Needy Households Must Stop Paying Energy Providers to Obtain Supplemental HEAP Benefits

Good News: Additional Federal HEAP Funds
With much fanfare, in February, New York received $82.3 million in supplemental federal funds for operation of the HEAP program this winter. See, e.g., Governor Spitzer Announces Additional Heating Assistance To Combat Rising Energy Prices; N.Y. OKs Extra Aid to Pay for Heat Bills: Needy Families May See Added Payment of up to $700 this Winter, N.Y. Officials Say.

The added funds are, of course, good news. They will permit the chronically underfunded HEAP program, to which the state adds no state funding, to extend its closing date to May 15, 2008, so more households will receive benefits needed to defray high energy costs.

After May 15, households with energy emergencies may receive assistance, but in a more limited and restrictive state-funded utility emergency program. For example, the state emergency utility assistance program generally requires benefits to be repaid if the applicant's income is above the level of public assistance. HEAP eligibility limits are more realistic and recipients are not required to repay a HEAP grant.

Not So Good News: Limited to Emergencies
Overlooked, however, was the significance of a decision taken by the New York Office of Temporary and Disability Assistance (OTDA) to limit the bulk of the additional payments with the $82.3 million supplemental funds to the category of "Emergency HEAP." According to the OTDA Press Release

The program offers two components – a Regular Benefit and an Emergency Benefit. This season, the state increased the maximum Regular Benefit a household can receive to $540, up from $440 last winter. Additionally, qualified applicants facing an energy-related emergency, such as a power shutoff or less than 10 days supply of heating fuel, can apply for an Emergency Benefit.

Under the program changes announced today, a second Emergency Benefit of up to $700 will be available to those without sufficient resources to address another crisis situation, if it should arise.

The Emergency Benefit is not available unless the applicant lacks resources to resolve a heat-related utility emergency. This is defined as having received a termination notice for natural gas service or electricity needed for heat or to operate a heating system. Similarly, Emergency HEAP is not available for those who heat with oil, kerosene, propane or other fuels unless the supply is running out.

In order to qualify for a second supplemental HEAP payment, OTDA provides the following information

How to Apply for the Second HEAP Emergency Benefit
A second HEAP emergency benefit is available, effective February 11, 2008, to HEAP eligible low-income households to assist in meeting their energy emergency needs. A household that has already received a regular and emergency HEAP benefit may be eligible for an additional HEAP emergency benefit. Applicants must be in an energy emergency situation, which is defined as having less than a 10 day supply of fuel, having utility service terminated, or having utility service scheduled for termination. In addition, applicants must not have enough resources to take care of their emergency themselves.

Households that have already received a first HEAP emergency benefit during the 2007-08 HEAP season (the season that started on November 1, 2007) may apply for the second emergency benefit by either calling their local social services office or by completing a “Request for Second Emergency Benefit” form in person. This form is available at your local social services office.

To Pay or Not to Pay
As stated by PULP in recent comments, the allocation of the new funds to the Emergency HEAP component

ignores customers with very high energy burdens who have been scrimping on other household necessities to pay high energy bills. Unless these customers promptly stop paying, they will receive no additional energy assistance, and they may suffer hardship. Thus the clear message sent by this allocation to these customers who also need help with their high energy burdens is to stop paying their utility and fuel bills now, so as to precipitate the preconditions needed to qualify the household for a crisis assistance payment.

Unlike the supplemental funds, the initial allocation of HEAP funds was paid as "Regular HEAP" to eligible households without any requirement that they be facing imminent shutoff. The initial plan was to use 59.33% of the HEAP funds for Regular HEAP and 15.59% for Emergency HEAP crisis assistance. (The balance is allocated for the weatherization program and administrative costs).

Perhaps due to improvements in the Regular HEAP system, the number of Emergency HEAP payments is actually lower, at this point, than it was last year, despite the much colder winter this year and high prices. A significant portion of the new funds could have been allocated to provide a supplemental Regular HEAP payment, which could have been automatically and efficiently paid (by vendor payments to the utilities and fuel vendors on behalf of households) without a requirement that households reapply individually and demonstrate that they are in emergency circumstances.

The clear message being sent by OTDA for those unable to pay all their household bills, after receiving a Regular benefit, or a Regular and First Emergency payment, and who seek additional help this winter, is to qualify for an additional Emergency payment by halting payment to their utility or other energy vendor, to precipitate a home energy crisis.

The allocation creates obvious moral hazards, by encouraging more people to stop paying their bills. It will surely result in hardship to those who do not understand the new path to help charted by OTDA, or who are fearful of energy crisis brinkmanship.

In addition, the Public Service Commission has not been requiring utilities to reinstate deferred payment plans after they receive an Emergency HEAP payment, as it once did. The OTDA only requires utilities to continue service for 30 days after an Emergency HEAP payment, under its "vendor agreements" with the utilities. Thus, an Emergency HEAP payment may simply postpone the emergency for 30 days, when the utility again demands payment of all arrears or an amount the customer cannot afford. This could put the recipient in a situation, after the HEAP program closes, of having to apply for welfare benefits. And, due to a restrictive regulation of OTDA, they may be ineligible for that if they previously received utility assistance and did not repay it.

Focusing HEAP on Emergencies Lightens State and County Emergency Aid Budgets
According to the OTDA press release, the new HEAP funds - the bulk of which will be used for Emergency and not Regular benefits - will save the state and counties money they otherwise would be required to spend under the state's utility emergency assistance program.

Enabling county social services agencies to authorize a second HEAP Emergency Benefit for those eligible will avoid approximately $10 million in local costs by reducing the need for state and locally-funded emergency assistance payments.

In essence, some of the supplemental HEAP funds are being used to supplant pre-existing state and local obligations to assist the poor that would be borne by the general public in the absence of HEAP. Funds intended by Congress to be targeted to relieve the high home energy burdens of the poor this winter are, in effect, being used to reduce the budgets of state and local governments, and thus to benefit the general body of taxpayers.

More Public Input Is Needed Before Allocating Significant Sums of New HEAP Dollars
This allocation of the $82.3 million in supplemental federal LIHEAP funds, roughly 25% of this year's total HEAP funding for New York, was decided without any input from the HEAP Block Grant Advisory Council or other public participation. PULP recently filed comments regarding the needs assessment for next year's HEAP plan mentioning the lack of public participation in this year's decision, pointing out that

[s]uch action is contrary to the spirit of the federal law, which allows states to tailor their programs on condition that they have an open and transparent advisory process, i.e., “timely and meaningful public participation in the development of the plan....” 42 U.S.C.A. § 8624(b)(12) (emphasis added).

For more information, see the OTDA HEAP web page and PULP's web page on HEAP.

PULP Urges HEAP Program Reforms

Background
On February 15, 2008 PULP filed comments with the New York State Office of Temporary and Disability Assistance (OTDA) urging changes in the state's Home Energy Assistance Program (HEAP). HEAP is a federally funded block grant program, supervised by OTDA and implemented by local social services districts. The Low Income Home Energy Assistance Act of 1981 (LIHEAA), 42 U.S.C.§§ 8621, et seq., sets broad parameters within which federal funding, appropriated annually by Congress and distributed through the federal Department of Health and Human Services (HHS) must be utilized. There are a few specific requirements in LIHEAA that all states must observe in their administration of the funds, e.g., a mandatory emergency component requiring prompt resolution of energy crises within specific time frames, the federal definition of eligible households, and maximum income eligibility standards. In general, however, most program design elements and benefit levels are left to be developed by the states through transparent needs assessment and public advisory processes.

The State legislature authorized the HEAP program by enactment of New York Social Services Law § 97. OTDA implements the program under its regulations in 18 NYCRR Part 393, and the annually developed State HEAP Plan, which is submitted by the Governor to HHS for federal approval. OTDA, the lead state agency, develops the annual HEAP Plan and supervises its implementation. Social services districts (the City of New York and departments of social services in each county outside New York City) administer HEAP locally. The State Office for the Aging and community organizations are also involved in program outreach and eligibility certification.

