Test Your Internet Speed at CWA Website and Compare it with Broadband Speed in Other Countries

The Communications Workers of America (CWA) recently launched a new website that enables one to check internet connection speed and compare it with average speeds in New York and with internet speeds in other countries. According to CWA:

The United States - the country that invented the Internet - has fallen from 1st to 15th in high-speed Internet penetration. High-tech innovation, job growth, telemedicine, distance learning, rural development, public safety, e-government and solutions to our environmental problems require truly high-speed, universal networks.

**** We are falling behind because the United States is the only industrialized country without a national policy to promote universal, affordable high speed Internet access. Instead, we have relied on fragmented government programs and uneven private sector responses to changing markets, leaving us with an alarming digital divide.

Check your internet speed at www.speedmatters.org

Time to Apply for Broadband Grants Has Arrived

With an announcement by Vice President Joe Biden on July 1st, the process to spend four billion dollars to work toward universal broadband access has begun.

There is now a wealth of information at a new web page to consolidate the efforts of the involved federal agencies: the Department of Commerce’s National Telecommunications and Information Administration (“NTIA”) and the United States Department of Agriculture’s Rural Utilities Service (“RUS”) . While the actual application to apply for funds is, surprisingly, not yet available , – considering that applications may be submitted as soon as July 14th – the Notice of Funding Availability (“NOFA”) is now online.

As stated in the NOFA, the general policies and application procedures for providing broadband grants, as anticipated by the American Recovery and Reinvestment Act, have been placed in two programs. The Broadband Initiatives Program (“BIP”) is offered by RUS to “extend loans, grants, and loan/grant combinations to facilitate broadband deployment in rural areas” and NTIA is offering the Broadband Technology Opportunities Program (“BTOP”) which “makes available grants for deploying broadband infrastructure in unserved and underserved areas in the United States, enhancing broadband capacity at public computer centers, and promoting sustainable broadband adoption projects.” It is anticipated that expanding broadband access “will advance the objectives of the Recovery Act to spur job creation and stimulate long-term economic growth and opportunity.”

The NOFA is 121 pages long. The application itself contains 15 sections, most of which include numerous, detailed sub-topics. The deadline is August 14th. And that’s only step one. The process continues for those applicants which get into the “pool of viable and potentially fundable applications.” Only those applications which are considered to be the most highly qualified (that is, receive the highest scores) will advance to the second step of the review process. In step two, NTIA and RUS must “fully validate” each surviving submission. Specifically, in this “due diligence” phase, applicants will be asked to submit additional information, as appropriate, to further substantiate the representations made in their application. Moreover, during step two of the BTOP application process, the Governor of each state will receive a list of the applications under consideration and may prioritize and recommend projects, along with an explanation of why the selected proposals meet the greatest needs of the state. The updated application would be due by October 15th.

The time is ripe for the federal government to stimulate broadband deployment. The United States under the previous Administration had a poor broadband record when compared with the availability, speed, and bandwidth price of most developed nations. However, will the complex application process created by the NOFA keep all but the most well-heeled applicants away?

Lou Manuta

Why is Submetering Attractive to Apartment Owners?

Resale of electricity to residential tenants is generally prohibited unless specifically allowed by an order of the PSC. PSC-approved and NYSERDA-subsidized submetering projects, which enable landlords to bill tenants separately for electricity in buildings where electricity had been included in the rent, have had calamitous results for low-income tenants when new charges for electricity are added to their rent and are not offset by rent reductions or additional Section 8 housing assistance payments.

The rationale for submetering advanced by landlords, the submetering industry and consultants, and uncritically accepted by the PSC and NYSERDA, is that submetering will significantly reduce electric usage by changing tenant behavior. There is little good research on the reduction of usage attributable to behavior changes. What is known to happen with submetering, and what probably makes it attractive to landlords and what makes submetered properties better candidates for acquisition by real estate investment trusts (REITs), is that the risks of rising and volatile electric prices, and the energy burdens of inefficient landlord owned or controlled structures, fixtures, appliances and controls, are all shifted from the owner to the tenants. The revenue stream is less affected by rising energy prices or energy price spikes, such as occurred in 2008.

According to the ads of a seller of submetering equipment, the value of a property to the owner will go up $5,000 per unit with submetering:

Utility submetering dramatically increases property value - more than any other ancillary service or comparable capital investment

See also,

• PULP Network, May 12, 2009 PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants;
  
• PULP Network Jan. 16, 2009, PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights.

Obviously, tenants do not own the inefficient structure, fixtures, major appliances and controls and so they lack the ability and the substantial funds to make them efficient. The "payback" to landlords for submetering and just getting rid of responsibility for energy bills, in terms of increased property value and shifted costs is probably much more attractive than investment in physical energy efficiency measures. Recently, the PSC slowed the flow of funds for submetering projects. See PULP Network, June 25, 2009, PSC Signals Shift in Landlord Subsidies to Implement Submetering.

For further infomation visit PULP's web page on submetering.

PSC Continues Stay of Submetering at Four Former Mitchell-Lama Projects

Background
In a November 25, 2008 letter to Urban America, the owner of the 1,003 unit Eastwood apartment complex located on Roosevelt Island at 510-580 Main Street, Roosevelt, New York (Eastwood), elected federal, state and local officials -- U.S. Representative Carolyn B. Maloney, New York State Senator Jose M. Serrano, New York Assembly Member Micah Z. Kellner, and New York City Council Member Jessica S. Lappin) -- representing constituents at Eastwood, objected to submetering. Apparently the owner had begun to install submeters prior to receiving PSC permission to resell electricity, and tenants were generally aware of its intent to submeter. The officials' letter asked the owner not to petition the PSC for permission to submeter unless the impact on tenants was assessed and mitigated and until measures were taken to assess and address energy inefficiencies in the building:

As of the date of this letter, it is our understanding from the New York State Public Service Commission that Urban American has not yet submitted its petition for approval of submetering at Eastwood. For the protection of the building's tenants, we ask Urban American not to submit the petition until the above steps have been taken.

However, a submetering petition had been filed in June 2008 and PSC had already approved it in an Order dated October 28, 2008 and issued November 21, 2008. The officials' letter to Urban America was received and docketed by the PSC as a comment after the order had been issued, on November 28. During a "shadow billing" period preceding actual charges for electric service, a myriad of problems were identified in a second letter from the elected officials dated January 9, 2009, which was sent to the PSC and was also docketed as a comment.

On February 6, 2009, Assemblyman Kellner and the other elected officials, long with Manhattan Borough President Scott Stringer, submitted a Petition for Rehearing to the PSC, based on information that came to light during the "shadow bill" period and errors of fact in the Petition for submetering and the Order approving it, which did not address the large low-income population, which misapprehended the applicable rules regarding rent adjustments, and which did not address the fact that electric heat was being submetered in premises that are not thermally efficient and not equipped with modern controls. The rehearing petition states:

Ultimately our current perspective is that given all of these factors, Eastwood is not an appropriate candidate for submetering. As long as Eastwood continues to utilize an outdated baseboard electric heating system we have a hard time envisioning a safe and reasonable way in which significant conservation efforts on the part of tenants could bring the submetered bills into any acceptable range.

The petition was supplemented by Assemblyman Kellner, who pointed out that the added charges for electricity were not being offset by increased housing subsidies or lowered rents, and that under the leases, charges for electric service were "deemed" to be "rent" so that tenants could be evicted:

While the applicant may have promised that HEFPA will be adhered to for all residents, the lease written by the applicant defines the utility costs as rent. Since the procedures agreed to by the applicant, specifically references housing court, it is clear that any unpaid utility bills will result in tenants being hauled into court for eviction proceeding. This will inevitably lead to elderly and disabled tenants thrown out of their homes and into the streets. Had the Commission been informed of this information, we believe there would have [been] a different outcome to these cases.

The Orders Staying Submetering
On February 12, 2009 PSC Chairman Garry A. Brown issued a one-Commissioner order staying the submetering at Eastwood, and submetering stays were issued in three similar situations in other buildings. The stays were issued as emergency rules under SAPA because a failure to act immediately would be "detrimental to the health, safety and general welfare of tenants who are low income, require electricity for life support, are elderly, and/or are disabled." See PULP Network, Feb. 12, 2009, Submetering Slowed at Roosevelt Island. The stay order was confirmed by the entire Commission, and readopted as an emergency rule under SAPA on May 12, 2009. Discovery was initiated by Assemblyman Kellner and by PSC Staff, and is still underway.

