California ALJs Reject Utility Proposal for Pre-Pay Electric Meters with Remote Shutoff, Illustrating Important Role of Utility Consumer Advocates

On November 22, 2013, Administrative Law Judges (ALJs) for the California Public Utilities Commission (CAPUC) issued a Proposed Decision in a San Diego Gas & Electric (SDG&E) case rejecting the utility's proposal to install pre-pay meters as a "pilot" project.

Utility service is typically provided as a credit transaction, in that customer pays after the service is provided.  From time to time proposals are made to reverse that and make poorer customers pay in advance, and pay more.  See Rethinking Pre Paid Utility Service: Customers at Risk.  SDG&E's proposal, couched in benign terms that made it sound like a benefit to customers, would have allowed customers to "choose" to have a pre-pay meter after a shutoff or under threat of denial of essential service for nonpayment of old bills.   Once in the program, a customer's electric service would simply be remotely shut off if the pre-paid money balance ran out.  The utility claimed this was good for consumers because by pre-paying, they: (1) could avoid paying a security deposit; (2) did not have to pay off debt owed for prior service to obtain service or reconnect after a shutoff; and (3) hypothetical energy savings due to assumed closer monitoring of usage as the prepaid amount is used up.  The ALJs in their Proposed Decision at page 51 described how customers would lose service under the utility proposal:

Operationally, as proposed by SDG&E, a participating customer would be disconnected if his or her Prepay account balance drops below zero, and if at least one of the following conditions is met: 1) the customer’s balance has been below zero for four consecutive days; or 2) the customer’s balance is at or below -$20.00. If at least one of the above conditions is met, a remote disconnection would be scheduled for the next business day during normal business hours.

The National Consumer Law Center (NCLC), The Utility Reform Network (TURN), the Center for Accessible Technology and the Greenlining Institute intervened in the case and jointly opposed the "pilot" project.   They argued the "pilot" would be illegal under California law because pre-pay customers would not receive the 15-day advance notice of a termination required by California statute; that service could be shut off during an investigation of a complaint disputing the amount of charges for the pre-paid service; that customers may not receive proper notice of available low-income discount rate programs prior to termination; and that customers might not knowingly waive these rights.

On that last point, we note that under New York law some "voluntary agreements" utility customers are required to make a condition of avoiding shutoff or obtaining utility service may be voidable even if they are "knowingly" made because they are not truly voluntary due to economic duress.  See Fourth Department Finds Payment Agreement Signed Under Duress After Water Service was Shut Off.

Customers with money to obtain regular service would be quite unlikely to sign up for the prepaid service. The ALJs noted an intervenor comment that the SDG&E's proposed "‘prepay program’ is not designed for any customer who is not poor or cash-strapped.”

The California ALJs' Proposed Decision noted that the proposed remote termination process, involving short internet and phone notice to the customer rather than mailed notice, was not tailored to provide adequate notice prior to shutoff:

We also take note of Consumer Groups’ logical inference that, depending on the communications means chosen (e.g., text message, automated phone message, or e-mail), customers on the proposed Prepay Program might receive no advance notice of termination at all since customers who are behind on their electric bills may also behind on their internet or phone bills. We find that such an outcome is unacceptable.

The ALJs also faulted SDG&E because it had "not consulted with likely affected customers as it developed its proposal." In conclusion they flatly rejected the company's proposal for prepaid service with remote shutoffs: "We do not find SDG&E's proposed Prepay Program . . . in the public interest."

The ALJs' Proposed Decision in CPUC docket 11-10-002 is scheduled to be voted on by the full California Public Utilities Commission on December 19, 2013.

Consumer groups who intervened in the California proceeding and submitted testimony and written arguments against the utility's proposal deserve accolades for bringing to bear the facts and arguments that nipped the program in the bud.  It is a reality, however, that full participation in regulatory proceedings takes money, and that without vigorous consumer input, the decisonal process and resolution of issues in "stakeholder" negotiations becomes skewed toward the utilities and business groups who can afford to participate.

To address the need for diverse public participation, California has an Intervenor Compensation program which provides funding to enable non profit groups to intervene in Public Utilities Commission proceedings.  This enables them to hire experts to testify and develop more fully the record upon which regulatory decisions are made.  Current California PUC intervenor compensation rates for attorneys are based in part on what utilities pay their counsel, and range, depending on experience, from $160 per hour to $555 per hour, and for experts, from $135 per hour to $410 per hour.

In contrast, New York, with some of the highest utility rates in the country, which has inadequate low income rate structures, and whose utilities shut service off to approximately 300,000 customers a year who cannot afford it, does not have a functioning system to support sustained independent utility consumer advocacy.