Each year, as part of the process of developing the State HEAP Plan for submission to HHS, OTDA conducts “needs assessment” hearings at which interested parties are invited to testify as to the home energy needs of low income households that should be addressed and the design of the program for the next year’s winter season. PULP submitted its comments pursuant to that request.

PULP's Comments
PULP's comments made the following points:

1. HEAP Payments Should Not be Diverted by Utilities to Pay Stale Arrears of Applicants for Service, Which Should be the Subject of a Deferred Payment Agreement.
   
2. Utility Vendor Agreements Need to be Clarified to Assure that Regular HEAP Payments Provide Assistance Primarily to Meet Immediate Home Energy Needs, and Are Not Allocated to Reduce Utility Bills from Prior Years
3. The Plan Should Provide for Public Input Regarding Allocation of Supplemental Appropriations
4. The HEAP Plan Should Specify that the Heating System Repair and Replacement Assistance Program will Use Energy Star Equipment
5. The Heating System Repair and Replacement Program Should Not Exclude HEAP Eligible Households who Have a Contract for Deed.
6. The Tenant of Record Requirement Excludes Eligible HEAP Households, is Unnecessary, Should be Reconsidered, and Eliminated
7. HEAP Funding Must Be Increased
   

PULP raised these points at the February 27, 2008 meeting of the OTDA HEAP Block Grant Advisory Council. At the meeting PULP also urged OTDA and the State to oppose reductions in the HEAP program and complete elimination of the low income weatherization program proposed by President Bush in his budget for 2008 - 2009. See Bush Proposes LIHEAP Cuts in 2009 Budget, and Bush Proposes Elimination of Low Income Home Weatherization Program.

The webcast of the February 27 HEAP meeting is available at the OTDA public meetings web page.

For more information see PULP's web page on the New York HEAP program.

Verizon Re-Launches Automatic Enrollment for Lifeline

In recent meetings with Verizon’s regulatory and Lifeline staffs, PULP has learned that automatic enrollment for Lifeline has returned. Although the automatic enrollment initiative, which compares public assistance recipient rolls with the carrier’s list of Lifeline customers, had been abandoned a few years back due to unexplained privacy concerns, the company has assured PULP that the program is back in place.

The return of automatic enrollment is good news for New Yorkers, as a successful Lifeline program promotes universal service and makes service available without hardship to the poor. In fact, in April 2004 the FCC stated that “Nationally, the telephone penetration rate is 94.7%, in large part due to the success of the Lifeline/Link-Up program and our other universal service programs.”

But, these numbers do not answer a most perplexing question about telephone subscribership. FCC statistics tell us that telephone penetration in New York in 1996 exceeded 94 percent and there were over three-quarters of a million Lifeline subscribers throughout the state. However, while overall subscribership in New York increased to over 96 percent by 2002, the number of Lifeline customers actually dwindled during the same time period. In fact, according to the FCC’s findings, in 2006 (the most recent year with results) there were 3.2 million households in the state with annual incomes under $20,000, but only 2.8 million of them had telephone service. That’s 400,000 households which could not reach 911 in an emergency. While the Lifeline totals for 2007 will not be available until March, with our state’s telephone subscribership back down to just about 94 percent (in the latest FCC figures from July 2007), it is not expected that Lifeline subscribership will approach the 1996 levels despite the return of automatic enrollment.

Why would that be?

Keep in mind that well over 900,000 households in New York are food stamp recipients, one of the primary eligibility categories for Lifeline. Shouldn’t actual Lifeline enrollment approach, or even exceed, this figure?

First of all, customers have left the incumbent carriers, Verizon, Frontier, Citizens, and Windstream (formerly ALLTEL), in unprecedented droves in the past few years. Some have cut the cord and have gone exclusively wireless. Access line counts have also decreased because many have cancelled second lines at their homes no longer needed for a separate fax line or for dial-up Internet access. Even more have switched to VoIP providers, primarily the local cable television company. These jumps have not just occurred in the biggest cities; rather, even in rural parts of the state, the cable companies have taken a significant number of independent telephone company customers as well. The figures for Verizon had been upwards of 100,000 access line losses per month in New York alone, but these have settled down to about 50,000 lines per month.

It is unclear whether services provided by wireless and cable operators are included in the FCC’s line count statistics. The specific question asked by the FCC in its three-times-per-year consumer surveys is: “Does this house, apartment, or mobile home have telephone service from which you can both make and receive calls? Please include cell phones, regular phones, and any other type of telephone.” However, through November 2004, this question had been worded: “Is there a telephone in this house/apartment?” Because of the increasing number of households that have selected alternative providers, there was concern that some of these households may not think of their phones when asked if they have a telephone. As a result of the “intermodal” shift, it is certainly conceivable that a two percent drop in telephone subscribership since 2002 could be attributable to misinterpreting this question. However, how many actual Lifeline customers and Lifeline-eligible customers have made this shift -- and how many can afford to?

Has automatic enrollment brought about the boost in Lifeline enrollment that we envisioned?

A possible factor in answering these questions is the lack of Lifeline discounts with service bundles. Packages combine basic local service with a host of vertical services (such as call waiting, Caller ID, and voice mail) or even toll service, at a substantially reduced rate compared to subscribing to each on an a la carte basis. The traditional telephone companies offer packages and so do the wireless and cable companies. However, at least for Verizon, Lifeline customers are ineligible to participate in these package deals unless they abandon Lifeline.

Of course, low income customers would benefit from reduced prices for these service bundles. For example, they may be victims of domestic violence and harassment and would place a very high value on services such as Caller ID. Others living in crowded situations may want call waiting or voice mail for household members in order not to miss important calls. Customers with poor eyesight, language, or literacy difficulties may find service offerings with unlimited directory assistance to be of particular value to them.

Back in the mid-1980s, the New York State Public Service Commission required that Lifeline be offered regardless of the service package selected by the customer. In an October 11, 1985 decision the Commission held:

[W]e did not adopt the company’s proposal to limit Lifeline service to customers subscribing to basic budget service, finding it would be better to require telephone utilities to provide a Lifeline discount to any income-eligible customer, regardless of the type of residential service the customer had. . . . Accordingly, all residential customers, regardless of the type of service they take, are now eligible for a Lifeline discount.

Apparently, times have changed.

To what extent do Lifeline-eligible customers forego subscribing to Lifeline in order to take advantage of package offerings by Verizon, T-Mobile, or Cablevision? While Sprint and Nextel have recently rolled out wireless Lifeline in New York, (see Reduced Rate Wireless Lifeline Service Now Available in New York) generally, Lifeline is still a landline telephone company offering. Why can’t Verizon Lifeline customers retain their Lifeline discount and enroll in a service bundle? Frontier Telephone of Rochester does not bar customers from receiving Lifeline rate reductions when they have a service package.

A study published in the Journal of Telecommunications and High Technology Law in 2007 supports this result and found that “a more general low-income assistance program that lets consumers use the subsidy for whatever communications services they most value, might improve participation and would make it more economical for low-income households to migrate to more advanced technologies.” Isn’t such improved participation the purpose of the Lifeline program?

Accurate reporting of local service provided by all types of providers is a necessity in order to ensure that the underlying premise of the Lifeline program is met -- that is, everyone who needs telephone service will be able to afford it. Is this basic tenet of universal service now being met? Based on the clients who come through PULP’s doors who either lack a home phone or have never heard of the Lifeline program, much more needs to be done. Perhaps the time has come for the Legislature to direct its own statewide survey of all types of telephone subscribers based on income and whether vertical or toll services are included in the price.

Lou Manuta

Queens Outage Update: ALJ Requires Con Edison to File Testimony on Prudence and Negligence Issues

In July 2006 a major electrical outage occurred in Queens. The outage was far broader than initially disclosed by Con Edison, and it lasted several days. The PSC commenced an investigation. Con Edison issued reports on the outage, as did the staff of the Department of Public Service. The staff report recommended on February 7, 2007 that the PSC undertake a prudence investigation of the utility conduct. In an April 18, 2007 order, the PSC initiated a prudence investigation phase of the case. For more background, see Queens Power Outage Update, February, 2007, and The Queens Blackout, August 10, 2006.