Extension of the Stays
On July 10, 2009, another Order was issued by Chairman Brown extending the stay another 60 days, noting that "[f]urther readoptions may be necessary prior to a Commission determination on the petition for rehearing and the stay."

Similar extensions of stays were adopted in the cases affecting three other America buildings -- Schomburg Plaza, Metro North Apartments, and KNW Apartments.

Other Cases
Tenants in several other former Mitchell-Lama projects also sought rehearing of the submetering orders in their cases. But in those cases, their Petitions for rehearing, modification, vacatur and stay of prior submetering orders were recently rejected by the PSC as untimely, and the cases were simply referred to the PSC Office of Consumer Services (OCS) as complaints, without action on the stay requests. OCS may take a year or more to decide a complaint.

For further infomation visit PULP's web page on submetering.

Update
On July 16, 2009 the entire PSC acted to confirm the one-commissioner orders, continuing the stays of submetering at Roosevelt Island Eastwood, Frawley Plaza, Metro North, and KNW Apartments.

New Leadership Brings Needed Changes to FCC and National Broadband Policy

Following his confirmation by the Senate, newly minted FCC Chair Julius Genachowski addressed the staff at the FCC on June 30th and in the process told the world how his administration would differ from the previous one. From PULP’s perspective, the two most important things he told the gathered group which separate him from the Martin-era FCC were:

“Our policy decisions will be fact-based and data-driven.”

And,

“As the country’s expert agency on communications, it is our job to pursue this vision of a more connected America, focusing on the following goals:

• Promoting universal broadband that’s robust, affordable and open.
• Pursuing policies that promote job creation, competition, innovation and investment.
• Protecting and empowering consumers and families. . . .”

Then, the next day, he traveled to Erie, Pennsylvania and spoke about why a federal program to deliver affordable broadband access nationwide is essential:

“Why are we lagging in many broadband categories but comparably better in linking classrooms? Because we had a plan.

In the Telecommunications Act of 1996, Congress enacted a program called the “E-Rate” to provide discounted Internet access in schools and libraries. The FCC implemented the plan and our country has made real progress – though there’s much more to do in this area.

Today, as the government moves quickly on billions in much-needed broadband grants, we are also moving on a broadband strategic plan for the entire country so that we can renew American leadership and competitiveness for the 21st Century.”

Let’s see: a fact driven agency and a leader who sees the need for government intervention to make universal affordable broadband a reality. An excellent stepping off point for Chairman Genachowski. I met him many years ago when I was interviewing then-FCC Chair Reed Hundt for a legal publication and Genachowski was Hundt’s Chief Counsel. We had both been out of law school just a couple of years. Even during my short visit, he seemed impressive. Leadership such as what Genachowski has proposed on broadband is essential if we are going to be successful in making it universally available and affordable. At least four states, California , Maine, Texas , and Wisconsin created in-state funding mechanisms to bring broadband to schools, libraries, and community centers while the federal government dithered under the Bush administration.

Inexplicably, New York, on the other hand, continues in its adherence to the failed “market driven” policies of the past that have given us slower, less ubiquitous, and more expensive broadband than a a growing number of states and nations. As we reported recently, the New York State Public Service Commission (“PSC”) told the FCC in its comments regarding its universal broadband initiative that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market.” Such blind faith in the market, we wrote, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. See PULP Network, June 12, 2009, PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service. In its comments , the PSC even questioned the need to bring broadband to every citizen today. See PULP Network, June 19, 2009, PSC's Market Ideology Clashes with Goals of Affordable Universal Broadband Service.

Maybe the time has arrived for the New York PSC Commissioners, all of whom lack prior experience in telecom and universal service issues, to make use of their state broadband service (not available to low-income New Yorkers who cannot afford it) to watch the new FCC Chair at meeting webcasts, and learn what it means to be a leader in the effort to achieve universal affordable broadband and how to play the necessary regulatory role to make it happen in New York sooner rather than later.

Lou Manuta

Rent Reductions in Submetered Buildings

When an owner of a master metered building obtains an order from the PSC waiving the general prohibition of retail resale of electricity, tenants in rent stabilized housing are entitled to a rent reduction when the landlord charges separately for a service (electricity) previously included in rent. Contrary to the myth that only electricity-squandering tenants will pay more when they are submetered, typically the amount of the rent reductions set in the DHCR rent reduction schedule are far exceeded by the new electric bills. See PULP's Top Ten Submetering Myths.

A document submitted by NYSERDA to the PSC in May indicates some rethinking on the topic of submetering:

In some low-income, electrically-heated buildings that are rent stabilized, rent controlled, or regulated by state or local agencies (where owners are required to pay the heat bill), and have separate circuits for heat and other electric needs (such as many Mitchell Lama buildings), two meters may be installed so that the tenant can be responsible for non-heat electric charges, and the owners will still pay for heat. NYSERDA is working with NYS DHCR to update the rent reduction formula, and determine the best implementation plans to accommodate Major Capital Improvement (MCI) issues that impact the potential for submetering projects.

The last time NYSERDA worked with DHCR on rent reduction formulas for submetering it was disastrous for many tenants. See PULP's Analysis of DHCR Rent Reductions for Conversion to Submetering, and PULP Analyzes DHCR Submetering Rent Adjustments.

PSC Implements 2% Assessment on Energy Utilities; Rebuffs PULP’s Request to Protect Low Income Customers

On May 15th, PULP reported on the New York State Public Service Commission (“PSC”) proceeding to implement the recently enacted Temporary State Energy and Utility Service Conservation Assessment. See PULP Comments on PSC Proposals to Implement 2% Utility Assessment. The "Temporary Assessment" imposes a charge of two percent of gross intrastate operating revenues, minus the amount of the current assessment on utilities for the PSC’s costs and expenses. The stated purpose of the Temporary Assessment is to encourage conservation of energy and other resources and applies to public utility companies, including municipal gas and electric corporations, Energy Service Companies (“ESCOs”), and the Long Island Power Authority. The Temporary Assessment does not apply to any telephone corporations or to energy utilities with $500,000 or less gross operating revenues from intrastate utility operations. Comments on the proposals regarding the Temporary Assessment were submitted on May 15th and the PSC issued its Order on June 19th .

PULP expressed concern in its comments that the Temporary Assessment will unnecessarily and unfairly burden low income customers, because it would “significantly diminish or offset reductions” in bills available under low income programs offered by the utilities. PULP had called for an exemption from the Temporary Assessment for low income customers or, in the alternative, to reopen rate cases to increase the low income rate discounts to off-set the Temporary Assessment, so that the new assessment would not add to their total energy burdens.

While the PSC recognized that “the imposition of the Temporary State Assessment may offset benefits from low income programs,” it found that the statute does not authorize an exception for any customer class, including low income customers. Although the statute did not expressly authorize such treatment for low income customers, PULP notes that the PSC is responsible for deciding how the assessment cost will be allocated among the various customer classes, and the statute certainly does not block the PSC from allocating the new rate burden taking into account fairness and equity to those living in hardship, just as it could with any other new rate burden. The PSC made the obvious that because the Temporary Assessment “will be collected from all customers on an equal basis within a class, the low income customers’ discount relative to other customers will remain unchanged, on a dollar basis.” However, such a conclusion does not eliminate the fact that any energy burden reductions for low-income customers the PSC approved in a prior rate case will now be reduced by application of the Temporary Assessment – a new state mandate which became effective after a utility’s rates were approved. The PSC then described opening up rate cases to correct this injustice as “impractical.” But if that is too much work, there are other familiar regulatory tools to accomplish this, such as telling utilities to defer collection of the new assessment from low income customers and later reallocating the deferred amount to be collected from other customer classes in the next rate case. The PSC has authorized such deferral mechanisms for a myriad of purposes, including the Temporary Assessment, and every utility has some deferral items. Indeed, Corning Gas filed a petition this week asking the Commission to change the proposed timing of collection of the Temporary Assessment charges, as did Niagara Mohawk.

Once again, the PSC passed up an opportunity to protect low income customers in the name of expediency.