• Though independent, the Utility Project lacks sustained, sufficient funding.  Unless extended, the Project's funding expires March 31, 2014.  
• The legacy NY CPB utility intervention unit now lodged at the Department of State lacks the requisite jurisdiction, independence and budget. 
• A bill to make the UIU more independent passed the Assembly in 2013 but was not passed by the Senate. See Assembly Passes Bill to Protect Overburdened Residential Utility Consumers
• UIU is not utilizing a million dollar a year appropriation of federal disgorgement funds, approved in October 2012, to advocate for consumers in matters affecting wholesale electric rates. 
• A bill to create a New York utility intervenor funding program passed the state Senate in 2010 but was not acted on by the Assembly prior to adjournment.

A 2013 Siena College poll conducted for AARP found strong support for strengthening utility consumer advocacy in New York.  See also, AARP Press Release, Consumer Groups ask NY Leaders for Better Utility Oversight, Stronger Consumer Protections, and More Resources for Independent Utility Consumer Advocacy.    

The June 2013 Final Report of the Governor's Moreland Commission on utilities recommends shoring up the system for ensuring utility consumer advocacy by independent groups at the Publid Service Commission.  See Moreland Commission Recommends Stronger Utility Consumer Advocacy.

Gerald A. Norlander


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Verizon Misses Service Quality Standards, Again

Today the New York Public Service Commission issued a report, received at its November 14 session, indicating that Verizon again missed major service quality targets.  Here is the conclusion of the Third Quarter 2013 Service Quality Report:

The Commission’s approval of Verizon’s revised SQIP in December 2010 established a new reporting paradigm for the company. The revised SQIP was intended to provide focus on repairs for Lifeline customers, special needs customers, or customers who do not have competitive wireline options. It eliminated reporting on certain service quality performance to more closely reflect the realities of competition by moving closer to comparable treatment for competing providers, thereby allowing the market to dictate service quality.
The company’s performance for network reliability, as measured by the companywide CTRR metric, missed the threshold for this metric every month in the third quarter of 2013 and the two-year trend continues to decline. . The company met the Commission’s two timeliness of repair metrics for core customers in each of five geographic areas during each month in the third quarter of this year, with the exception of the OOS>24 threshold being missed in the New York City area in July. The company’s repair service answer bureau missed the threshold for the call center answer time metric every month in the third quarter of 2013, however, the two-year trend is improving. Consumer complaints to the Department were slightly worse during the third quarter of 2013 as compared to one year earlier, despite having lost over 500,000 lines, over that same period. However, the two-year trend shows slight improvement. Staff meets monthly with the company concerning service quality and consumer complaints and will continue to monitor the company’s performance in these regards and report back to the Commission.

In the "Performance Regulation" style for oversight of utilities now in vogue at the Public Service Commission, regulators set a price or revenue limit and purport to measure results, not inputs.  This is thought to encourage the utilities to reduce expenses and keep the added profit from that without reducing their revenues, so long as they provide adequate service.  A failure to meet the criteria can result in financial sanctions.  Critical to this style is that enough of the right things are measured, and that it is not efficient for the utility to breach the standards.  It is becoming obvious that the potential adverse consequences to Verizon for missing the Commission's performance regulation targets are less than the cost of expending the funds and effort to satisfy the standards.

PSC Holds Off on Requiring New Code in the 315 Area Code Region

The New York State Public Service Commission today announced today it is putting on hold plans to create a new area code within the existing 315 area, which serves Syracuse, Utica, and large areas of the north central part of New York State.  The Commission Press Release indicates that a revised number exhaust date allows postponement of the change.  COMMISSION PUTS 315 AREA CODE CHANGES ON HOLD, — Revised Forecast Results in New Area Code Exhaust Date, November 14, 2013.  An order is expected to be issued later with a fuller explanation of the decision.

The revised number exhaust date was issued by Neustar, the North American Numbering Plan Administrator, (NANPA).  A spinoff of Lockheed Martin,

Neustar administrates the North American Numbering Plan, the authoritative directories that manage virtually all telephone area codes and numbers, and enables the routing of calls among thousands of competing Communications Service Providers (CSPs). All telecommunications service providers (TSPs) that offer telecommunications services to the public at large must access the Neustar clearinghouse to properly route virtually all of their customers’ calls. Also, Neustar provides clearinghouse services to emerging CSPs, including Internet service providers (ISPs), mobile network operators, cable television operators, and voice over Internet protocol (VoIP) service providers.