The Administrative Law Judge issued procedural rulings regarding the scope of the case, and parties filed their assertions. PULP raised a number of issues in its filing, including known conditions in the system that had overloaded secondary mains in the area where a fire triggered a series of cascading events that led to outages, whether the system had sufficient reactive power, whether Con Ed lacked sufficient information regarding the status of the system, whether the system was often run at its reliability design limits, and whether Con Edison lacked sufficient information regarding large numbers of submetered customers and any special medical needs they may have. Many of the papers in the case are available here and at PULP's website page on the 2006 Queens outage.

Settlement discussions ensued. When no resolution was reached, the ALJ on February 8, 2008 issued an order requiring Con Edison to file testimony by March 14, 2008 to justify its claim that it acted prudently.

The ALJ's Ruling on Scope of Company Testimony, Schedule, and Discovery included in the scope of issues whether Con Edison had acted with "gross negligence," as requested by the Attorney General. A finding of "gross" negligence could make Con Edison liable to its customers for their damages due to the blackout, because the Company's tariffs only exclude liability for ordinary negligence. In addition, the ALJ's ruling requires Con Edison to come forward with evidence to justify its prudence on numerous issues the Company had sought to exclude from the scope of the case.

Residential Submetering Update

The Public Service Commission (PSC) requires submeterers who resell electricity to apartment dwellers to agree, as a condition of permission to submeter, not to charge more than the customers would be charged if they were directly metered customers of the utility, and to provide all of the protections of the Home Energy Fair Practices Act (HEFPA). Since posting our PULP website article tracking the history of residential submetering PULP has received several calls from tenants and tenant organizations raising serious concerns and complaints about the practices of submeterers. The complaints fall mainly into two categories:

• Lack of price transparency which impedes submetered customers’ ability to determine whether they are being over-charged, and
  
• Violations of Home Energy Fair Practices Act (HEFPA).

Submetering Promoted
The New York State Research and Development Authority (NYSERDA) promotes submetering as an energy conservation measure, citing studies that tenants in master-metered buildings with electricity included in their rent, consume more electricity than those in submetered buildings who pay separately for electricity. NYSERDA supports building owners recovering the cost of their submetering equipment investment by passing it through to tenants in a variety of ways, and it urges owners to offer submetered electricity at less than direct-metered rates, to induce residents to approve the conversion to submetering. See NYSERDA Residential Electrical Submetering Manual (Oct. 2001).

Also, rental apartment buildings where customers have received individual metered service from the local utility are often converted to submetering when the building is converted to a cooperative or a condominium. Here, the individual customer charges imposed by the local utility can be avoided, and there may be differences in the rates for service to the owner of the building, which may be provided at higher voltage and in a rate class other than residential.

The NYSERDA Manual contains some troubling advice to submeterers regarding the intended consumer protections contained in the PSC orders granted in connection with each authorization for submetering.

New York State has extensive regulations in place to protect residents against their electric service being shut off. An owner seeking to continue the tenancy while discontinuing the service will most likely be required to comply with all tenant-protection regulations applicable to utilities for discontinuing the service. These include various notice and payout [Deferred Payment Agreement] requirements and protections for the elderly and disabled, which are time-consuming, burdensome to the owner, and inconsistent with continuation of the rental tenancy. Moreover, special arrangements with respect to electric charges are likely to cause confusion in billing and collection procedures. As a result, owners may want to consider legal action for eviction of the resident or recovery of unpaid amounts as the primary enforcement mechanism for nonpayment of submetered electric charges.

Thus, the NYSERDA manual suggests that HEFPA consumer protections, such as the duty to offer negotiated repayment agreements to customers in arrears, can be avoided simply by evicting them or suing them in court for unpaid charges. PULP notes, however, that under PSL § 75 no court action can be maintained for charges for electricity that have not been "fixed" by the PSC, and the PSC does not "fix" submeterers charges. Also, in general, courts have held that tenants cannot be evicted in summary proceedings for nonpayment of utility charges. Still, the thrust of the advice in the NYSERDA manual -- for submeterers to avoid compliance with HEFPA -- is contrary to the expectation of the PSC, that submetered customers will be no worse off than directly metered customers. Those who are worse off as a result of submetering may be able to challenge it in court on the ground that only electric companies may sell electricity.

Price Transparency Problems
Public Service Commission submetering regulations prevent “charges to tenants from exceeding the utility’s tariffed residential rate for direct metered service. . . .” 16 NYCRR § 96.2(3). The problem, however, is that most tenants have no way to know whether they are being overcharged. Several factors make it difficult to compare the bills

• Bills received from submetering landlords often fail to adequately explain charges for service
• The utility supplying electricity to the building does not provide submetered customers information about what the charges would be if they were direct metered customers of the utility
• Rate information for direct metered utility customers on utility websites is obscured in voluminous tariff leaves and separate monthly adjustment filings. Arithmetic calculations must be performed to adjust the posted rates for variations in "market supply" charges and "monthly adjustment clauses"
• The PSC provides utility typical bill information only twice a year on a delayed reporting basis

Thus, even assuming that all submetered tenants have internet access and are conversant in English and mathematics, they are still virtually precluded from making a quick and meaningful monthly rate comparison between the utility rates and the rates being charged by a submeterer.

HEFPA Violations
Under Public Service Law definitions, submeterers are “utilities” for purposes of HEFPA (PSL § 53) and must provide all HEFPA protections to submetered tenants. In their zeal to shift electricity and submetering equipment investment costs to tenants, some submeterers have overlooked their consumer protection obligations.

In addition to complaints that submeterers' bills do not explain service charges in “clear and understandable form” as required by PSL § 44, PULP has received all of the following complaints:

• Submetered customers are not being offered budget or levelized billing, in violation of PSL § 38(1)
• Elderly submetered customers are not being offered quarterly payment plans, in violation of PSL § 38(2)
• Submetered customers are not receiving annual notification of their HEFPA rights, in violation of PSL § 44
• Submetered customers who require electricity to operate life-support equipment have not been identified, in violation of PSL § 65
• Submeterers have not established complaint handling procedures, in violation of PSL § 43
• Submetered customers have received termination notices that lack information required by HEFPA and that were not accompanied with information about Deferred Payment Agreements and possible availability of assistance.

In sum, building owners are ignoring specific requirements of PSC Orders granting submetering approval and the PSC regulations requiring compliance by submeterers with HEFPA.

Conclusion
The PSC’s attention to submetering in recent years has been largely limited to routine approval of petitions of building owners for submetering. As submetering approvals have increased, so have complaints against the practices of submeterers. It is time for the PSC to investigate the practices of submetering building owners to ensure their compliance with HEFPA and with the obligation to charge no more than the tenants would be charged if they took service directly from the utility instead of through the landlord. Submeterers should also be assessed their fair share of the Department of Public Service and PSC operating costs under PSL § 18-a, in return for their being allowed to operate as if they are utilities.

We also find it odd that NYSERDA, a state entity that administers the system benefits charge funded by electricity customers, would, in its submetering manual, describe basic compliance with state law provisions designed to protect those very rate payers (HEFPA) as “time-consuming [and] burdensome” or would tolerate the use of eviction rather than compliance with HEFPA “as the primary enforcement mechanism for nonpayment of submetered electric charges.” See NYSERDA SubmeteringManual, above, at p. 30.

In our view, HEFPA imposes no undue burden whatsoever upon submeterers who promise in their petitions to comply with HEFPA as a condition for PSC permission to engage in submetering that is otherwise unauthorized by law. See Campo v. Feinberg.

Governor Spitzer's Budget Leaves PULP's Survival to the Legislature

PULP Background
Since 1981, the Public Utility Law Project (PULP) has received state funding to support its mission of advocacy on behalf of low and fixed income utility and energy consumers. PULP vigilantly enforces rights of utility consumers under the laws, and has sparked and contributed to major initiatives affecting affordability, universal service, and customer protection.