PULP had also made a suggestion to have the PSC base its assessment of energy service company (“ESCO”) revenues on actual data instead of estimating ESCO revenues by having distribution utilities multiply the amount of electric or gas delivered to ESCO customers by the commodity supply price that would be charged by the distribution company for sales to its bundled service customers. PULP believes that estimating ESCO revenues in this fashion may inaccurately estimate ESCO intrastate revenues. The distribution utility’s commodity supply price for natural gas, for example, may be 20 or 30 cents (or more) per therm lower than the actual ESCO residential end user rate, so the ESCO revenues would be higher than estimated. Conversely, some ESCOs' revenues from some large industrial customers may be less than what the distribution utility would charge, and so their revenues may be overstated for purposes of calculating the Temporary Assessment. The PSC opted to not “undertake the more complex, uncertain, and multi-faceted plan” proposed by PULP, relying on its own less-accurate estimates instead.

PULP also provided detailed documentation showing that the ESCOs with the highest residential rates also had the most PSC complaints lodged against them, increasing demand on PSC resources, and warranting a full assessment based on their actual revenues. Despite the citation to published PSC statistics on ESCO Complaints outlining this correlation, the point was dismissed out of hand by the PSC as “highly speculative.”

Lou Manuta

PSC Rips HEFPA Safety Net for Utility Applicants with Arrears from a Prior Period of Service

In October 2007, applicants for Niagara Mohawk service sought relief from the Public Service Commission when they were denied service due to arrears on a prior account and lacked the money to pay $1,000 demanded by the utility as a down payment to reduce the arrears. They argued that Section 31.1 of the Public Service Law requires the utility to provide service to an applicant who owes the utility arrears for service provided to a prior account if the applicant

agrees to make payments under a deferred payment plan of any amounts due for service to a prior account in his name and makes a down payment based on criteria to be established by the commission. No such down payment shall exceed one-half of any money due from an applicant for residential utility service, or three months average billing, whichever is less....

Some of the applicants were homeless, living in shelters or motels at public expense, and needed to show a new landlord that they had utility service arranged in their name before they could take possession. Even though they could pay a significant down payment, some with the aid of charities, they were denied service, under Niagara Mohawk's "Grand Plan." The "Grand Plan" required full payment of arrears less than $1,000 and a $1,000 down payment if the arrears were owed for prior service exceeded $1,000, if the applicant had broken a minimum payment plan agreement during a prior period of service to a closed account.

Normally a utility is required to file all rules, terms and conditions of service as tariffs, subject to public scrutiny and PSC review, and no new rates, terms and conditions are valid unless they are publicly filed. The "Grand Plan" rules, however, were never filed.

The applicants got no relief when they called the PSC's Office of Consumer Services (OCS) Complaint Line and Emergency Hotline, which has the power to direct the utility to provide service.

This was not particularly surprising, inasmuch as National Grid had informally vetted the "Grand Plan" with OCS. OCS gave the green light and so its Hotline staff upheld the utility's denial of service when applicants could not come up with $1,000. Indeed, National Grid conducts training programs for the OCS staff who handle complaints against National Grid, indoctrinating the regulators regarding the utility's untariffed policies and practices.

Applicants were thus denied essential utility service and had no more remedies they could invoke without a lawyer.

PULP represented numerous denied applicants whose offers to pay part of the arrears they owe had been rejected by National Grid and OCS. They filed a Petition with the PSC itself for declaratory relief, seeking emergency one-commissioner orders directing National Grid to provide service. Examples of the effects of Niagara Mohawk's policy on the Petitioners included:

• A household with a 14 month old infant was without service because they could not meet the demand for $1,000.
  
• A mother with four children was evicted and became homelesswhen the father halted child support payments. The family was living in a car, and was relocated to a possibly dangerous motel situation. The mother found an apartment, but was unable to move in because the landlord required utility service to be on before giving possession. She could not resolve her homeless situation because she could not meet National Grid's demand for $1,000. The PSC Consumer Services Division was made aware of the situation and did not provideany relief.
• A senior citizen receiving SSI and moving to a different apartment where utilities are not included in rent, had arrears dating back more than six
  years from a prior episode of service, and was refused service unless he paid at least $1,000, which he did not have.
• A disabled amputee with seizures who was denied service due prior arrears because he could not satisfy National Grid's demand for $1,000.
  

When the case was filed, National Grid provided service. On each occasion that an individual case of an intervenor was presented to the Commission, the utility reversed its position - which had previously been backed up by the OCS Hotline -- provided service, and the PSC referred the complaints to OCS. Eventually some of the denied applicants received $25/day bill credits for wrongful denial of service, under PSL Section 31.5.

The PSC issued a Declaratory Ruling March 20, 2008, invalidating the "Grand Plan" rule, holding that it was not sufficiently flexible. See PSC Nullifies National Grid's $1,000 "Grand Plan" Requirement for Utility Service.

But in the decision annulling the "Grand Plan" the PSC still allowed Niagara Mohawk to demand more than half the amount due and more than the amount of three months bills as a down payment, thus gutting the clear statutory language that "No such down payment shall exceed one-half of any money due from an applicant for residential utility service, or three months average billing, whichever is less...."

The obvious intent of the language, which immediately follows language giving the PSC power to set criteria for payment plan down payments, was to limit PSC discretion. There was good reason to do so, because in the past, prior to enactment of PSL 31.1 as part of HEFPA in 1981, which is the Bill of Rights for New York's utility consumers, the PSC had allowed utilities to require payment of 100% of arrears due as a condition of service.

HEFPA and its companion public assistance legislation, Chapter 895 of the Laws of 1981, were intended to overrule that past practice. See HEFPA History. HEFPA gave the PSC power to establish criteria for down payments in payment plans, which PSL Section 37 requires to be negotiable, fair and equitable.

To prevent the PSC from being recaptured by the utilities and reintroducing harsh down payment requirements for service, HEFPA limited the PSC's power with the proviso that "No such down payment shall exceed one-half of any money due from an applicant for residential utility service, or three months average billing, whichever is less...."

Thus, in the Declaratory Ruling, the Commission crossed the "bright line" set in the statute for maximum down payments on payment plans.

The Commission said applicants who previously broke a minimum DPA (typically the poorer customers) could be required to pay more than the statutory amounts, and were not eligible for a down payment within the statutory maxima.

The Commission also rejected as inflexible National Grid's $1000 requirement, told OCS to review National Grid's policies, and directed National Grid to meet with OCS regarding the issue of down payments on payment plans and the provision of written denial notices to persons denied service, which must advise applicants of their opportunity to seek review from OCS. (Many of the Petitioners denied service by Niagara Mohawk were not provided timely and adequate notice of their administrative remedies through the PSC Complaint Handling Procedures). The Commission also denied PULP's discovery requests. See footnote 8 of the Declaratory Ruling.

PULP petitioned for rehearing and clarification, and while rehearing was pending, discovery in another case, (the then-pending Niagara Mohawk natural gas rate case), revealed that the utility had adopted a sub rosa policy to demand, instead of $1,000, 80% of old arrears as a down payment on a deferred payment plan for applicants with arrears for service to a prior account. The 80% rule again resulted in denial of service to applicants who could pay the 50% maximum down payment allowed by the statute. The instructions to utility staff were not to reveal that a fixed percentage demand was being made, just to demand an amount equal to 80%. Persons denied by the utility under the 80% rule sought help from the OCS Hotline, which consistently backed up the utility even though the demand exceeded the limits of the statute. PULP again assisted denied applicants in seeking intervention and relief from the Commission. See National Grid's "Grand Plan" May Be Gone, but its "80% Solution" Remains. Again, once each intervenor's case was brought to the Commission's attention, the denial of service was reversed.

On June 25, 2009, the Commission issued its Order Denying Petition for Rehearing, But Granting Clarification in Part. The Commission huffed about how Niagara Mohawk could have replaced its rigid $1,000 down payment rule with a rigid 80% rule. It recites how Niagara Mohawk, in private conversations with OCS, discussed the 80% rule:

We note that OCS has been meeting with National Grid regularly since the Ruling was issued. Early in this process the utility said that it wished to request an 80% down payment initially from applicants owing money under prior broken minimum DPAs, and OCS informed the utility that this was inappropriate and should not be done. However, as PULP’s subsequent submissions have shown, OCS’s instructions were not initially followed. We find the utility’s failure to follow those instructions inexplicable given the language of our Ruling.