The company created and operates the Number Portability Administration Center (NPAC), which enables US and Canadian consumers to keep their phone number when they switch carriers. Each time a consumer attempts to transfer their number from one phone company to another, Neustar is involved.  In this role, "Neustar manages changes to telephone number routing information when subscribers change service from one local telephone service provider to another and keep their existing telephone number — whether the service is wireline, wireless, voice over IP (VoIP) or cable."

The Utility Project urged the PSC to adopt more aggressive number conservation measures to recover excess numbers stranded in rural areas to obviate the need for a new area code in the 315 region.  With Millions of Phone Numbers Still Unused in 315 Area Code Region, Utility Project Urges PSC Not to Add New Area Code Now, August 8, 2013.

Recent technological advances might make it possible to free up many numbers that are now seemingly tied up in rural areas of the 315 region within only lightly used NXX blocks of 10,000 numbers. For example, someday it may be possible to move a nearly empty and largely redundant NXX exchange from a rural area to an area where it is needed, and then forward or port the few numbers now used back to the rural area without requiring even those few customers to change their numbers.

The Commission previously decided to use a new three-digit overlay code for adding new phone numbers, and would require 10-digit dialing with either the existing 315 prefix or the new one. Today's decision will at least delay the cost and inconvenience of adding a new overlay code, and should give more time to explore more aggressive number conservation and potential reclamation measures.

Gerald A. Norlander


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Fire Kills 3 Boys After Con Ed Shut Power Off to Collect Unpaid Bill and Mom Used Candles

The importance of continued, safe electric service was tragically underscored again last night, when three young Bronx boys, ages 4 months, 2 years, and 5 years died in a fire apparently caused by a candle used for light.  According to a CBS news report,  "Con Edison confirmed that it had shut off power to the apartment due to non-payment. Neighbors said the mother of five who lived in the unit had been using the candles as an alternative to light the apartment. The power had only been off for a few days, Con Ed told CBS 2.

According to ABC News, "The mother had been approved for public assistance, and the lights were due to come back on Saturday."

According to a DNAinfo.com story, "A Con Edison spokesman said the apartment's electric meter had been removed and power shut off on Thursday. The electric bills had totaled $8,700 and had about $500 of late fees tacked on, a landlord told DNAinfo.com. He said the one-bedroom unit was still in Turner's grandmother's name..."

The Utility Project has repeatedly warned that utilities are being allowed by their regulator, the Public Service Commission, to have rates unaffordable to the poor, to reduce customer service to those in need, and to unduly rely on service interruption, as a bill collection tactic, instead of negotiation or assistance in obtaining public aid as a last resort.  See, e.g.,

• As Poverty Continues its Tight Grip on New York State, Utilities Increase Interruptions of Electric and Natural Gas Service to Collect Bills, April 2010,
•  No Electricity: Middletown Residents in Critical Condition from Lantern Fire,  October 19, 2008,
•    Candle Fires: A Symptom of "Rolling Blackouts" Affecting Low Income Households,  September 5, 2006.  
•  The Gas Company as Social Worker; Brooklyn Utility Tries Softer Approach to Pursue Unpaid Bills.

After Tropical Storm Irene raised awareness of the cost and danger of electric service interruptions due to storm blackouts, AARP issued a White Paper on the less noticed but no less dangerous and harmful deliberate service interruptions for collection purposes.  See The Quiet Blackout, New York’s Utility Termination Storm (2011).

After Hurricane Sandy resulted in electric service interruption to many thousands of customers, poor and nonpoor alike, a Moreland Commission was convened.  The Utility Project and AARP submitted a report questioning the deregulatory style of Public Service Commission, which relies on "performance regulation" to reward cost cutting, which has no performance standards for major storms, which maintains revenues at the same level even when service is off, and which defers for later recovery from customers all costs of major storms. As with major storms, utility revenues are unaffected by the 80,000 or so annual service terminations for collection purposes, due to the "revenue decoupling" mechanism promoted by environmentalists to guarantee the same utility revenues regardless of the amount actually used, and there is no performance "metric" to measure and discourage the interruption of service as a bill collection tactic.

In the recent Central Hudson/Fortis merger case, the Utility Project objected to approval of the merger and a rate plan extension without improvement of low-income rates and investigation of Central Hudson's practices regarding the interruption of service for bill collection purposes, submitting data showing that shutoffs have risen from 4,688 in 2005 to 13,687 in 2012, and that the percentage of customers shut off rose from 1.89% in 2005 to 5.99% in 2012.