PULP's work contributes to New York's reputation as a leader in utility consumer protection, with pioneering work regarding the Home Energy Fair Practices Act, the Energy Consumer Protection Act of 2002, the telephone lifeline program, low income rates, and numerous other utility low income assistance programs approved by the PSC in utility rate cases. PULP's highly qualified staff

• provides assistance to individual consumers and local advocates through PULP's telephone hotline, often in crisis situations when other avenues for help and local advocates have failed;
  
• conducts training programs throughout the state on topics such as prevention of utility service termination;
  
• participates in rate cases and generic utility policy cases at the Public Service Commission, providing comments informed by PULP's expertise and mission;
  
• participates on numerous state advisory panels regarding low income customer concerns on energy and telecommunications matters;
• participates actively in bar association and other professional activities, and
  
• provides information regarding energy and utility matters through the PULP website including customer self-help information at the PULP website Help Center.
  

History of PULP's State Funding
PULP has received state budget funding since 1981. Prior to 1995, PULP was included in the executive budgets of Governor Cuomo. Typically, PULP received at least two state appropriations, one funded with general revenue funds and one funded with utility "special revenue" funds raised by utility assessments under Public Service Law 18-a. PULP's grants were "deemed" to be expenses of the Public Service Commission, which are in turn funded through utility rates and not the general state tax revenues.

In contrast, when Governor Pataki took office in 1995, all funding for PULP was completely omitted from his proposed budget in that year, and in every subsequent budget he proposed through his twelve years in office. During the Pataki years, PULP survived, with great hardship and difficulty, only due to legislative additions to the Governor's budget achieved by the state Assembly. In some years, PULP appropriations added by the Legislature were vetoed. Assembly leaders, including Speaker Sheldon Silver, Committee Chairs Destito, Brodsky, Pheffer, Weinstein, Cahill, and many other Assembly members repeatedly acted to overcome veto threats and successfully preserved PULP through the member item process.

Late budgets frequently led to late pay, partial pay, and during some intervals, no pay for staff who remained determined that PULP and its work should continue. During those years, staff retrenchment became necessary due to reduced funding levels. In 2001, after 9/11, funding for PULP and other agencies that had been funded through legislative initiatives was cut by about 25%. Since then, PULP's funding has been basically frozen at a level that, taking inflation into account, now amounts to considerably less than half of PULP's total resources in 1994.

Governor Spitzer's budget proposals in his first year continued to follow the pattern set by Governor Pataki: he proposed no funding at all for PULP. But for the Assembly's continued support and the addition by the legislature of funding for PULP in the 2007 - 2008 budget, PULP simply would not exist today.

PULP Funding Again Omitted in Governor Spitzer's 2008 - 2009 Budget
PULP is seeking additional funding for 2008 - 2009 in order to rebuild its staff and to increase its services during this crucial period of rising energy prices. Four Assembly Committee Chairs supported the inclusion of PULP in the Governor’s Budget for 2008 – 2009, urging the use of utility special revenue to increase the funding to bolster PULP's services, State Budget Director Laura Anglin replied, stating

“The Governor asked me to respond to your joint letter regarding funding for the Public Utility Law Project (PULP). While we recognize the importance of PULP and its advocacy services on behalf of New York’s utility consumers, there is no specific funding for PULP included in the Executive Budget. However, there are $70 million in Civil Legal Services funds from the Interest on Lawyer Account that PULP may apply for. . . .”

Reliance on IOLA Funding is Not the Solution
The Governor's solution as suggested by State Budget Director Anglin is for PULP to replace all of its state budget funding with a grant from the IOLA Fund. Contrary to the suggestion of the Budget Director, however, there is no "$70 million in Civil Legal Services funds from the Interest on Lawyer Account that PULP may apply for. . . ." IOLA simply has nowhere near that amount of money to distribute. See the IOLA revenue reports. Moreover, the bulk of IOLA revenues are categorically targeted by its enabling legislation to fund local legal aid groups.

Even under the most rosy scenarios for future IOLA funding, however, PULP will exhaust all its funds long before any new IOLA funds could be granted and received for 2009. The next regularly scheduled round of applications for IOLA funds is in September 2008, for 2009. PULP’s existing funding expires March 31, 2008 and PULP would completely run out of funds long before the next round of IOLA funding.

Historically, IOLA provided some supplemental funding to PULP, in addition to its core state budget funding. IOLA grants were never more than 15% of total annual PULP funding, mainly to enhance the training and local advocate support portion of PULP's work, in the "Administration of Justice (AOJ)" category. Under the Pataki administration, the IOLA Fund gradually eliminated even the small AOJ grants for PULP by 1998. Since then, the IOLA Fund repeatedly denied all PULP funding requests, including the most recent request, made for calendar year 2008 funding, which was denied by IOLA in December 2007. Thus, upon scrutiny, the suggestion of the State Budget Director assumes a major change of available grant revenue, policy, board, and staff at the of which there is scant evidence. See Spitzer Urged to Stay Away from Defense Fund. Reliance upon IOLA simply is not a viable short or long term funding solution for PULP.

It is again necessary for the Legislature to make additional appropriations in the 2008 - 2009 state budget to ensure not only the survival of PULP but also to provide the increased funding needed to assure fuller representation of the interests of low income energy and telecommunications consumers at the PSC and in other forums.

National Grid Adds "Consumer Advocates"

National Grid serves approximately 1.5 million electric customers and 540,000 natural gas customers in upstate New York. In February 2008, National Grid sent letters addressed to “Assistance Agencies Colleagues” announcing that the utility hired four new “consumer advocates” for its widespread upstate New York service territory. This could be a positive development for customers and local advocates who have difficulty in negotiation and other dealings with the utility. National Grid was allowed by the PSC to close all of its walk-in customer service offices, so now it primarily deals with customers through remote call centers. This poses difficulties, obviously, for customers without telephones or for whom communication by telephone is difficult, and for local assistance agency staff dealing at a distance with unfamiliar call center personnel.

Under PSC regulations adopted to enforce the Home Energy Fair Practices Act, utilities are required to have internal customer complaint handling procedures, and to make those procedures open and available to the public. Only after these internal utility procedures do not satisfy a customer do the external PSC complaint procedures come into play, which can trigger investigation of complaints by agency staff, formal or informal hearings, and eventual written decision of a dispute by the PSC.

National Grid's filed tariffs on complaint handling do not spell out the utility's internal complaint process; they only say that their "complaint handling procedures . . . are available for inspection at company offices where applications for service may be made in person." As noted above, however, the PSC allowed National Grid to close all of those offices, so there is no convenient public availability of the internal complaint procedures. Also, the National Grid website map has no reference to complaint handling procedures of the company or instructions on how to lodge a complaint.

Now, with the new hires, National Grid will have nine "consumer advocates" to work with customers whose problems are not solved through the call center processes, at least those who are fortunate enough to find their way to a community service agency that will help deal with the company. Even with the additional "consumer advocates", they will be spread thin. For example, one "consumer advocate" serves customers in ten counties and another serves those in nine.

The National Grid letter requests that when an assistance agency is approached by a National Grid customer who has “no available assistance options” they should be referred to the appropriate consumer advocate. For example, there are situations where a customer may be subject to lawful termination of utility service, may lack funds demanded to retain service, may not be eligible for public assistance, may not have a medical emergency, and may not live with another person who could obtain service in their name.

Contacting a "consumer advocate" at the utility may be an avenue for redress for community advocates trying to help National Grid customers at risk of going without essential service, or with complicated disputes. A list of the National Grid "Consumer Advocates", their service areas, and their telephone numbers is also posted at PULP's website.

Amicus Brief Challenges FERC Refusal to Consider Better Use of Historic Cohoes Falls

Cohoes Falls is the state's second largest waterfalls, after Niagara, but is dry much of the time due to an obsolete dam and antiquated hydro power station. The power plant had been owned by Niagara Mohawk, and was sold to Orion Power to comply with the PSC vision of divestiture and restructuring. The project has since been sold to Reliant and then to Brascan, a Canadian company, which is now known as Brookfield Asset Management, Inc. The license for the old hydro power station at Cohoes Falls expired in 1993, and it was given annual extensions until 2007, when FERC granted a new 40 year license.

