manipulation.
FERC's effort to recast the purpose of the Federal Power Act from reasonableness of prices to competition and regulating spot market structure is now being touted by a prominent advocate of deregulated spot markets as a foundation for even greater reliance on wholesale spot markets with even more "scarcity" pricing and fewer limits on market prices ultimately paid by consumers. See Looking for the “Vroom”: A Rebuttal to Dr. Hogan’s “Acting in Time: Regulating Wholesale Electricity Markets”. But no matter whether a utility is "competitive" or monopolistic, and no matter how "workable" the market is, the law still requires all rates and charges to be just and reasonable and subject to review and revision by FERC.
Thursday, September 20, 2007
More Doubts About FERC's Market Rate Regime From Ninth Circuit
In several opinions in recent years, the Court of Appeals for the Ninth Circuit has remanded cases to FERC to consider refunds to remedy flagrant market rate manipulation by sellers with FERC-approved "market-based rates." Also, for at least five years, consumer advocates have been asking FERC and the federal courts to consider whether the FERC private market rate regime is consistent with the public filing requirements of the Federal Power Act. To date, the courts have not ruled on the merits of their claims, which are based on the plain language of statutory filing requirements of the Federal Power Act and a Supreme Court decision involving analogous efforts of a federal regulatory agency to implement price deregulation without a change in the law establishing a filed rate regulation system. See May the FERC Rely on Markets to Set Electric Rates?
The Ninth Circuit has indicated further judicial impatience with FERC arguments that market rates, never filed or reviewed, should receive the same deference courts normally give to reasoned federal agency decisions based on a full record and their expertise. Circuit Judge Fletcher, in a case questioning whether the "filed rate doctrine" should be followed when rates were never filed subject to FERC review, stated in her concurring opinion:
To date, the Court of Appeals for the District of Columbia, which wrote opinions generally supporting FERC's deregulation agenda in the 1990's, has never analyzed the argument of consumers -- supported by strong Supreme Court Decisions rejecting attempts of other federal regulatory agencies to deregulate the industries they were charged by Congress to regulate -- that under Section 205 of the Federal Power Act, all rates for wholesale electricity must be publicly filed in advance, subject to FERC review and protest by consumers. On four recent occasions the court has dismissed petitions without grappling with the apparent inconsistency of FERC's relaxation of filing and review requirements with longstanding statutes. The Ninth Circuit decisions have arisen in cases where FERC invoked the "filed rate doctrine" as a bar to refunds of charges inflated by rate manipulation, even though the actual rates and charges had never been filed and thus were never publicly known or subject to FERC review for reasonableness before the charges were imposed.
Some utilities ordered to give refunds under other Ninth Circuit decisions are challenging whether those decisions permitting refunds of excessive market rates -- involving billions of dollars -- are correct. Eventually, these cases, or cases brought by consumers, may reach the Supreme Court.
The Ninth Circuit has indicated further judicial impatience with FERC arguments that market rates, never filed or reviewed, should receive the same deference courts normally give to reasoned federal agency decisions based on a full record and their expertise. Circuit Judge Fletcher, in a case questioning whether the "filed rate doctrine" should be followed when rates were never filed subject to FERC review, stated in her concurring opinion:
Without minimum standards for FERC oversight, the Filed Rate Doctrine threatens to come unmoored from its rationale of respecting the actions of a federal agency to which Congress has delegated authority. Instead, I fear respect is being given to agency passivity, allowing anticompetitive and otherwise illegal actions to escape review. E & J Gallo Winery v. EnCana Corporation, No. 05-17352 (9th Cir. Sept 19, 2007)Several consumer advocates have been pressing claims that the current FERC system allowing unfiled market rates and unfiled contracts for wholesale electricity sales is inconsistent with Supreme Court decisions involving similar statutes which hold that a federal regulatory agency cannot disregard rate filing and review procedures contained in statutes enacted by Congress. See Consumer Challenge to FERC "Market-Based Rate" System Proceeds; FERC Escapes Court Review of Legal Authority for its Electricity Market Rate Regime; Consumer Advocates Seek Rehearing of D.C. Circuit Court Decision Allowing FERC to Avoid Consideration of Statutory Filing Requirements
To date, the Court of Appeals for the District of Columbia, which wrote opinions generally supporting FERC's deregulation agenda in the 1990's, has never analyzed the argument of consumers -- supported by strong Supreme Court Decisions rejecting attempts of other federal regulatory agencies to deregulate the industries they were charged by Congress to regulate -- that under Section 205 of the Federal Power Act, all rates for wholesale electricity must be publicly filed in advance, subject to FERC review and protest by consumers. On four recent occasions the court has dismissed petitions without grappling with the apparent inconsistency of FERC's relaxation of filing and review requirements with longstanding statutes. The Ninth Circuit decisions have arisen in cases where FERC invoked the "filed rate doctrine" as a bar to refunds of charges inflated by rate manipulation, even though the actual rates and charges had never been filed and thus were never publicly known or subject to FERC review for reasonableness before the charges were imposed.