The Commission adhered to its prior decision that it could declare applicants for service ineligible for a payment agreement if they had broken an agreement regarding service to a prior account:

It is only applicants who have arrears and have previously defaulted on a minimum DPA that are not eligible for DPAs. These applicants that have not adhered to a minimum DPA should not be given the same terms available to an applicant who owes the utility arrears, but has not broken a minimum DPA.

This added condition for a deferred payment plan with a down payment limited by the statutory maximum -- 50% of arrears or three months' bills, whichever is less -- of course, is an invention of the PSC and is not in the statute. The statute imposes a duty on the utility to provide service to any customer with arrears who agrees to a payment plan; it has no added restriction on eligibility of those who broke a payment plan during a period of service to a prior account. The down payment maximums have no exception, they are intended to limit utility and PSC power to extract large sums through denial of service.

It is now up to the courts, the Legislature, or a future Commission to rectify this situation which allows utilities to deny service with the blessing of the PSC, imposing economic demands for payment plan down payments that exceed the statutory limits intended to advance the enlightened universal service values embraced by the Legislature when HEFPA was enacted.

NYISO Needs State "Visitation"

We have observed from time to time that New York State, and in particular, the Public Service Commission, should exercise some oversight power over the NYISO, a New York not for profit organization operating as a wholesale electric utility, even though the rates set in its spot markets are under federal jurisdiction. See, e.g., FERC, NYISO and PSC Watched While NYISO Gamers Looted Consumers, PULP Network, August 21, 2008; NYISO Costs Skyrocket, Benefits Questioned, PULP Network, September 26, 2006.

Recently the New York Assembly committees that oversee energy utilities, corporations, authorities and commissions held joint hearings on the NYISO. See Assembly Committees Hold Hearing to Discuss NYISO Practices and High Electric Prices. Evidence was received from McCullough Research pointing to high bidding that seemed unlikely to be based on sellers' marginal production costs, as spot market and competition advocates theorize. See McCullough Research, “New York Independent System Operators Market-Clearing Price Auction Is Too Expensive for New York”, and New Yorkers Lost $2.2 Billion Because of NYISO Practices: The Debate Continues.

NYISO refused to provide information requested by the committees regarding the identity and anomalous bids of sellers in its electricity spot markets. The NYISO claims its internal rules, which have been approved by FERC, require secrecy about recent bids and complete "masking" of the identity of who, for example, regularly submits bids at the market maximum of $1,000/MWH, or who submitted more than 585,000 bids above $900/MWH from September 2007 to August 2008. See Data Discredits NYISO and PSC Defense of Spot Market Rate Demands; 12% of Bids Exceed $900, PULP Network March 31, 2009; and More Questions for the NYISO, PULP Network, April 9, 2009.

A Supreme Court decision issued this week in the context of state examination of federally chartered national banks, Cuomo v. Clearing House Association, L.L.C., contains an interesting historical discussion of the power of states to look into corporation matters, including those of federally regulated companies:

In 2005, Eliot Spitzer, Attorney General for the State of New York, sent letters to several national banks making a request “in lieu of subpoena” that they provide certain non-public information about their lending practices. ****

Historically, the sovereign’s right of visitation over corporations paralleled the right of the church to supervise its institutions and the right of the founder of a charitable institution “to see that [his] property [was] rightly employed,” 1 W. Blackstone, Commentaries on the Laws of England 469 (1765). By extension of this principle, “[t]he king [was] by law the visitor of all civil corporations,” ibid. A visitor could inspect and control the visited institution at will. ****

A State was the “visitor” of all companies incorporated in the State, simply by virtue of the State’s role as sovereign: The “legislature is the visitor of all corporations founded by it.” Guthrie v. Harkness, 199 U. S. 148, 157 (1905) (internal quotation marks omitted).

This relationship between sovereign and corporation was understood to allow the States to use prerogative writs—such as mandamus and quo warranto—to exercise control “whenever a corporation [wa]s abusing the power given it, or, . . . or acting adversely to the public, or creating a nuisance.” H. Wilgus, Private Corporations, in 8American Law and Procedure §157, pp. 224–225 (1910). State visitorial commissions were authorized to “exercise a general supervision” over companies in the State. I. Wormser, Private Corporations §80, pp. 100, 101, in 4 Modern American Law (1921).****

[fn] As Justice Story’s opinion in Dartmouth College stated, visitors of charitable corporations had “power . . . to correct all irregularities and abuses,”4 Wheat., at 673, which would surely include operations in violation of law. But whether or not visitors of charitable corporations had law-enforcement powers, the powers that they did possess demonstrate that visitation is different from ordinary law enforcement.

The Supreme Court upheld the information request from the New York Attorney General -- even though federal law prohibits and preempts states from exercising any "visitorial" oversight of national banks -- because his request was not for visitorial information, but for state law enforcement purposes.

The Supreme Court's decision is a reminder that there is no real barrier to New York State exercising "visitorial" powers over the NYISO to obtain information witheld from the public that would aid in ascertaining whether the NYISO is acting in the public interest for the people of the State. Unlike the national bank case discussed above, there is no federal statutory bar to prevent New York State from exercising its visitorial powers over the NYISO, as a New York not for profit organization. This inquiry could be conducted by legislative committees, by the PSC, (if it posessed the requisite curiosity and fortitude), or by the Attorney General. Also, based on results of its investigation, the legislature could find it in the public interest to reorganize the NYISO, which has a self-perpetuating board and a structure tilted toward producers and sellers. For example, after the spot market manipulation in California, the California ISO was made public benefit corporation, with its board directors appointed by the Governor, and confirmed by the state senate. See NYISO Governance, PULP Network, June 18, 2008.

Also, if NYISO persists in its refusal to release information to the state legislators about anomalous rates demanded by sellers in its markets, it could frame for judicial review the issue whether such secrecy is contrary to the Federal Power Act, which requires sellers to file all rates and rate changes publicly, and in advance of changes. FERC approved NYISO rules that

• allow hourly unfiled changes
• allow sellers to charging multiple and wildly varying rates for power made the same hour from the same power plant,
  
• mask the identities of sellers to whom FERC gives so called "market-based rate" permission and delay for months the release of masked data.
  

This system of secret, unfiled and unreviewable wholesale electric rates invented by FERC/NYISO has not been upheld by the Supreme Court. Indeed, last year the Court took pains to note it was not upholding or ratifying FERC's rationale for "market-based rates," calling it "metaphysical." See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered, PULP Network June 26, 2008. See also, May the FERC Rely on Markets to Set Electric Rates?

NY Rolls out 511 Service with Travel and Transit Data; Not All Phones Can Access the Service

With a Press Release on June 19th, Governor David Paterson announced the launch of 511 service throughout New York State . According to the announcement, 511 is a “free and comprehensive service” which provides near real-time “information about traffic incidents, roadway conditions, congestion, work zones, weather, and planned events” and is designed to benefit commuters, long distance travelers, and tourists. The service was launched last year in the New York City area, but reportedly is now available statewide 24 hours a day, seven days a week. While there is no charge to access 511, calling 511 from a landline phone will cost the same as making a local call and if a cell phone is used, airtime and roaming charges may apply.

What the Press Release failed to detail is that calls from Voice over Internet Protocol, or VoIP, providers will not work unless the company provides location address information so the system knows where the call originates. Also, customers of traditional telephone companies may not be able to reach 511 if the company has not performed the required translations in their switch (converting the three digit 5-1-1 number to a local seven digit telephone number).

Essentially, the 511 system automatically detects a landline caller’s location from where the call to 511 is placed (using the exchange or NXX code of the phone number – 518-NXX-1234) and a wireless caller’s location from the communications tower to which his or her cellular phone is connected. The system then routes the call to relevant travel information for their local region. There are nine regions in the state: New York City, Long Island, Hudson Valley/Catskill, Capital Region/Albany/Saratoga, Adirondack/Watertown/Plattsburgh, Central/Syracuse/Utica, Finger Lakes/Rochester, Southern Tier/Hornell/Elmira/Binghamton, and Niagara/Buffalo. If a caller seeks information from a different region, toll-free numbers are also available.

According to the 511 New York website, information on the following topics can be found by dialing 511:

* Emergency alerts about major transportation problems

* Traffic conditions, camera images, speeds

* Work zones and construction reports

* Border-crossing conditions

* Transit conditions

* Weather conditions and forecasts

* Transit trip-planning (door to door)

* Transit services

* Intercity bus and rail services

* Paratransit services

* Carpools and vanpools

* Park-and-ride lot locations

* Airports and airport access services

* Ferries, tunnels, and bridges

* Commercial vehicle information

* Bicycling

* Toll information

* Weather condition

Generally, alerts are updated every minute, or even sooner. Alerts will also be made available on the 511 New York website as well, .