PULP has joined with Poughkeepsie - Scenic Hudson, Capital District Regional Planning Commission, Village of Green Island, Town of Green Island, City of Watervliet, Town of Waterford, New York Bicycling Coalition, Inc., New York Association of Public Power, and Friends of the Falls, in filing an amicus brief requesting the United States Court of Appeals for the Second Circuit to overturn a Federal Energy Regulatory Commission (FERC) decision to relicense the School Street hydro project at Cohoes Falls. See Hydropower Plan Generates Friends: Scenic Hudson Backs Proposed Plant Upstream from Cohoes Falls.

Enhancements to the Cohoes Falls Project were proposed by Green Island Power Authority, and Adirondack Hydro Development Corporation, in an offer of proof to FERC that a better project is possible. See Plans Harness Falls' Power. These enhancements would

• double the clean renewable hydro power produced by the Mohawk River
• restore the flow of water over Cohoes Falls year round
  
• remove unsightly overhead transmission lines
• all but eliminate fish kills in an improved new hydro plant
• provide recreational access for the communities surrounding Cohoes Falls and
  
• stimulate interest in Cohoes Falls, as a location of great natural beauty, historical and cultural significance, where Benjamin Franklin met with the Iroquois to learn about their system of government, elements of which inspired the U.S. Constitution and federalism.

FERC refused to consider these issues.

The main brief of Petitioners in GIPA v. FERC argues for reversal of several decisions which denied motions to intervene, including PULP's motion, all of which which culminated in FERC's final decision denying rehearing in September 2007. FERC said it was powerless to consider better solutions because the time had run out for competing license applications, and that there was no evidence in the record to justify anything but giving a license renewal to the current owner. The petitioners argue that FERC has a duty under several statutes to consider better uses by the license applicant, even if the time for another entity to file a competing application had expired before 1993.

Petitioners argue that FERC's action, after denying interventions and refusing to consider relevant evidence of a better project

rests on its improper decisions to scrub that record of any evidence that better development is possible, or that the public could receive more benefits from this stretch of the river.

The amicus brief argues that FERC failed to consider national and New York State policies on clean renewable energy and climate change, and the environmental and community benefits associated an alternative Cohoes Falls Project endorsed by the Green Island Power Authority and Adirondack Hydro Development Corporation, in violation of the Federal Power Act, the National Environmental Policy Act.

The brief also relies on the Second Circuit's historic 1965 environmental ruling in Scenic Hudson Preservation Conference v. FPC, which found that FERC's predecessor, the FPC, failed to protect the public interest in violation of the Federal Power Act by inadequately considering all the factors that were of interest to the public, namely, the beauty and historical significance of Storm King Mountain.

The petitioners and amicus ask the court to reverse the FERC decision granting a 40 year license, and to remand the case to FERC requiring the agency to consider evidence regarding better use of the natural resource.

Bush Proposes Elimination of Low Income Home Weatherization Program

In his proposed budget for 2009, President Bush proposes to delete all funding for the Department of Energy (DOE) Low Income Weatherization Assistance Program. DOE described the program as follows:

The Weatherization Assistance Program enables low-income families to permanently reduce their energy bills by making their homes more energy efficient. It is this country's longest running, and perhaps most successful energy efficiency program. During the last 30 years, the U.S. Department of Energy 's (DOE) Weatherization Assistance Program has provided weatherization services to more than 5.5 million low-income families.

By reducing the energy bills of low-income families instead of offering aid, weatherization reduces dependency and liberates these funds for spending on more pressing family issues. On average, weatherization reduces heating bills by 31% and overall energy bills by $358 per year at current prices. This spending, in turn, spurs low-income communities toward job growth and economic development.

After the President announced his plans to terminate the program, DOE deleted the above program description from its website. See Weatherization Program Called "Most Successful" on Website, Then Truth Erased After Bush Eliminates Program.

Bush Proposes LIHEAP Cuts in 2009 Budget

President Bush Proposes LIHEAP Funding Cut in 2009 Budget
On February 4, 2008 President Bush issued his budget proposals for the federal 2009 Fiscal Year which begins October 1, 1008. If enacted, funding for the Low Income Home Energy Assistance Program (LIHEAP), would be reduced from $2.522 billion to $2.136 billion, a cut that could eliminate benefits for one million of the nation's neediest households. See More aid for transit in Bush budget; less for health, heat, N.Y.Daily News, Feb. 5, 2008; Bush Budget Ignores Realities of Low-Income Americans. This proposed reduction is similar to the President's proposal for the current year, which was rejected by Congress. See Veto Clouds New York's HEAP Program: More than 200,000 Households May Be Affected

Losing Ground
In the past, each time President Bush proposed LIHEAP cuts, Congress rallied to preserve funding, or to increase it incrementally. Meanwhile, energy costs have risen and so have the energy burdens of the poor. Even with Congressional restoration of funds for 2007-08, the current LIHEAP program functions at a level far below the $5.1 Billion authorized in the Energy Policy Act of 2005. That level, never actually appropriated in a budget, would only adjust the LIHEAP funding to the inflation-adjusted level of 1981.

Federal law requires the Secretary of HHS to submit an annual LIHEAP report to Congress

(b) The Secretary shall, no later than June 30 of each fiscal year, submit a report to the Congress containing a detailed compilation of the data under subsection (a) with respect to the prior fiscal year, and a report that describes for the prior fiscal year. (1) the manner in which States carry out the requirements of clauses (2), (5), (8), and (15) of section 2605(b); and (2) the impact of each State's program on recipient and eligible households.

According to the HHS website, "The most recent LIHEAP Report to Congress covers FY 2003." That report indicates that the number of financially eligible households has grown, while the number of those households actually receiving benefits has stagnated:

The funding level for LIHEAP proposed by the Bush administration is the same as it was in 2001, even though household energy costs have risen 65% since 2001. The proposed 2009 LIHEAP cuts drew swift criticism. See, e.g.,

• Bush's Budget Rankles Mainers: the State's Republican Senators Join Democratic Congressmen in Decrying Social Service Cuts

• NJ Senators: Bush Environment, Energy Budget Fails Garden State

• Lawmakers Denounce President's Budget Request

• Gov. Ritter Criticizes President Bush's Budget Proposal

New York's HEAP program provides assistance to more than 800,000 low income households, and receives more LIHEAP money than any other state. As of this writing, New York has not publicly objected to the Bush budget cuts.

New Leadership in State Energy Policy Emerging

The Assembly, the Senate, the Governor's office, and the PSC will all have new leadership on energy matters in 2008.

• On February 6, 2008, Assemblyman Kevin A. Cahill was named as Chairman of the New York State Assembly Energy Committee. That post was filled for many years by Paul Tonko until he resigned to become President and CEO of NYSERDA.
  

• The Chairmanship of the State Senate Committee on Energy and Telecommunications is vacant at this time, due to the resignation of its past Chairman, Senator Wright.

• In January 2008 Garry Brown took office as the new Chairman of the PSC, the first Commissioner to be named by Governor Spitzer.
  

• In the Governor's office, Paul DeCotis became Deputy Secretary for Energy in December 2007.

Protection of consumers, particularly those with low incomes, will be a challenge for these new leaders in an era of rapidly rising energy costs. Also, achievement of new environmental goals and the need for more energy planning in the aftermath of electricity industry restructuring are likely to be on the energy agenda in the years ahead.

PULP Files Comments on Regulation of ESCO Sales Practices

Background
Beginning in 1996, the PSC began to "unbundle" residential natural gas and electric service in order to deregulate the so-called "commodity" portion of service. In the PSC's "vision" the "commodity" would be bought by customers from deregulated pipeless and wireless gas and electric companies, which the PSC labeled "energy services companies" (ESCOs). As we predicted in 1998, the effort to deregulate led to a Race to the Bottom

[T]he contracts often hold customers to a term of a year or more, with automatic renewal unless the customer provides written notice during an annual 15-or 30-day renewal window. Marketers are not certified, and none of their prices are filed with the commission to facilitate public review and comparison. * * * * Customers attracted by promises of lower base charges will be quickly discouraged by the blank check provisions in the fine print * * * * Customers have a growing awareness and experience with rip-offs, scams and unscrupulous "slamming" by new competitors in the telephone industry and may be well aware that in the end they may pay more, not less, to a competitor. Not all customers have the financial means to write off their loss as a bad mistake, or pay another supplier or "provider of last resort" if deposits or customer credit balances in dispute are held by the marketer to satisfy a disputed claim. * * * * Waiting for the "market" or lawsuits to weed out bad-apple marketers and unfair contract clauses is not an adequate remedy for the wronged consumer with limited means who has lost her money.