Some utilities ordered to give refunds under other Ninth Circuit decisions are challenging whether those decisions permitting refunds of excessive market rates -- involving billions of dollars -- are correct. Eventually, these cases, or cases brought by consumers, may reach the Supreme Court.
Thursday, September 06, 2007
Excelsior! Con Edison Residential Rates Spike (Again)
Typical Bill Reports
The New York Public Service Commission (PSC) for many years has published a series of reports on typical utility customer bills for each major customer class. These reports show what a typical electric bill would be at various levels of usage and permit comparison of prices of the major electric utilities. The reports provide a "snapshot" over time of typical bills for the months of January and July.
Reflecting the New York state motto "Excelsior!" (ever upwards) the most recent typical bill report shows once again that Consolidated Edison Company of New York (Con Edison) has the highest prices of the major investor owned utilities in New York State, and, perhaps, the nation:
(click on chart to enlarge)
The Effects of Restructuring and Con Edison Reliance on NYISO Wholesale Spot Markets for Energy Supply
The chart also illustrates how Con Edison rates began to increase and destabilize beginning with the first summer of operation of the NYISO wholesale electricity spot markets in 2000. See Con Ed Bills Spike 43%: Hike Despite Cool July; and PULP Testimony to Westchester County on Summer 2000 Con Edison Price Spikes.
Con Edison agreed to divest nearly all of its New York City area power plants in voluntary restructuring agreements with the PSC in 1997. Its long term buy-back contracts with the new owners of its divested power plants were designed to expire when the NYISO spot markets were initiated. The idea at the time, promoted by Enron and adopted by the PSC as its vision, was to allow the wholesale sellers to charge what the market would bear (regardless of their costs of production) and eventually to allow the retail utility simply to flow through spot market energy prices to retail customers, without the retail utility attempting to control price levels and volatility by producing electricity at its own plants or by purchasing outside the spot markets to assemble a portfolio of wholesale supply contracts for long term, medium, and short term energy needs.
The PSC "vision" in 1996 was that a new group of middlemen- including traders like Enron - would eventually supply energy to all customers, while Con Edison's role as a producer and seller of electric energy for its customers would diminish or end. See Disconnected Policymakers. Enron went bankrupt in 2001, no state has followed the lead of New York since then, a number of states that implemented the restructuring model have turned away from it, and others are experiencing electric restructuring remorse as their electricity rates soar and their electricity intensive industries close down operations.
In November, 1999, the NYISO began operations, and in May 2000, the PSC allowed Con Edison to flow through month to month price changes, which are often dramatic. At the time, the New York Times reported:
Con Edison had enthusiastically adopted the restructuring "vision" of the 1996 PSC, and reshaped itself into an Enron-like utility holding company, with new affiliates engaged in energy trading, power production at plants built in other states, a retail energy seller, and a now-defunct telecom company. See Con Edison Subsidiaries. In its June 30, 2007 SEC 10-Q report, at page 43, Con Edison's Income Statement indicates that $1.26 billion was invested in its power production affiliate (Con Edison Development) and that $241 million was invested in its energy trading affiliate (Con Edison Energy).