In the Con Edison rate case now underway, the Utility Project is raising the issue of undue reliance on service interruption as a bill collection measure. See Utility Project Files Testimony in Con Edison Rate Case, Seeking Improved Low Income Rates, Reduced Service Interruption to Collect Bills, Improved Storm Cost Recovery Measures, June 2013.  See also, Testimony of Nancy Brockway, a former Commissioner of the New Hampshire Public Service Commission, who stated in her rate case testimony:

[R]ates charged by a Con Edison electric and gas are too high and too volatile for many low-income families. Second, with regard to the use of service interruption as a collection tool, the Company relies too much on this practice and not enough on better practices for engaging with payment-troubled customers who lack the resources to pay in full and on time. Third, steps should be taken to expand the reach and effectiveness of the low-income affordability program.

Usually quick to invoke confidentiality of customer information, in this situation Con Edison appears to be taking inoculatory PR measures to justify the interruption of service that preceded the fire and deaths:  According to a CNN report,

"The account had a significant amount of arrears -- well into the thousands of dollars," Consolidated Edison spokesman Allan Drury told CNN.   "We try to avoid turning service off to customers. We'll put them on payment plans to work with them to avoid turnoff, but this account had substantial arrears."  

The situation, where service was off while the customer sought public assistance, is similar to a 2005 incident  involving the death of a New York City child in a fire started by a candle while power was shut off. It was reported that the customer had made payment arrangements sufficient to be reconnected, the reconnection was scheduled for the next day, but the 2005 fire occurred during the intervening night:

• "[A] Con Ed spokesman ... confirmed electricity to the apartment had been cut off at 1:45 p.m. Monday. Two hours later, [the customer] appeared at a local Con Ed branch to pay $700 - almost half the outstanding bill. [A]n order to restore electricity within 24 hours was issued two hours later. Tragically, it was not in time - firefighters responded to the scene of the fatal fire at 10:45 p.m."

Questions that should be answered in any investigation include:

• Did Con Edison comply in all respect with the Home Energy Fair Practices Act when it terminated electric service to the customer?  See Lawsuit Involving Death of Velma Fordham Settled by National Fuel
• Did Con Edison have a written deferred payment agreement (DPA) with the customer that was broken by the customer, or was it unwritten?  The HEFPA statute requires DPAs to be signed by both the company and the customer.  Utilities frequently enter into oral, unwritten agreements with customers.  As noted by the PSC, "However, 16 NYCRR § 11.10(a)(1) requires the utility to offer a written deferred payment agreement, signed "by both the utility and the customer," prior to terminating service for nonpayment. Therefore, a customer who defaults on a verbal deferred payment agreement remains eligible for deferred payment terms, as per 16 NYCRR § 11.10(b)(1)." 
• If there was a written DPA that was broken, was it negotiated based on the customer's individual financial circumstances, as contemplated by Section 37 of the Public Service Law?
• Did Con Edison shut the customer off for breach of an "oral" DPA?  The deregulation minded Public Service Commission gave its OK to unwritten oral DPAs and countered objections with the promise that if a customer broke an oral DPA they would still have the chance to keep service with a new written DPA.  See Utilities Must Offer Written, Negotiable Payment Agreements Before Terminating Electric or Natural Gas Service, August 2008. But Con Edison is known to threaten shutoffs for breach of an oral DPA.  
• Did the utility provide aid to the customer in accessing public assistance for utility arrears? 
• Did the bills include excessive charges for ESCO service, purchased from the ESCO by Con Edison and demanded from the customer under threat of shutoff?  
• Did the customer have phone service to communicate and negotiate with Con Edison, which has been allowed by the PSC to close most of its walk-in service centers?  
• Does Con Edison have effective liaison with public assistance agencies, and why does it leave power off after public assistance is assured?
• Should Con Edison be required to make same-day reconnections when payment is guaranteed by HRA?
• Were some of the arrears for which the customer was terminated stale, transferred from other persons, backbilled, reversal of shared meter charges, or incurred prior to other public assistance payments under Social Services Law 131-s that should have precluded repeat terminations to collect old arrears?
• Could another adult person in the household have opened a new account in their name?
• Did the customer have access to legal assistance to forestall the shutoff or pursue bankruptcy remedies?

Gerald A. Norlander

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PSC Extends Time for Public Comment on Central Hudson Nominee for "Golden Shareholder"

The New York State Public Service Commission, for procedural reasons, has issued a Notice Extending The Period For Commission Consideration Of The Proposed Holder Of A “Golden Share”
 in the Central Hudson/Fortis merger case.  The Commission previously issued an order approving the merger, which has been consummated.  The Commission has not ruled on pending petitions for rehearing and investigation whether the utility has earned in excess of the intended return and there should be rate reductions.  Comments on the "Golden Share" issue will continue to be accepted until Nov. 15.  