According to the Governor, the federally funded service will cost approximately $2.5 million annually to operate and maintain. All states are required to have a 511 system in place by 2010 and 34 states are already in compliance. However, with so many New Yorkers receiving service from providers that may not have technical compatibility with the 511 service, the state may not truly be in compliance yet.

Lou Manuta

Stimulus Funds for New York Can Be Used for Utility Assistance to Prevent Homelessness

HUD recently announced that it has allocated new economic stimulus funds to New York for prevention of homelessness, including assistance to individuals in paying utility bills when that is related to current or potential homelessness.

According to the Notice regarding the Homelessness Prevention and Rapid Re-Housing Program:

The funds under this program are intended to target two populations of persons facing housing instability: 1) individuals and families who are currently in housing but are at risk of becoming homeless and need temporary rent or utility assistance to prevent them from becoming homeless or assistance to move to another unit (prevention), and 2) individuals and families who are experiencing homelessness (residing in emergency or transitional shelters or on the street) and need temporary assistance in order to obtain housing and retain it (rapid re-housing).

Low income households are often in a situation where due to a utility shutoff, relocation is necessary, and persons in homeless shelters are sometimes stymied in securing an apartment because the landlord insists upon the tenant having a utility account that has been refused by the utility due to claimed arrears. Under the HUD program,

Financial assistance is limited to the following activities: short-term rental assistance, medium-term rental assistance, security deposits, utility deposits, utility payments, moving cost assistance, and motel and hotel vouchers. Grantees and subgrantees must not make payments directly to program participants, but only to third parties, such as landlords or utility companies.

The amount of assistance available is considerable:

HPRP funds may be used for up to 18 months of utility payments, including up to 6 months of utility payments in arrears, for each program participant, provided that the program participant or a member of his/her household has an account in his/her name with a utility company or proof of responsibility to make utility payments, such as cancelled checks or receipts in his/her name from a utility company.

The allocation of funds to grantees in New York State is as follows:

NY NY State Program $25,527,382
NY Albany $1,523,772
NY Babylon Town $526,925
NY Binghamton $955,655
NY Buffalo $6,594,081
NY Dutchess County $654,862
NY Elmira $560,951
NY Erie County $1,209,200
NY Islip Town $840,437
NY Jamestown $573,517
NY Monroe County $789,300
NY Mount Vernon $745,701
NY Nassau County $6,458,352
NY New Rochelle $686,935
NY New York $73,929,729
NY Niagara Falls $1,037,411
NY Onondaga County $897,454
NY Orange County $713,117
NY Rochester $3,954,235
NY Rockland County $860,643
NY Schenectady $1,048,938
NY Suffolk County $1,511,657
NY Syracuse $2,524,997
NY Tonawanda Town $772,574
NY Troy $845,286
NY Union Town $578,661
NY Utica $1,192,417
NY Westchester County $2,373,791
NY Yonkers $1,533,003

PSC Signals Shift in Landlord Subsidies to Implement Submetering

Background
Pressure from tenants led the PSC in 1950 to ban residential submetering, see Resale of Power in City Is Curbed. It was reintroduced in 1978 for cooperatives and condominiums whose owners request submetering, and was expanded to rental housing in 1979. Little submetering of rental housing occurred until the Pataki administration years, when conversion to submetering was promoted through coordinated action of several agencies.

• NYSERDA subsidies paid for submeters, installation, and landlord consultants,
  
• DHCR rent reduction formulas were tilted to benefit landlords financially when they submeter,
  
• PSC approved utility rate structures that encourage submetering, and
  
• scores of building-specific PSC orders waived the prohibition against submetering and winked at landlord efforts to circumvent HEFPA and the PSC role in deciding customer disputes
  

While giving routine lip service to consumer protection in its submetering orders, the PSC actually allowed submetering landlords, in practice,

• to avoid providing the safeguards of the Home Energy Fair Practices Act,
  
• to deem electric charges to be rent and to evict tenants for unpaid utility charges,
• to ignore complaints or divert them away from the PSC administrative complaint determination process,
• to avoid compliance with rate calculation requirements,
  
• to violate price caps, and
  
• to provide service without tariffs and without tenant agreement to terms and conditions of service consistent with PSC orders.

Last year, PSC staff testified in favor of extending submetering further, to more than 600,000 additional tenants in Con Edison territory.

Previously we noted how System Benefit Charge (SBC) revenue collected under PSC orders from electric customers to promote energy efficiency is being used, in the name of helping low income customers, to subsidize landlords, cause economic hardship to tenants, and foster displacement of low-income households from subsidized and rent stabilized apartments. See, e.g.,

• PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights,
  
• Submetering Challenged at Claremont Gardens in Ossining,
  
• PSC Order Allowed Landlord to Shift Million Dollar Electric Bill to Low Income Tenants;
• Submetering Slowed at Roosevelt Island.

The PSC is key to submetering, because no submetering occurs without a PSC order allowing it, and because the PSC (not the Legislature) effectively appropriates how NYSERDA spends hundreds of millions of SBC dollars.

The EEPS Proceeding
A marathon, multi-track generic proceeding is underway at the PSC which affects how NYSERDA should spend SBC funds known as the Energy Efficiency Portfolio Standard (EEPS) proceeding. Due to its limited resources, PULP has not been participating actively in the proceeding, which entails extensive and time-consuming conferences, collaborative work groups, and comment processes.

A recent order in the EEPS case suggests that the PSC is beginning to modify its policies.

NYSERDA's Initial Proposal for More Subsidies to Landlords who Install Submeters
The Commission issued an Order on June 24 signalling a slight shift in its promotion of residential submetering. It recounts how NYSERDA initially proposed to increase subsidies to landlords to underwrite the cost of installing submeters, and master meters that will facilitate implementation of real time electric pricing passed through to captive tenants by landlords acting in the role of a monopoly utility.

The submeter rebate would be $500 for low income units and $250 for market rate units. The advanced master meter rebate would be $2,000 for low income buildings and $1,000 for market-rate buildings.

This "advanced metering" and submetering scenario creates the technical capability to introduce "real time" pricing, exposing retail customers to volatile and unpredictably spiking prices of the NYISO. This amounts to reckless human experimentation when it involves households lacking the savings or income to buffer the price spikes. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers; New York Residential Real Time Pricing Experiments Must be Voluntary. Widespread deployment of "smart meters" has been challenged as not being cost effective. See AARP Opposes PEPCO Plan for Spending on "Smart Meters".

NYSERDA's Modified Proposal for Submetering
Earlier this year, the PSC issued stays of submetering implementation in buildings where landlords were shifting costs for electric heating to tenants. Also, tenants in other buildings petitioned to vacate PSC orders allowing submetering, some involving electricity for heat, see Submetering Slowed at Roosevelt Island, and Yonkers Tenants Ask PSC to Halt Submetering at Riverview Towers, and others involve non heat related electricity, see Parker Towers Residents Petition PSC to Vacate Prior Submetering Order, and Hazel Towers Tenants Ask PSC to Act on Submetering Complaints.

According to the PSC Order, NYSERDA modified its proposal last month:

On May 19, 2009, NYSERDA filed an update to its original proposal. The update places more emphasis on market rate buildings, including condominiums and cooperatives. NYSERDA now proposes that electrically-heated, low-income buildings that are rent stabilized, rent controlled, or regulated by state or local agencies, might require the installation of two submeters in each dwelling unit – one for electric needs and another for heat. The installation of two separate meters would allow the low-income resident to continue to have their heat included in the rent, while the tenants would assume responsibility for their individual non-heating electricity usage.

This would still allow NYSERDA to subsidize submetering of electric heat in buildings with market rate tenants.

The two-meter situation, i.e., not submetering the heat, is the model implemented by Starrett Corporation at Claremont Gardens, in Ossining. This system still causes major hardship and displacement of Section 8 tenants whose utility allowances were insufficient to meet the new cost of electricity added to their rent. See Submetering Challenged at Claremont Gardens in Ossining, which contains a link to the tenant's petition. Tenant leaders say that many Section 8 tenants were driven out since submetering began. Once a subsidized tenant is evicted at Claremont Gardens, the unregulated premises can be rented at higher market rate rents.