There was no net income from these holding company affiliate ventures, which represent about 6% of the company's total assets. Con Edison's main income remains from its regulated subsidiaries. In May 2007 Con Edison of New York filed for a major increase in rates - 17% - to fund new investment in its regulated operations. See Con Edison Asks PSC for 17% Increase in Residential Electric Rates: Low Income Customers Would Pay Even More
Con Edison still provides energy to nearly all residential and small commercial customers in its service territory. It still has legacy long-term contracts and residual generating plants, and so it has only partially implemented the 1996 restructuring "vision." Con Edison is increasingly dependent upon purchases of energy from a small number of sellers at the NYISO, at spot market rates, and it may be planning to become even more dependent on the spot market for future energy purchasing. Con Edison's Exhibits 45 and 48 in the 2008 rate case (Adobe pages 19 and 22) indicate that in 2006, Con Edison acquired 24.6% of the energy supply for its customers through spot market purchases, and that it plans to acquire 49% of its customers' needs from the spot market by 2011, approximately doubling its reliance on the spot market.
Heavy reliance on next day and next hour purchasing was criticized by FERC after the California electricity spot market rate manipulation of 2000 - 2001. Basically, FERC acknowledged that market rates it had allowed in the spot markets are unreasonable, and said no one should heavily depend upon them, just as no consumer would buy all household food and necessities at a convenience store:
See also, NYISO Costs Skyrocket, Benefits Questioned.
Some maintain that retail utilities can buy at the spot markets and control for price and volatility through purchase of exotic financial derivative contracts, in which one party pays the other when spot market prices exceed or fall below certain designated points. Con Edison's 2008 rate case exhibit indicates that in 2006 the company incurred net hedging costs of $169,335,578. One can only wonder, when looking at the chart of 2006 prices, what bills would have been without "hedging."
Customers of Other New York Utilities Fared Better with Less Reliance on NYISO Spot Markets
In contrast to Con Edison, the chart above shows that the major investor owned utility with the lowest rates in New York state is now RG&E. That utility did not embrace the Enron model and did not divest its power plants (except for its interest in the Ginna nuclear plant, which was sold with a long term buy-back contract).
In contrast, the utility that previously had the lowest rates, Central Hudson, eventually agreed with the PSC to sell its power plants. Unlike Con Edison, and despite PSC resistance, Central Hudson entered into energy buyback agreements with the new owners that kept rates low for several years after divesting the power plants. The idea was to stabilize retail prices during a "transition" period until wholesale and retail markets developed. According to a 2002 article
In essence, what RG&E customers pay for energy is closer to what the power costs to produce locally at the utility's power plants, and the cost of RG&E's long term wholesale power contracts. As a result, the price of service from RG&E is less affected by NYISO spot market rates. The benefit of low cost power plants still flows to RG&E consumers, not to merchant power producers, because the energy can be acquired at cost, not at whatever price the market will bear in the seriously flawed wholesale markets. Those markets pay all producers the same price, regardless of their costs, at the price level demanded by the last seller needed to meet demand.
Con Edison Rates Eclipse LILCO/LIPA Rates
The chart also illustrates how Con Edison surpassed those of LILCO, which was bought by a publicly owned utility, the Long Island Power Authority (LIPA). LILCO once had the state's highest rates, mainly due to the $7 billion cost of constructing an unused nuclear power plant. When LILCO was taken over by LIPA, the stranded cost of the abandoned nuclear facility could be financed with lower cost municipal bonds. Also, with no investors in the publicly owned utility, there was no longer a need to set rates at a level necessary to provide an ample after-tax return on their investments. LIPA rates dropped below Con Edison's in 1999.
NYISO spot market prices are in many hours far higher for Long Island than for Con Edison's area, but LIPA has managed to keep its rates lower than Con Edison's. This appears to be due to LIPA's proactive energy planning, long term contracting, construction of transmission lines to non-NYISO areas, all of which reduce dependence on NYISO spot market energy purchasing. Also, because LIPA still owns an 18% interest in the Nine Mile 2 nuclear plant in upstate Oswego, NY, low cost power from that facility may benefit LIPA ratepayers. LIPA refused to divest its interest when ownership of the plant shifted from Niagara Mohawk to Constellation. In contrast, Con Edison divested its nuclear facility at Indian Point to Entergy, and also sold most of its other power plants, including Ravenswood, which has capacity for about 25% of the New York City area market. As a result of divestiture, Con Edison today has little power available at the cost of production, requiring more purchases of power at market-based rates.