Many Buffalo area customers were bilked when they paid in advance and an ESCO failed to provide service, requiring them to pay twice. See State Forgot Consumer Protections in Deregulating Gas. In reaction, the Legislature enacted the Energy Consumer Protection Act of 2002, which made ESCO service subject to the Home Energy Fair Practices Act (HEFPA) and which made ESCO customer complaints subject to adjudication by the PSC. Prior to that time the PSC had refused to decide bill and service disputes between ESCO customers and ESCOs.

Even though HEFPA protections have been available to ESCO customers since the 2002 amendments, major problems remain with ESCO service. Many of these problems arise from switching to ESCOs and switching back to the old utilities.

High pressure door to door sales, or ESCO referral programs authorized by the PSC may give consumers the false impression that they are likely to save money. While they will save small amounts on delivery service (due to a tax law flaw and PSC reduction of certain charges) the (truthful) promise of these reductions can be far outweighed by more expensive charges for the commodity portion of service now sold by the ESCO.

Customers who switch to gas or electric service from ESCOs thinking they would save money may discover, to their dismay, they "agreed" to very high prices. Then, the fine print in one-sided contracts foisted upon them may purport to make it very expensive for them to switch providers, due to costly early termination charges, or due to prepayments that are likely to be forfeited if they choose a new ESCO or return to conventional full service from the distribution utility. See Think Twice Before Switching Utilities, and PULP's web page on ESCO Issues.

The PSC has continued its practice of not overseeing the reasonableness of all terms and conditions of ESCO service. Indeed, to our knowledge the PSC has never issued a formal decision in a customer complaint case involving ESCOs, even though PSC Consumer Complaint Statistics show that complaints against ESCOs comprise a disproportionate share of the total complaints.

The CPB/DCA Petition
The news media continue to report numerous incidents involving ESCO customer dissatisfaction. Often, these stories focus on exorbitant ESCO prices, high pressure or deceptive recruitment tactics, and onerous terms and conditions that work to frustrate corrective action by the consumer. For example, prepayment for service and termination charges raise the cost of switching away from an ESCO to more reasonably priced service. See PULP's web page on ESCO Issues.

In December 2007 the Consumer Protection Board (CPB) and the New York City Department of Consumer Affairs (DCA) filed a petition with the PSC to address certain sales practices of ESCOs. According to the Press Release

The PSC has worked with ESCOs to develop a “Statement of Principles for Marketing Retail Energy to Residential and Small Businesses in New York State,” but there is no mandate that ESCOs follow those principles.... [P]ersistent allegations that some ESCOs or their representatives have misrepresented themselves as agents of distribution utilities, have made other false and misleading statements and have engaged in extreme marketing practices continue to surface. Both Agencies have received complaints about ESCOs, ranging from misrepresentation to undisclosed charges, and attempt to either resolve the complaint or refer it directly to the PSC. This type of conduct confuses and harms consumers and also damages the reputation of utilities and reputable ESCOs.

The CPB/DCA Petition filed with the PSC December 17, 2007 states that

[T]he CPB and DCA are concerned that the marketing practices of some ESCOs deny customers the accurate information which is necessary for well-functioning markets, and may result in consumers paying unreasonable rates. * * * * Based on complaints . . . it appears that problems with abusive, misleading and deceptive marketing tactics used by ESCOs in their contacts with residential and small commercial customers are persistent and disruptive. * * * *

In recent years, Staff of the Department of Public Service ("DPS") has worked with ESCOs to develop a "Statement of Principles for Marketing Retail Energy to Residential and Small Business Customers in New York State." * * * * Clearly, an entirely voluntary approach to preventing misleading marketing practices is unworkable.

The CPB/DCA Petition asks the PSC to

• Develop and adopt new marketing standards for ESCOs selling electricity and natural gas services to residential and small commercial consumers;
• Require ESCOs and their representatives to clearly identify themselves upon contacting a consumer;
• Compel ESCOs to clearly explain that they are not associated with the regulated utility; and,
• Give the PSC clearly defined legal authority to sanction ESCOs whose marketing practices are deemed to be detrimental to consumers.
  

PULP Comments: Broaden the Scope of ESCO Issues Under Review
PULP filed comments supporting the CPB/DCA petition, and asking the PSC to broaden the scope of an investigation into ESCO issues beyond door to door sales practices. Such issues could include ESCO practices that discourage further customer choice, such as demands for prepayment, and one-sided arrangements which prevent unhappy customers from switching providers without significant extra costs.

Customers enticed by PSC supported promotions to switch to an ESCO at no cost, or with a teaser rate, often find it very expensive to switch again when they are unhappy with ESCO service. PULP noted that after more than a decade of service the PSC has not issued a body of decisional law regarding reasonableness of ESCO service, despite many customer complaints. Indeed, as noted above, we are not aware of any PSC decisions arising from ESCO customer complaints, even though ESCOs account for 20 - 25% of all initial complaints and there is a steady stream of PSC consumer complaint decisions involving non-ESCO utilities.

PULP urged the Commission to take penalty actions in situations where an ESCO has violated Commission rules or orders, or the Public Service Law. PULP also pointed out that although ESCO matters consume considerable resources of the PSC, the PSC is not requiring ESCOs to support the cost of the agency's regulatory services allocated to ESCO matters.

NFG Issues Tariff Regulating Door to Door Sales of Natural Gas Service
In the aftermath of publicity regarding practices of door to door sellers of natural gas service, NFG issued a tariff that would apply to such sales, effective April 25, 2008. Compliance with a code of conduct would be made a condition of ESCO eligibility to sell gas or electricity in cooperation with the distribution company, whose services are needed by the pipeless and wireless ESCOs to facilitate their sales. See National Fuel Targets Door-to-Door Marketers. It is unclear how violations of the tariff conditions by ESCOs would be sanctioned, if at all, by the PSC, and how consumers would obtain timely remedies if the ESCO violates the conditions. The tariff is subject to PSC review and approval before it takes effect.

NFG Directed by PSC to Eliminate Late Charges on Deferred Payment Agreements

The Public Service Commission (PSC) recently ordered National Fuel Gas Distribution Company (NFG) to drop the 1.5% per month interest fees that it charges its residential customers on deferred payment agreement balances. In a December 2007 rate case order the PSC directed NFG to “eliminate . . . assessment of late payment charges on balances recovered through a residential deferred payment agreement.”

Public Service Law § 37 requires utilities to offer written deferred payment agreements (DPA) to all residential customers who are threatened with service termination. DPAs allow customers to pay outstanding utility charges over a period of time and service will not be terminated if customers stay current with their monthly bills and make incremental payments on their arrears as provided for in the DPA. Section 42.2 of the Public Service Law prohibits any late payment charge on a deferred payment agreement. Under Section 42.1, utilities may assess a late fee if a customer fails to timely pay DPA installments, but they may not charge interest or late fees on the original amount covered by the DPA.

Despite a PSC order issued almost a decade ago, finding that “application of late payment charges to amounts covered by a DPA is prohibited by statute,” NFG continued to assess these charges. In documents submitted to the PSC in the course of its rate case, NFG estimated it would collect over $6.8 million dollars in interest charges on DPA balances in 2008 alone. Much of this would have been collected from low-income consumers.

In its order establishing new rates for NFG’s gas service, the PSC rejected the utility’s argument that late payment fees on DPA balances were lawful, and it ordered NFG to file tariff amendments eliminating these charges and to remove the amount of its projected collections from its 2008 revenue forecasts.