Claims of Energy Savings Questioned
In scoring applications for SBC funds, NYSERDA evaluates the cost benefit of energy savings due to investment in energy efficiency measures. A premise of submetering proponents is that huge energy savings would occur if , instead of the landlord, the tenants pay the electric bills. This estimate of savings justifies the installation subsidies, and DHCR bases its schedule of paltry rent reductions upon, inter alia, an assumption of large usage reductions with the advent of submetering. See PULP Analyzes DHCR Submetering Rent Adjustments.

The PSC has finally begun to look beyond the claims of interested submetering applicants to check out the claims of large savings:

NYSERDA’s proposed program (both the original and updated versions) claims an annual energy savings of 20% or more due to behavioral changes alone, based on the installation and implementation of submeters in master metered buildings.
****
NYSERDA’s claims of 20% energy savings, strictly as a result of the installation of submetering (in the absence of further steps to reduce energy usage), appear overly optimistic. The Electric Power Research Institute (EPRI) cites studies examining the effect on customer behavior of obtaining better information on their energy usage. These studies show decreases in electric usage of between 5 and 15%. [footnote omitted] For the purpose of modeling expected energy savings, Staff assumed an energy savings rate of 8%, achieved strictly as a result of better information available to customers, and a payment obligation, as to their energy usage as a result of the installation of individual metering.

The PSC said to use an 8% savings estimate pending further evaluation:

In its program evaluation efforts, going forward, NYSERDA needs to establish more detailed requirements and specifications for examining the effects of the introduction of submeters on tenants' energy use than those that were required under the previously offered Comprehensive Energy Management Program (administered by NYSERDA) so that the energy savings relating to behavioral change, in the absence of other factors, can be isolated.

It is evident that there has been no real effort of the PSC or NYSERDA to arrive at an independent research based estimate of energy savings fairly attributable to changed tenant behavior despite a massive rollout of submetering and a decade or more of experience. NYSERDA has already begun using the reduced 8% estimate of savings due to changed tenant behavior. See PULP Analyzes DHCR Submetering Rent Adjustments.

Meanwhile, exaggerated claims of large savings are still relied upon by DHCR in its rent reduction schedules and by PSC staff in advocating even more submetering. Every time a rent stabilized tenant is submetered, and receives a rent reduction of about $30 and an electric bill that is a multiple of that, landlords are enriched and tenants are harmed.

A Submetering Subsidy Slowdown Pending Further Action
The PSC announced that it would not approve SBC funds for submetering subsidies to owners, except in market rate buildings, cooperatives, and condominiums, pending resolution of pending cases which challenge submetering orders and pending the outcome of its generic case considering revision of submetering regulations.

Another factor that will affect the size of the program involves the low-income segment of the multifamily market sector. As a result of our role in approving submetering plans within New York State, we are aware of concerns that have arisen in conjunction with installation of submetering in buildings with low-income residents. At the time of this order, rehearing petitions are pending before the Commission and original orders approving submetering are stayed. The concerns raised are building-specific and will be addressed by the Commission. General concerns raised on the topic of submetering in the low-income sector are being addressed through a collaborative effort to update the Commission’s submetering rules and regulations. Until the pending rehearing petitions are decided and until the collaborative effort to revise the regulations is completed, we will limit participation in the new Master-Metered Multifamily Buildings Program to market-rate rental buildings, cooperatives, and condominiums. These are market segments that could greatly benefit from this program.

The generic case to review and "update" submetering regulations was initiated not to protect tenants but at the behest of submetering proponents for further streamlining" of the requirements and the process for landlords to engage in submetering. The initial draft rules would have eliminated the landlords' need for a PSC order (which carries with it the theoretical potential of fines under Public Service Law section 25 if it is violated) and would eliminate all utility tariff prohibitions on retail resale of utility service. This could allowing landlords to submeter without notifying the utility or the PSC, and perhaps allow resale of electric service even without submeters, by allocating charges based on square footage or apartment size. Landlords sought complete deregulation of the maximum prices they can charge to their captive tenants. See Submetering Landlords Clamor for More PSC Deregulation of Electric Service; PULP Files Comments on PSC Proposal to Relax Submetering Rules; Bronx Tenant Association Objects to PSC Staff Proposal to "Streamline" Electric Submetering Rules.

Conclusion
The PSC submetering policies and practices have begun to draw the attention of the press and the Legislature due to their harsh impact on many tenants. This new attention includes several submetering bills introduced in the Legislature, including ones that would put a moratorium on any new submetering pending a thorough report to the Legislature from the PSC on the submetering that has been allowed to date. See Assembly Bill A. 7814 and the identical Senate Bill S. 5009.

The purpose of these bills is

To require the Public Service Commission to perform an audit regarding submetering orders it has issued in the last five years to determine compliance by building owners of utility price caps and tenant protection provisions, and to determine if submetering has resulted in energy savings in those buildings. The Commission will have twelve months to complete the audit and make a report to the legislature and until that time no new submetering orders may be approved.

The temporary slowdown of the PSC's submetering juggernaut, while welcome news, needs to be seen in this context.

FERC's Advice: Avoid Our Deregulated ISO/RTO Spot Markets

We have previously noted FERC's refusal to scrutinize the rates set in the dysfunctional spot markets it fostered and approved for wholesale electricity trading. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets. FERC again has rebuffed another plea to take a closer look.

Senator Barbara Mikulski of Maryland recently asked FERC to respond to the request of the Campaign for Fair Electric Rates "to undertake an investigation of whether the rates produced in these RTO-run markets meet the just and reasonable standard." Maryland has been ravaged by higher electricity prices since allowing utilities to sell their power plants (as did New York). This ended state control over prices charged for the production of energy, and created a huge dependency on power now purchased in wholesale markets, from sellers who have been allowed by FERC to sell at whatever price the market will bear.

FERC responded with a defense of its market rate regime and a suggestion:

Finally, as you are also aware, jurisdiction over electricity prices is both a federal and state/local issue. While this Commission has jurisdiction over RTOs and ISOs, participation by utilities in these markets is on a a voluntary basis. Federal regulations do not require anyone to make purchases from any RTO or ISO, including PJM. Many entities generate most of their own electricity or purchase it through long-term contracts and make only limited purchases through RTO or ISO spot markets. And, while these organized wholesale markets are subject to this Commission's jurisdiction, state and local regulators have jurisdiction over retail distributor procurement policies. Those policies affect the prices that utility retail customers pay.

FERC's glib remedy for those unhappy with ISO/RTO spot market prices is simple: states can tell their utilities to stop buying at the RTO/ISO spot market convenience stores and make more long-term purchases. It is consistent with what FERC said some years ago, during the California spot market manipulation, to the effect that prudent retail utilities would arrange to buy most of the energy needed by their retail customers in long term wholesale contract arrangements, and would only buy 10% or so from the spot markets.

A 2005 report indicates that about 55% of the energy in New York is purchased in the NYISO spot markets. It is possible that much of the power sold under bilateral long term contracts has price adjustment factors which link the contract price to the spot market prices.

It is not responsible for FERC just to say buyers should purchase elsewhere. Sellers with "market-based rates" are also allowed by FERC to set their own prices for their long term sales contracts, which FERC requires to be unfiled and refuses to review for reasonableness. Obviously, the sellers are informed by their predictions of what they will receive at the ISO/RTO spot markets, and so they will tend to raise their long term rates accordingly. Some long term contracts are indexed to electricity spot market prices with a premium added.

It is also not a satisfactory answer for FERC to rely on states or local utilities to discipline the high rates of wholesale sellers by threatening to buy electricity in other markets -- from the same sellers functionally deregulated by FERC. FERC cannot avoid or subdelegate its statutory duties under the Federal Power Act, which establishes a filed rate regulation system with rates actively overseen by FERC.

Relying on local distribution utilities to buy wisely and benefit their customers has not worked. If, as in New York, the retail utilities are allowed by state regulators to pass through all wholesale purchased power costs, they will have little incentive to fight high ISO/RTO prices and market power on behalf of their consumers. Also, if they have holding company energy trading affiliates, for example, Con Edison Energy and Con Edison Solutions, whose business plans rely on the RTO/ISO spot market system, the local utilities may not wish to change the status quo.