Other states that restructured and required their utilities to do what Con Edison has done voluntarily to comport with the 1996 PSC vision are now considering whether to allow power plants again to be built by retail utilities. Then, power can be produced and made available to consumers at state regulated cost based rates instead of buying it all at federal wholesale market rates, which are not meaningfully regulated by FERC. See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed
The New York Public Service Commission (PSC) for many years has published a series of reports on typical utility customer bills for each major customer class. These reports show what a typical electric bill would be at various levels of usage and permit comparison of prices of the major electric utilities. The reports provide a "snapshot" over time of typical bills for the months of January and July.
Reflecting the New York state motto "Excelsior!" (ever upwards) the most recent typical bill report shows once again that Consolidated Edison Company of New York (Con Edison) has the highest prices of the major investor owned utilities in New York State, and, perhaps, the nation:
(click on chart to enlarge)The Effects of Restructuring and Con Edison Reliance on NYISO Wholesale Spot Markets for Energy Supply
The chart also illustrates how Con Edison rates began to increase and destabilize beginning with the first summer of operation of the NYISO wholesale electricity spot markets in 2000. See Con Ed Bills Spike 43%: Hike Despite Cool July; and PULP Testimony to Westchester County on Summer 2000 Con Edison Price Spikes.
Con Edison agreed to divest nearly all of its New York City area power plants in voluntary restructuring agreements with the PSC in 1997. Its long term buy-back contracts with the new owners of its divested power plants were designed to expire when the NYISO spot markets were initiated. The idea at the time, promoted by Enron and adopted by the PSC as its vision, was to allow the wholesale sellers to charge what the market would bear (regardless of their costs of production) and eventually to allow the retail utility simply to flow through spot market energy prices to retail customers, without the retail utility attempting to control price levels and volatility by producing electricity at its own plants or by purchasing outside the spot markets to assemble a portfolio of wholesale supply contracts for long term, medium, and short term energy needs.
The PSC "vision" in 1996 was that a new group of middlemen- including traders like Enron - would eventually supply energy to all customers, while Con Edison's role as a producer and seller of electric energy for its customers would diminish or end. See Disconnected Policymakers. Enron went bankrupt in 2001, no state has followed the lead of New York since then, a number of states that implemented the restructuring model have turned away from it, and others are experiencing electric restructuring remorse as their electricity rates soar and their electricity intensive industries close down operations.
In November, 1999, the NYISO began operations, and in May 2000, the PSC allowed Con Edison to flow through month to month price changes, which are often dramatic. At the time, the New York Times reported:
In April [2000], the regulatory commission authorized Con Ed to pass along to users its cost of buying electricity on the new spot market. By contrast, upstate utilities, including New York State Electric & Gas, which covers parts of northern Westchester County and Putnam County, provide energy to residential customers at fixed prices that do not fluctuate with spot market prices.Deregulation and Weather Fail to Cool Electric Rates, NY Times, August 22, 2000.
The commission's critics say that by eliminating Con Ed's risk when buying electricity on short notice (and shifting that risk to its customers) the commission gave the utility little incentive to try to make long-term deals with suppliers that could result in lower prices. Con Ed is allowed to recover part of the savings it gets when it makes such deals and buys electricity at below-market prices, but it can also lose money if it makes the wrong prediction and gets stuck with electricity that costs more than the market price.
Con Ed officials say they have been forced to buy on the spot market because a shortage of power plants has meant that the long-term deals needed to meet the surging demand have not been available.
Con Edison had enthusiastically adopted the restructuring "vision" of the 1996 PSC, and reshaped itself into an Enron-like utility holding company, with new affiliates engaged in energy trading, power production at plants built in other states, a retail energy seller, and a now-defunct telecom company. See Con Edison Subsidiaries. In its June 30, 2007 SEC 10-Q report, at page 43, Con Edison's Income Statement indicates that $1.26 billion was invested in its power production affiliate (Con Edison Development) and that $241 million was invested in its energy trading affiliate (Con Edison Energy).