The late payment charge controversy began in 1982, when the PSC promulgated rules to implement the Home Energy Fair Practices Act (“HEFPA”), but failed to specifically preclude late payment charges on DPA balances in the language of its regulations. By 1998 when the PSC initiated a proceeding to resolve the issue, the only utilities that continued to impose these charges on their customers were NFG and New York State Electric & Gas Corp. (NYSEG). NYSEG discontinued the practice after it was sued in 2005 by a customer represented by PULP.

In a generic companion order issued by the PSC on the same day as its decision in the NFG’s rate case, applicable to all electric and natural gas utilities and large water companies in the state, the PSC again held late payment charges may not be assessed on DPA balances. The PSC identified NFG as “the sole major utility to assess [late payment charges] on DPAs. . . .” The PSC concluded, however, that there is no basis for refunds to NFG customers of the unlawful charges, because they were levied pursuant to a filed NFG tariff. Under the “filed rate” doctrine, retroactive changes in tariffs are not possible.

In the generic order, the PSC cites its 1982 case in which HEFPA regulations were adopted to implement the statute, and mentions the position of “a party” who contended then that the Public Service Law did not permit late payment charges to be imposed on DPA balances, and urged the Commission to prohibit this. That “party” was PULP. The PSC finally resolved this issue in 2007, after the matter languished for 25 years, permitting some utilities to collect scores of millions of dollars from customers who could least afford to pay.

By Geraldine Gauthier
Staff Attorney

PULP and Other Consumer Groups File Supreme Court Amicus Briefs in Electricity Market Rate Case

Background
Nearly all the electricity used by New York consumers must be purchased in wholesale markets because many of the state's electric utilities sold most of their power plants in recent years. Previously, local utilities generated much of the power used by their customers, at cost, and purchased from others when it was available at lower cost. Now they must buy electricity at market prices demanded by sellers in poorly regulated wholesale markets under Federal Energy Regulatory Commission (FERC) jurisdiction. A major issue has arise regarding FERC's failure to assure that all contracts for the sale of wholesale electricity are reasonable, as required by the Federal Power Act. See Energy Contracts Spark High-Stakes Supreme Court Case, and U.S. Supreme Court to Decide Electricity Market Rate Refund Case.

The Morgan Stanley Case
On January 14, 2008 PULP filed an amicus brief in a case to be argued in the United States Supreme Court regarding the review by FERC of contract charges for wholesale electricity. FERC assumes that any prices set by sellers are reasonable if they lack "market power." The contracts were formed during a period of rampant market manipulation, were not filed, and were never reviewed by FERC for reasonableness. The issue in the case is whether a Ninth Circuit ruling, which basically required FERC to review contract rates for reasonableness, is in conflict with longstanding Supreme Court decisions in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956), and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956), together known as the Mobile-Sierra cases. Those cases made it very difficult for sellers to revise upward the prices they previously agreed to charge in contracts.

FERC, represented by the U.S. Solicitor General, agrees with Morgan Stanley Capital Group and other wholesale electricity sellers that the Mobile-Sierra cases make it nearly impossible to revise rates downward. Represented by luminaries of the bar, including three former Solicitors General, energy producers, traders, dealers in financial derivatives, economists and others are asking the Supreme Court to reverse the Ninth Circuit order. They argue that the "sanctity" of contracts is at stake, that the Mobile-Sierra doctrine applies, and that FERC cannot modify contract rates except in extreme circumstances.

PULP's Amicus Brief
PULP's amicus brief points out that the Mobile-Sierra cases both involved situations where the contracts had been filed publicly in advance as required by Section 205(d) of the Federal Power Act. Thus, the contract rates in those cases already had been subject to public scrutiny and review by the regulator for reasonableness before they took effect. Only then did the doctrines favoring repose of contract rates apply.

In contrast, the contract rates in the case now before the Supreme Court are "market-based rates." Under FERC's regime, these contracts were not filed in advance as required by the Federal Power Act, and thus the rates and charges were never subject to public scrutiny or review for reasonableness by FERC before the contract sales began.

PULP urges the Supreme Court to affirm the Ninth Circuit order because unfiled rates and contracts for wholesale electricity have always been subject to subsequent revision by FERC if they are unreasonable, without regard to the Mobile-Sierra doctrine. PULP also rebuts the claim that FERC's determination that a seller lacks market power satisfies the utilities' statutory obligation to file all rates and contracts publicly, in advance. The statute does not give FERC power to grant blanket waiver of the utilities' filing duties. The Supreme Court in MCI v. AT&T in 1994 held that federal regulatory agencies have no power to relax utility filing requirements. The court said filing requirements are utterly central to filed rate regulation schemes similar to that of the Federal Power Act. See May the FERC Rely on Markets to Set Electric Rates?

Public Citizen's Amicus Brief
Public Citizen, the Colorado Office of Consumer Counsel, the New Mexico Attorney General, and the National Consumer Law Center also submitted an amicus brief supporting affirmance of the Ninth Circuit order. It provides an historical perspective on the reasons why the Federal Power Act and the recently repealed Public Utility Holding Company Act were enacted to protect utility customers. A premise of these statutes is that it cannot be assumed -- as FERC now does -- that utilities and energy traders will act in the interest of consumers when they make contracts for the sale and purchase of wholesale electricity. The brief also shows why accepting the extreme position of the sellers would allow all electricity contracts to escape any meaningful review for reasonableness.

Other briefs are available at the ABA website. The case will be argued February 19, 2008.

PSC Requires More Study Before Allowing Major Investment in "Smart Meters"

In 2006 the PSC issued an order requiring the state's electric and natural gas utilities to develop plans for implementation and widespread deployment of "smart meters." See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers, PULP Network, April 16, 2007.

In a decision issued December 19, 2007, the PSC required Con Edison and Orange & Rockland Utilities to file supplemental plans, and required assessment of demonstration projects and cost effectiveness of any plans for broader deployment. The utilities' plans had called for expediture of $712.8 million to deploy smart meters, and projected total benefits of $782.5 million, $224 million of which was calculated to come from changes in customer consumption, i.e., by shifting usage to times of day when prices presumably would be lower.

The Commission said "The $713 million AMI program cost is a significant additional future cost whose potential offsetting benefits are far from clear or certain at this point." As discussed in Not So Smart, calculations about lower market prices from peak shifting by customers with smart meters -- 30% of the projected benefits -- may rely not only upon unproven assumptions regarding the ability of very large numbers of customers to shift their usage in response to spiking prices, but also on rather robust assumptions about the competitiveness of markets, reasonableness of real time prices, and the behavior of sellers in the repetitive auction spot markets. See Cornell Professor Gives Low Marks to NYISO Electricity Markets, PULP Network, December 13, 2007.

In addition, the Commission cautioned Con Edison and O&R against the use of new technologies to accomplish remote termination of service, stating:

Finally, we remind the companies that termination of service for nonpayment is subject to Home Energy Fair Practices Act (HEFPA) regardless of whether that disconnection is performed by physical (on site) or electronic (remote) service shut off. No utility may utilize AMI for remote disconnection of service for nonpayment unless it has taken all of the prerequisite steps required by HEFPA, including the requirement of 16 NYCRR §11.4(a)(7) that customers must be afforded the opportunity to make payment to utility personnel at the time of termination. This process requires a site visit, even where a remote device is utilized.

On the same day, in a similar decision rejecting Central Hudson's plan, the Commission reiterated its concern that all HEFPA procedures must be followed:

A concern relates to the use of AMI to accomplish remote disconnection and reconnection of service. While this capability can provide benefits when disconnection and reconnection are implemented pursuant to customer requests or for system safety, Home Energy Fair Practices Act (HEFPA) regulations incorporate a “last knock” policy requiring that terminations for nonpayment be preceded by a customer’s opportunity to pay the bill to utility personnel at the time of termination, and avoid disconnection. Central Hudson is reminded that termination of service for nonpayment is subject to HEFPA regardless of whether that disconnection is accomplished by physical or electronic (remote) service shut off.