FERC is simply trying to evade its duties under the Federal Power Act, which requires all rates demanded and charged to be just and reasonable. That includes all rates set at the ISO/RTO.
As the Supreme Court has stated, "the prevailing price in the marketplace cannot be the final measure of "just and reasonable" rates mandated by the Act **** the Act makes unlawful all rates which are not just and reasonable, and does not say a little unlawfulness is permitted. " FPC v Texaco, 417 U.S. 380 (1974).

As a matter of law, it is not an acceptable solution for FERC to do nothing to correct the RTO/ISO rates and tell the public, states, and local utilities to make their own power or buy it elsewhere. See Supreme Court Leaves Fundamental Questions About FERC Market Rate Scheme Unanswered. Under the circumstances, however, it may not be a bad idea to secure more energy from sources less affected by the spot markets.

Millions of RGGI "Cap and Trade" Auction Proceeds Unspent Due to Legal Challenge

In a prior PULP Network blog post, we discussed the pending legal challenge to the Regional Greenhouse Gas Initiative (RGGI) program now being implemented by New York and nine other states in an effort to reduce CO2 emissions from power plants, in advance of any national program.

New York is the only state where a Governor, through executive action and action through a agency and a state authority (DEC and NYSERDA), attempted to implement RGGI without specific enabling legislation. As a result, NYSERDA is receiving substantial auction revenue from the sale of allowances and allocation of the revenue -- $128 million to date -- is underway without any specific enabling legislation or budget appropriation.

As with any "cap and trade" program to reduce C02 emissions, the RGGI program is raising electric rates for all electricity sold at spot market rates in New York, even that which is produced with wind, water, or nuclear rather than by burning fossil fuels like natural gas or oil. See

• "Cap and Trade" Market System for CO2 Reduction Likely to Raise New York Electricity Prices, and
  
• CO2 Cap and Trade Programs Inflate Electric Rates in Restructured States.

Also, all sellers offering to enter into long term bilateral contracts are likely to consider what they could receive in the spot markets, even if they are non fossil producers whose own costs do not rise. Litigation was commenced by a power producer with a long term contract who could not raise its prices to the buyer due to the added cost of allowances it is now required to buy under the DEC RGGI regulations.

The Petition and Complaint in the court proceeding contends, inter alia, that the Governor, DEC, NYSERDA and the PSC acted beyond the authority delegated to them by the Legislature, and that RGGI is an interstate compact not approved by Congress.

As a result of the court case and uncertainty over legal authority to operate the program, the $128 million received to date in new revenue from the auctions of CO2 allowances is not being spent by NYSERDA. See Brian Nearing, Energy Efficiency Pool Hits $128m - Lawsuit from Corinth Operator Bars State from Spending Funds, Albany Times Union, June 20, 2009.

PULP recommends -- without success to date -- that a significant portion of revenue from the sale of RGGI allowances be specifically allocated to provide energy efficiency measures to help low-income customers reduce their rising energy bills.

Low-income households typically live in older, less efficient housing with older heating systems, controls, appliances, and energy consuming fixtures. Due to their lack of income and savings, there is a chronic market failure because they cannot afford the initial cost of investments in energy efficiency measures that will reduce usage and bills over time. Thus, providing assistance to low-income households may have significant payoffs in terms of reduced energy usage and improved living standards with less distortion of markets in which affluent customers can make cost effective energy efficiency investments without the need for subsidy. See PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs, PULP Network, January 7, 2008.

See also, NYSERDA Concept Paper - Operating Plan for Investments in New York under the CO2 Budget Trading Program and the CO2 Allowance Auction Program, which contains a brief mention of low-income energy assistance as a possible use of RGGI revenue, but there is no quantification or any proposed allocation for the purpose.

PSC Didn't Provide Complete Explanation When it Ended its 315 Area Code Proceeding

As we noted earlier this week, the New York State Public Service Commission (“PSC”) formally decided to put on hold its proceeding to add a new area code in the 315 region of central New York State. The PSC press release announcing the good news claims the reason the need additional numbering resources has dropped, causing the PSC to end its plans to add an overlay area code in the region, is “primarily due to the slowing of the economy.”

While there is certainly no argument that the current “Great Recession” is causing significant economic harm across the state, PULP does not agree with the PSC that this is the primary reason for the drop in telephone exchange code demand. Rather, it was the Commission belatedly ending its ill-advised procedure to dole out multiple 10,000 telephone number exchange codes (also known as NXX codes) to multiple providers in very rural communities.

When the PSC submitted its request to the FCC in August 2005 to expand "thousands block" pooling – that is, assigning numbering resources 1,000 at a time instead of 10,000 at a time – outside the state’s major population centers, the PSC did not signal the urgency of the need and did not request expedited treatment to stem the pending numbering crisis . While it did take the FCC over a year to grant the request, the PSC sat for an additional four months prior to implementing its new authority. During this brief time period alone, (November 2006 to March 2007), 10 new 10,000 telephone number NXX codes were assigned (19 requested, nine returned), representing 100,000 telephone numbers stranded in rural areas that did not need them.

Let’s look at more numbers: Between December 2004 and December 2007, a total of 40 NXX codes were assigned in the 315 area code, averaging between 13 and 14 codes a year. The big drop off occurred beginning in October 2007, when a net of only two NXX codes were assigned in total until July 2008 (six requested, four returned). Since then, only four NXX codes have been requested through May 2009 and three have been returned. As a result, since October 2007, a net of three NXX codes have been assigned in the 315 area code, far short of the levels hit in 2005, 2006, and 2007.

However, in order to recognize this fact, the Commission would be placed in a position to admit that the reduction in NXX code demand began when it implemented thousands block pooling. However, that admission would raise questions as to why the Commission was handing out 10,000 numbers at a time (and multiple times) to over 50 rural communities in central New York, each of which has only a thousand or two living there.

On top of this, despite souring economic conditions, demand for telephone numbers continues in other regions of the state, including New York City, where the recession has hit hard. Since the beginning of the year, 19 new NXX codes have been put in place in the city.

PULP is pleased that the PSC has rectified its numbering allocation procedures, which has caused it to avoid forcing over a million people to change their telephone number and change their dialing patterns for reasons which were completely avoidable. However, don’t blame the recession for the drop in NXX code demand. The credit for forstalling the new area code goes to the PSC's new number conservation policies, no matter how tardy they may have been in coming into play.

Lou Manuta

AARP Opposes PEPCO Plan for Spending on "Smart Meters"

Spending billions on "smart meters" seems to be really in vogue in states where utilities sold their power plants, failed to make money in their Enron-like holding companies, and now have no safe place to sink investment for a regulated return. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers.

Recently the electric utility serving the Washington D.C. area, PEPCO, proposed to roll out "smart meters" with large amounts of spending that would be underwritten in part by consumers through higher utility rates and in part by taxpayers through the use of federal ARRA stimulus funds.

The invocation of high tech and environmentalism sounds keen and green.

But on closer examination, testimony submitted today by AARP's expert witness, Barbara R. Alexander, shows that the "smart meter" proposal simply is not cost effective.

Update
See the Comments and Reply Comments of NASUCA to U.S. Department of Energy requests for information regarding "Smart Grid" initiatives. In their Reply Comments, NASUCA stated:

"First, the consumers are the ultimate owners of their energy consumption data. The establishment of privacy protections for personal energy information is critical, and the issue must be resolved in favor of the highest degree of consumer protection.

Second, consumers should have the choice to participate in any advanced metering program or in any dynamic pricing schedule that may involve data sharing arrangements.

Third, there are unique differences among electric consumers that must be considered for any Smart Grid deployment.

Fourth, investments made in Smart Grid technologies must be supported by a detailed cost-benefit analysis and subject to evidentiary proceedings and prudence review before costs are passed on to utility consumers."

PSC’s Market Ideology Clashes with Goals of Affordable Universal Broadband Service

Last week, PULP reported on the comments filed at the FCC regarding the development of a national universal broadband policy. See PSC to FCC: We Oppose Measures to Effectuate Universal Affordable Broadband Service. The New York State Public Service Commission (“PSC”), in conjunction with the state’s Chief Information Officer, submitted comments which in essence argue for continued reliance on failing market-based policies, policies which exacerbate the digital divide and have left millions of households without broadband. A review of other comments filed with the FCC reveals that New York is behind the times and out of step with every other state that submitted comments.