There was no net income from these holding company affiliate ventures, which represent about 6% of the company's total assets. Con Edison's main income remains from its regulated subsidiaries. In May 2007 Con Edison of New York filed for a major increase in rates - 17% - to fund new investment in its regulated operations. See Con Edison Asks PSC for 17% Increase in Residential Electric Rates: Low Income Customers Would Pay Even More
Con Edison still provides energy to nearly all residential and small commercial customers in its service territory. It still has legacy long-term contracts and residual generating plants, and so it has only partially implemented the 1996 restructuring "vision." Con Edison is increasingly dependent upon purchases of energy from a small number of sellers at the NYISO, at spot market rates, and it may be planning to become even more dependent on the spot market for future energy purchasing. Con Edison's Exhibits 45 and 48 in the 2008 rate case (Adobe pages 19 and 22) indicate that in 2006, Con Edison acquired 24.6% of the energy supply for its customers through spot market purchases, and that it plans to acquire 49% of its customers' needs from the spot market by 2011, approximately doubling its reliance on the spot market.
Heavy reliance on next day and next hour purchasing was criticized by FERC after the California electricity spot market rate manipulation of 2000 - 2001. Basically, FERC acknowledged that market rates it had allowed in the spot markets are unreasonable, and said no one should heavily depend upon them, just as no consumer would buy all household food and necessities at a convenience store:
we would expect any responsible retail supplier to rely on a portfolio of resources and to turn to the spot market only to engage in economy transactions or to meet portions of its load that could not be predicted well in advance or which were notSan Diego Gas & Electric Company, FERC Docket No. EL00-95-000, p. 10 (Aug. 23, 2000).
anticipated due to resource outages greater than are covered by prudent reserves.
See also, NYISO Costs Skyrocket, Benefits Questioned.
Some maintain that retail utilities can buy at the spot markets and control for price and volatility through purchase of exotic financial derivative contracts, in which one party pays the other when spot market prices exceed or fall below certain designated points. Con Edison's 2008 rate case exhibit indicates that in 2006 the company incurred net hedging costs of $169,335,578. One can only wonder, when looking at the chart of 2006 prices, what bills would have been without "hedging."
Customers of Other New York Utilities Fared Better with Less Reliance on NYISO Spot Markets
In contrast to Con Edison, the chart above shows that the major investor owned utility with the lowest rates in New York state is now RG&E. That utility did not embrace the Enron model and did not divest its power plants (except for its interest in the Ginna nuclear plant, which was sold with a long term buy-back contract).
In contrast, the utility that previously had the lowest rates, Central Hudson, eventually agreed with the PSC to sell its power plants. Unlike Con Edison, and despite PSC resistance, Central Hudson entered into energy buyback agreements with the new owners that kept rates low for several years after divesting the power plants. The idea was to stabilize retail prices during a "transition" period until wholesale and retail markets developed. According to a 2002 article
The short-term future for Central Hudson consumers is price stability -- an achievement of which the company is proud, and that it pioneered by being the first to persuade the PSC to allow power supply deals with Dynegy Inc. and Constellation Nuclear, the buyers of its plant interests.After 2004, however, due to expiration of the initial energy buy-back contracts,Central Hudson began to flow more of the impact of NYISO wholesale market rates through to its customers. A 2005 article describes what happened:
''Importantly, this agreement also means that we can promise price stability during the next few years while the deregulated energy markets mature here in New York -- and that is priceless,'' Senior Vice President Arthur Upright said last August.
Now, Central Hudson is hoping that maturation occurs before its favorable deal with Dynegy runs out after 2004.
If you're a customer of Central Hudson Gas & Electric Corp., you might want to grab a stiff drink before opening your next bill.
The utility's electric customers can expect to pay about 15 percent more this July than they did a year ago, even if they use the same amount of power.