The Commission press release in the Con Edison case underscored the need for pilot projects and further assessment of costs and benefits before full deployment, stating:

This sophisticated combination of meters, and other supporting equipment, is clearly the wave of the future. However, before we approve full-scale AMI implementation, we must determine if the investment is justified and whether the meters to be installed contain features and functions that will provide consumer and system benefits, or can be later modified to add new functionality. Pilots can play a very important role in reducing the number of open questions and obtaining better forecasts of costs and benefits.

The proposed expenditure of nearly three quarters of a billion dollars is a major investment by Con Edison and O&R. If this was not better for shareholders than for consumers we doubt we would see such a plan from a utility. "Smart meters" are in vogue, pushed by the electricity deregulation crowd as the solution to unreasonable prices, and by environmentalists as a way to address energy efficiency goals. These formidable voices cheering for "smart meters" (along with the message implicit in the label that if we have an old meter we are "dumb") resonate well with the interest of utilities wanting to make large new capital investments that could allow them to demand and justify higher future earnings and higher rates.

The PSC was not only smart, it was wise to require more analysis of the costs and benefits, particularly because under the Public Service Law, time of use pricing for residential customers is strictly voluntary, and to date has not attracted many adherents.

PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs

RGGI
New York along with nine other northeastern states is creating its own greenhouse gas "cap, auction and trade" system in an effort to reduce carbon dioxide emissions from power plants using fossil fuel. This "Regional Greenhouse Gas Initiative," known as RGGI, was conceived by the states in the absence of any comprehensive national program, carbon tax or national cap and trade system designed to reduce carbon dioxide in the atmosphere.

Sale of CO2 Allowances
Regulations to implement a New York greenhouse gas allowance auction system have been proposed by NYSERDA and the New York State Department of Environmental Conservation, DEC. DEC will require New York utilities emitting carbon dioxide to purchase allowances, and NYSERDA will conduct the auctions.As the amount of allowances is gradually reduced, their cost will increase, and presumably the higher cost of production will induce buyers to purchase from cleaner sources and will induce power producers and sellers to reduce overall emissions in order to avoid or reduce the cost of allowances. Subsequently, after the initial auction, allowances may be bought and sold and traded by non utilities, including energy traders and hedge funds, in largely unregulated secondary markets.

PULP Comments
In December 2007 PULP filed comments on the NYSERDA regulations. The comments point out that the new system is likely to increase the price of all electricity sold in the state, even electricity produced by generators that emit little or no carbon dioxide, such as hydro, nuclear, and wind power plants. This is because the wholesale energy markets are designed to pay all sellers the market clearing price, which is set by fossil fueled power plants.

In addition, there is a possibility that sellers will incorporate prices set in secondary markets for allowances when they make their price demands in in the day-ahead and real time single clearing price spot markets. These secondary markets and the prices of allowances are basically unregulated.

A possible result of the secondary market prices is that even if sellers have allowances purchased in advance from NYSERDA, they may make their price demands for electricity to be sold tomorrow in spot markets as if they are buying allowances today in the secondary markets, at possibly much higher prices. A similar phenomenon has occurred with respect to the pricing of electricity generated with natural gas. Power producers typically make their price demands based on tomorrow's price of natural gas, even if they already have lower cost gas available under a long term contract. Volatile high prices in a secondary market for greenhouse gas allowances may thus enable sellers to ratchet prices much higher than they would be elevated by the price of allowances when they are initially sold by NYSERDA. It is not clear how the contracts for purchase of allowances would be regulated by FERC, but based on FERC's enthusiastic embrace of deregulated wholesale markets, it is probable that FERC would take no action to assure reasonable prices when allowances are bought by sellers with "market based rate" permission and the price is added to wholesale rates.

A possible warning sign is that in Europe greenhouse gas allowances are adding substantially to the cost of electricity. Also, significant results from the cap and trade program, in terms of reduced emissions, seem to be absent so far.

If RGGI has similar results in New York, the cost of electricity could increase substantially. This may be dismissed by cap and trade proponents as only the cost of a few lattes, but it could make a very large difference to low income households who now have difficulty paying today's energy prices and who run out of money for other essentials for their families before the end of the month.

PULP urged NYSERDA to commit 35 - 45 percent of the proceeds of its allowance auctions to increase energy efficiency services for low income households.

NYC Bar Association Energy Committee Recommends New State Energy Planning Board

The Energy Committee of the Association of the Bar of the City of New York has issued a Report on Energy Planning, urging state policy makers to take a more proactive role in planning for future energy needs. The Report has a useful history of the state's prior energy planning, done under a now lapsed statute, and does not urge replication of the former planning structure of the now defunct state energy office. In reality, major stakeholders are always planning. What is lacking today in New York is transparency, coordination, and accountability of energy planners to consumers and to the public at large.

Over the past decade, New York state abandoned formal energy planning in the hope that reliance on deregulation and market forces would meet growing electricity needs at lower cost in an environmentally acceptable manner. Depending on one's perspective, this was either a big mistake or a bad idea. Although some persist in confidence that unregulated markets will meet future needs, when the rubber hits the road and new power plants must be built, the merchant power sector generally has not met the need and it has been necessary for publicly owned utilities (NYPA and LIPA) or the old distribution companies (Con Edison) to address the need:

In metropolitan New York City, merchant power producers have not built new capacity to meet the growing load. For example, in metropolitan New York City, most recently-completed capacity (86 percent or 1,700 MW) was built by the New York Power Authority, Consolidated Edison Company of New York, Inc., or under contract to them. Generators and load serving entities are taking significantly different positions in an investigation of New York City’s generating capacity markets before the FERC about the ability of merchant suppliers to build new energy supply facilities. Some merchant generators consider that the revenue available through the NYISO’s current markets is inadequate to support investment in new generating capacity and that future capacity markets are unpredictable and unreliable.

The Report recognizes weaknesses in the NYISO planning, which only addresses reliability needs and not attainment of affordable prices or environmental goals. When "the market" fails to produce needed facilities, the NYISO "plan" ultimately punts to the old utilities to meet their duty to serve (eschewed by the NYISO and merchant power utilites) by undertaking regulatory backstop solutions to satisfy reliability criteria. This has meant either building their own plants or entering into long term contracts to buy the output from a new plant to be owned by others. Thus, commitments are made for which utility consumers must pay in the future in order to finance new "competitive" plants.

The Report recommends creation of a new Energy Planning Board comprised of state agency heads. Its members would include the PSC Chairman, the Commissioner of the Department of Environmental Conservation, Chairman of the Empire State Development Corporation, Chairman of NYSERDA. The NYISO would have an important advisory role:

The Energy Policy Board would include the chairs of the Commission, the DEC, the New York State Energy Research and Development Authority (“NYSERDA”) and the Empire State Development Corporation. The Board would prepare a biennial statement of State energy policy recommendations, addressing the (1) risks, benefits and uncertainties of energy supply sources, (2) emerging energy trends, (3) energy policies and long-range planning objectives and strategies, (4) administrative and legislative actions needed to implement energy plans and objectives and (5) impact of the energy policy statement’s recommendations on economic development. The energy policy statement would provide the framework for coordinated actions and decisions by State agencies.

The proposed new board could foster coordination of Executive Branch agencies, but it leaves out any role for legislative leaders. In the current vacuum of energy planning, and the continued suctioning of wealth from New York City consumers to merchant power providers who may have an interest in sustaining scarcity there, New York City stepped up to the plate recently and proposed its own, highly proactive, energy plan. Unlike the Energy Committee Report, which seems careful not to trouble proponents of deregulation, the New York City Energy Plan issued earlier this year minces no words:

New Yorkers face rising energy costs and carbon emissions from an ineffective market, aging infrastructure, inefficient buildings, and growing needs. That’s why we must make smart investments in clean power and energy-saving technologies to reduce our electricity and heating bills by billions of dollars, while slashing our greenhouse gas emissions by nearly 27 million metric tons every year.

The ABCNY Energy Committee Report certainly points in the right direction toward a better planning process, and in many respects it is a breath of fresh air. But leaving out major players like legislative leaders, NYPA, LIPA, the City of New York, and distribution utilities who have the duty to serve, and relegating them to a role of commenting on draft plans of the proposed board, may not yet be a full solution to the energy planning needs of the state.