As we reported, the PSC comments did not directly voice support the goal of affordable, universal broadband, grudgingly acknowledged that the FCC has been tasked to address the problems, and then endorsed a lack of government involvement in broadband deployment:

“The [Federal Communications] Commission has been directed to develop a plan, but it may reasonably question the use to which the plan is to be put. The underlying assumption seems to be that the market is not providing the appropriate level of broadband service and that government should reallocate resources so there is more broadband. More broadband means less of something else and it isn't clear that people want to consume less of that commodity and more broadband. Indeed, given that the market is free, just the opposite is true.”

Essentially, the PSC seems to be saying that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market” - which in most localities is a duopoly of landline and cable providers. Such blind faith in the market, however, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. The PSC even questioned the need to bring broadband to every citizen today:

A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.

This is a familiar refrain to defend market power of existing providers: someday the market will bring providers with a new technology that magically would bring affordable service to unserved or underserved areas, so therefore regulators and government should do nothing.

Groups that provided comments similar to those of the PSC were free-market think tanks, such as Americans for Prosperity, FreedomWorks Foundation, and Americans for Tax Reform (ATR). ATR, founded by anti-tax radical Grover Norquist. The PSC’s positions closely resonate with the comments of ATR, which glossed over the market failure and reduced competitive position of the United States in comparison to other countries, and wrote:

We are on the right track; the free market is working. Consumers are enjoying an ever-expanding array of choices and performance. . . . In order for free-market models to provide for the further development of broadband access, however, it is absolutely critical that government intrusion not prevent private capital from recouping its investment. If private capital becomes convinced that its ability to recoup its investments is less likely, it will be less likely to make the significant investments in broadband that is the very goal of this FCC inquiry.”

Both the PSC and ATR take these “hands off” positions when it comes to the price and deployment decisions of the cable and phone company duopoly, even though

• millions of people who in theory have “access” to broadband cannot afford it,
  
• the U.S. has some of the world's slowest, most costly broadband (per megabit per second),
• the U.S. subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more affirmative broadband policies surge ahead.

See The Broadband News Is In, but it Isn't All Good. The myths spouted by the PSC and ATR about markets and competition are addressed in the comments of Consumers Union:

The disappearance of potential competitors through mergers, the domination of the in-region wireless market by the dominant incumbent local exchange carriers, and the failure of CLEC competition on the platform have left residential consumers with, at best, a cozy duopoly that dribbles out bandwidth at high prices. While the Commission should prioritize its efforts according to the extent of market failure – zero providers is a worse outcome than one and one is worse than two – it should not fool itself in to believing that the mere presence of two competitors is sufficient rivalry to ensure consumers will get the benefit of real competition. This is particularly true in urban areas, where low-income households have been priced out of the marketplace. There is nothing in economic theory or real world experience to suggest that two is enough for vigorous competition.

In contrast to the New York PSC, other states that submitted comments recognized reality: the marketplace is failing to provide universal affordable broadband and that more steps need to be taken if the United States is to keep up with countries that have a sound broadband policy and program. This is what they had to say:

The Michigan Public Service Commission (“MPSC”) hit many important notes in its comments , stating:

the FCC should develop a national broadband plan with the goal that all Americans have physical access to broadband service . . . at the location of their residence. While physical access alone does not imply that all Americans choose to adopt broadband service due to constraints like price, the FCC should not overlook this essential component. . . . The best solution would be to work toward an infrastructure that allows for broadband connections at reasonable prices at every residence, as well as robust broadband connections at free or further reduced prices available at community centers such as libraries. These two goals need not be mutually exclusive. While the national broadband plan will likely need to prioritize which of these types of projects to fund with public money, such as the money available under the [American Recovery and Reinvestment Act] ARRA, the FCC should ensure that the ultimate goal of the national broadband plan is true access for all Americans, including access through community centers and at their place of residence.
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While the MPSC believes that demand-side policies will help encourage competition, thereby reduce price for consumers, it cautions the FCC against simply ‘allowing market forces to work.’ Due to the largely deregulated environment for broadband technologies, the FCC should closely monitor the competitive marketplace for broadband in order to address any areas where the market fails to provide broadband services at reasonable prices and with reasonable privacy protection. In the cases where the market does not produce sufficient demand for broadband at reasonable prices, the national broadband plan should include recommendations for reforming the universal service fund in such a way that broadband services would be supported.

Similarly, the Vermont Public Service Board and the Vermont Department of Public Service wrote that the deployment of broadband needs to be supported by the Universal Service Fund, stating:

The Vermont Public Service Board and the Vermont Department of Public Service (“Vermont”) are of the view that our national communications and technology culture have evolved to the point where broadband has become an indispensable tool for how Americans obtain and disseminate information, and communicate with each other about that information. Furthermore, for rural states such as Vermont, broadband internet service is vital for efforts to promote job creation and to retain a modern and technologically literate workforce. For these reasons, it is imperative that a national broadband policy be implemented that facilitates the deployment of a robust, inclusive broadband infrastructure that reaches American communities large and small with rate and service parity and reliability. To this end, Vermont recommends that the Federal Communications Commission (“FCC” or the “Commission”): (1) adopt a technically robust definition for “high speed” broadband; and (2) treat the deployment of broadband as a service to be supported by the Universal Service Fund (“USF”).

Vermont favors creation of a separate Broadband Fund, as outlined in the Federal-State Joint Board Recommendation, which would be tasked with expanding broadband Internet services to unserved areas.

The New Jersey Department of the Public Advocate's Division of Rate Counsel made several recommendations in its comments, including expanding universal service support to include broadband services and to make broadband affordable for all citizens.

Absent such regulatory intervention, the United States may become a two-tiered society of disparate access to and use of broadband.

The California Public Utility Commission in its comments stressed the need for government involvement for a broadband universal service fund:

At the federal level, we do support a limited federal Lifeline/Link-up Pilot Program to provide computers and discounts for monthly Internet access service to low-income consumers as a way to gauge the costs of such a program. However, if the Commission or Congress decides to permanently add Internet access or broadband service to the definition of federal ‘universal service’, all broadband and Internet access providers should be required to contribute to the federal Universal Service Fund. The FCC should then expressly clarify state authority to seek contributions from all broadband providers and Internet access providers for their respective universal service programs.
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Another suggestion for funding of broadband would be for the FCC to explore universal service, at least initially, as a matter of ubiquitous availability of broadband infrastructure separate from universal subsidy of broadband service. If the broadband infrastructure is in place universally, then service plans and their costs can be approached relatively free of the costs associated with infrastructure deployment.

The Massachusetts Department of Telecommunications and Cable supports a broadband fund in its comments:

In response to the Commission’s queries with regard to universal service, the Joint Commenters affirm the [Massachusetts Department of Telecommunications and Cable] MDTC’s previous position that universal service support should be expanded to include broadband. Specifically, if the Commission were to incorporate broadband access into high-cost support, then it should establish a separate broadband fund for that purpose. In fact, the Commission should adopt the creation of a Broadband Fund comparable to that proposed by the Federal-State Joint Board on Universal Service.

The biggest telecom providers in New York support movement away from market-based solutions that have not worked. For example, Verizon in its comments stated its support for “policies that increase computer ownership, teach people how to use those computers and navigate the Internet, and demonstrate the relevance and benefits of broadband to their lives could go far in increasing broadband adoption.” Its preferred method to address affordability, however, was for refundable tax credits for low income families to help them afford broadband access. Time Warner Cable in its comments wrote that it:

encourages the use of federal funds to support broadband demand side programs, with a focus on outreach and education, subsidies for low-income consumers, and
programs that distribute laptops to low-income schools and families. Such initiatives are a core component of the broadband stimulus legislation, and figure prominently in the Rural Broadband Strategy. Even where broadband services are available from multiple providers, penetration remains relatively low in certain at-risk communities. Addressing that gap should be among the Commission’s highest priorities, facilitated by the process of obtaining improved information about the extent of that gap already underway, independent of this proceeding.

In sum, every state that submitted comments, consumer groups, and two of the largest voice and broadband providers in New York all recognized the need for a national policy and action to address the inadequate deployment and unaffordability of broadband. It is unfortunate that the New York PSC still has its head in the quicksand of the last century's market ideologies and continues to leave broadband deployment and pricing to the whims of the duopoly "marketplace" – despite the duopolies’ continuing failures to bring affordable broadband to all.

Lou Manuta