The higher bills are largely the result of Central Hudson's growing reliance on the state's deregulated power market. When Central Hudson sold its power plants to Dynegy Inc. in 2000, the companies signed a four-year contract allowing Central Hudson to buy varying amounts of power at fixed prices for four years.
That contract expired in October, leaving the utility at the whim of the state's power market, where prices are higher and more volatile than its customers are used to.
Central Hudson's market supply charge - the price it passes through to customers based on what it pays for electricity - is 7.3 cents per kilowatt-hour for July, said spokesman John Maserjian. Last July, with an assist from the Dynegy contract, the price was 5.4 cents per kwh.
Year-over-year, that's an increase of about 35 percent.
Central Hudson's residential rates, once lowest in the state, are now destabilized, and are higher than RG&E's. See A Failed Experiment: Why Electricity Deregulation Did not Work and Could not Work.
In essence, what RG&E customers pay for energy is closer to what the power costs to produce locally at the utility's power plants, and the cost of RG&E's long term wholesale power contracts. As a result, the price of service from RG&E is less affected by NYISO spot market rates. The benefit of low cost power plants still flows to RG&E consumers, not to merchant power producers, because the energy can be acquired at cost, not at whatever price the market will bear in the seriously flawed wholesale markets. Those markets pay all producers the same price, regardless of their costs, at the price level demanded by the last seller needed to meet demand.
Con Edison Rates Eclipse LILCO/LIPA Rates
The chart also illustrates how Con Edison surpassed those of LILCO, which was bought by a publicly owned utility, the Long Island Power Authority (LIPA). LILCO once had the state's highest rates, mainly due to the $7 billion cost of constructing an unused nuclear power plant. When LILCO was taken over by LIPA, the stranded cost of the abandoned nuclear facility could be financed with lower cost municipal bonds. Also, with no investors in the publicly owned utility, there was no longer a need to set rates at a level necessary to provide an ample after-tax return on their investments. LIPA rates dropped below Con Edison's in 1999.
NYISO spot market prices are in many hours far higher for Long Island than for Con Edison's area, but LIPA has managed to keep its rates lower than Con Edison's. This appears to be due to LIPA's proactive energy planning, long term contracting, construction of transmission lines to non-NYISO areas, all of which reduce dependence on NYISO spot market energy purchasing. Also, because LIPA still owns an 18% interest in the Nine Mile 2 nuclear plant in upstate Oswego, NY, low cost power from that facility may benefit LIPA ratepayers. LIPA refused to divest its interest when ownership of the plant shifted from Niagara Mohawk to Constellation. In contrast, Con Edison divested its nuclear facility at Indian Point to Entergy, and also sold most of its other power plants, including Ravenswood, which has capacity for about 25% of the New York City area market. As a result of divestiture, Con Edison today has little power available at the cost of production, requiring more purchases of power at market-based rates.
Other states that restructured and required their utilities to do what Con Edison has done voluntarily to comport with the 1996 PSC vision are now considering whether to allow power plants again to be built by retail utilities. Then, power can be produced and made available to consumers at state regulated cost based rates instead of buying it all at federal wholesale market rates, which are not meaningfully regulated by FERC. See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed
Monday, August 27, 2007
New York Residential Real Time Pricing Experiments Must be Voluntary
In recent years, industrial and residential customers have become increasingly concerned about excessive rates charged by sellers in dysfunctional wholesale spot markets. (See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed). To the extent that a utility buys electricity for its retail customers in the wholesale markets (rather than producing it), the wholesale costs are passed through to customers.
Advocates of deregulation, as usual, have proposed a new market solution to correct obvious flaws in the spot markets and "market-based rate" system created by FERC. They argue for passthrough of high (and possibly manipulated) "real-time" wholesale spot market rates, on the theory that when faced with extreme market prices at times of peak usage, some consumers might alter their demand for electricity and their usage patterns in order to avoid the excessive and unreasonable charges. This "demand response," in theory, will increase elasticity of demand and perhaps tame the excesses of the flawed spot markets. On the other hand, under existing conditions where power producers perceive no obligation to serve at reasonable prices, where meaningful regulatory oversight of wholesale rates is absent, and where energy planning has been abdicated by the state, allowing extreme prices during hours of scarcity may only induce more scarcity. See NYISO "Scarcity Pricing" Events.
Real time pricing is often touted as a "green" solution. See 'Smart' Electric Meters Debated over Cost. That may be true to the extent extreme prices deter customers from using electricity without corresponding loss of productivity or loss of other social benefits. But, to the extent real time pricing simply shifts customer usage to off-peak times when the incremental usage is more likely to be produced by coal-fired power plants (instead of cleaner natural gas), it may actually increase greenhouse gas emissions.
Spiking rates, in any event, may not be affordable to residential customers living from check to check on low or modest incomes. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers. After previous experiments with mandatory time of use pricing for high usage residential customers, and consumer opposition to it, a New York statute now permits time of use pricing for residential electricity customers only when they voluntarily consent to it.
In April 2007 Con Edison proposed a tariff modification to expand residential real time pricing experiments, conducted in cooperation with NYSERDA, that will affect electricity consumers living in subsidized housing projects that have been submetered. PULP filed comments expressing concerns regarding voluntariness of consumer participation and the right of submetered consumers to continuation of price capped service with full consumer protection rights.
On July 18, 2007, the New York PSC issued an order approving Con Edison's new Rider I -- Experimental Rate Program for Multiple Dwellings, recognizing validity of PULP's concerns, stating
Advocates of deregulation, as usual, have proposed a new market solution to correct obvious flaws in the spot markets and "market-based rate" system created by FERC. They argue for passthrough of high (and possibly manipulated) "real-time" wholesale spot market rates, on the theory that when faced with extreme market prices at times of peak usage, some consumers might alter their demand for electricity and their usage patterns in order to avoid the excessive and unreasonable charges. This "demand response," in theory, will increase elasticity of demand and perhaps tame the excesses of the flawed spot markets. On the other hand, under existing conditions where power producers perceive no obligation to serve at reasonable prices, where meaningful regulatory oversight of wholesale rates is absent, and where energy planning has been abdicated by the state, allowing extreme prices during hours of scarcity may only induce more scarcity. See NYISO "Scarcity Pricing" Events.
Real time pricing is often touted as a "green" solution. See 'Smart' Electric Meters Debated over Cost. That may be true to the extent extreme prices deter customers from using electricity without corresponding loss of productivity or loss of other social benefits. But, to the extent real time pricing simply shifts customer usage to off-peak times when the incremental usage is more likely to be produced by coal-fired power plants (instead of cleaner natural gas), it may actually increase greenhouse gas emissions.
Spiking rates, in any event, may not be affordable to residential customers living from check to check on low or modest incomes. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers. After previous experiments with mandatory time of use pricing for high usage residential customers, and consumer opposition to it, a New York statute now permits time of use pricing for residential electricity customers only when they voluntarily consent to it.
In April 2007 Con Edison proposed a tariff modification to expand residential real time pricing experiments, conducted in cooperation with NYSERDA, that will affect electricity consumers living in subsidized housing projects that have been submetered. PULP filed comments expressing concerns regarding voluntariness of consumer participation and the right of submetered consumers to continuation of price capped service with full consumer protection rights.
On July 18, 2007, the New York PSC issued an order approving Con Edison's new Rider I -- Experimental Rate Program for Multiple Dwellings, recognizing validity of PULP's concerns, stating
NYSERDA should require that a notice of intent to participate in the NYSERDA pilot program be provided (by the building owner or manager) to each existing tenant and include a summary and explanation of the pilot program. In addition, new tenants should be notified when they sign a lease agreement that the building is participating in the NYSERDA pilot program, and the lease agreement should summarize the NYSERDA pilot program. The building owner or manager should certify that the method of tenant rate calculation, rate caps, complaint procedures, tenant protections, and the enforcement mechanisms will be incorporated in plain language in all current and future lease agreements. The NYSERDA pilot program participant should also notify each tenant that, at any time, the tenant can file a complaint pursuant to the Home Energy Fair Practices Act (HEFPA) with the Department of Public Service together with contact information for the Department’s Office of Consumer Services.For further information, see PULP's Help Center web page on Submetering.
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