The history of holding company ownership of regulated utilities is replete with instances in which utility affiliates, and their customers, suffered from negative financial events affecting other holding company affiliates or the holding company parent. The most famous of these was the collapse of the utility holding company empire of Samual Insull in the 1930's, which may have prompted Congress to enact the Public Utility Holding Company Act of 1935 (PUHCA).  PUHCA regulated and effectively discouraged interstate and international utility holding companies, and promoted local utilities more responsive to local communities under full state regulation, as Central Hudson was.  Indeed, Central Hudson was once owned by the Niagara Hudson holding company and was required to be divested in the 1940's by the SEC, which administered PUHCA. PUHCA was repealed in 2005, over the objection of consumer, environmental, union and credit rating groups, and replaced with a far weaker law.  Subsequently, the pace of mergers and acquisitions of local utilities by interstate or international holding companies has increased.

The "Golden Share" is a corporate structure tool intended to help "ring fence" a regulated utility by preventing a holding company parent from taking its regulated utility subsidiary into voluntary bankruptcy or reorganization, where its assets could be liquidated, contracts could be abridged, and rates could be raised to generate more cash to cover liabilities. Where the holding company parent controls selection of the utility subsidiary's directors, the directors could vote to file for bankruptcy, but for the creation of a special "Golden Share" of preferred stock which has voting power to block a voluntary bankruptcy decision by the board.

At issue is who should hold the "Golden Share"?

In explanations of the Central Hudson/Fortis merger plan, the "Golden Share" mechanism was touted as the antidote to possible voluntary bankruptcy of the local utility which would protect customers and New York State even though control of the local utility is transferred out of the state and country.  Central Hudson's nominee for holding the "Golden Share" to protect consumers and the State is not a public official, such as the State Controller or Secretary of State, but rather is a corporate services company based in New Jersey.  Their proposed contract is with Central Hudson, and it contains no direct instruction for the Golden Shareholder to act in any particular way in voting on a corporate resolution to go bankrupt.  Nor is there any fiduciary accountability created by law or contract. Instead there is a vague statement that the "Golden Share" holder will protect interests under the public service law.  As the Utility Project pointed out in its Opposition to Central Hudson's Nomination of the "Golden Shareholder," and in its pending Petition for Rehearing, Rate Investigation and Temporary Rates, interests under the public service law include those of the utility.  In actuality, the nominee proposed for "Golden Shareholder" has no public service duty a New York State public officer would have.  Also, there is no ascertainable fiduciary duty placed on the private "Golden Share" holder to vote in any particular way, and thus there can be no real assurance that the shareholder nominee will actually protect the state of New York or customers of Central Hudson.

Public comments can be electronically filed at the Public Comment tab at the PSC website page for the Central Hudson/Fortis merger.

Gerald A. Norlander


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ALJs Rule that Refund Statute May Apply in National Fuel Gas Rates Proceeding

Background
 In the pending proceeding to review natural gas rates of National Fuel Gas Distribution Company, the New York Public Service Commission set temporary rates subject to refund prospectively from the date of its order. In addition, in light of apparent over earnings in the past, the PSC asked the Administrative Law Judges to examine whether a rarely used statute authorizing refunds of past utility earnings in excess of the intended return applies to the case.  See PSC Power to Order Refund of Earnings Above Authorized Return at Issue in National Fuel Case, October 7, 2013.

The Utility Project and Department of Public Service Staff filed briefs supporting application of the refund statute in this case.  The Utility Project brief provides a detailed analysis of how deferred costs for pension and retirement costs, which ultimately are paid by customers, built up over the same period when National Fuel was overearning.  National Fuel filed a statement opposing application of the law and alternatively limiting it, and a reply brief in response to Staff and the Utility Project on October 16, 2013.

In a short Ruling Concerning the Applicability of PSL 66(20) on October 18, 2013, the Judges ruled that the refund statute may be applied, and said a fuller opinion will be issued. The judges sought input by October 29 from the parties regarding whether to adopt a  litigation schedule for the refund of past earnings issue that would be different from the current litigation timetable for the rate case.  That schedule calls for National Fuel to file testimony and exhibits regarding rates on November 1, 2013.  A decision would be reached by the Commission, at the earliest, in August 2014.

Gerald A. Norlander


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PSC Denies Time Warner Petition to Expand Times when Phone Service May be Interrupted for Bill Collection Purposes

At its October 17, 2013 session, the New York State Public Service Commission denied the Petition of Time Warner Cable Information Services, LLC, to enlarge the times when phone service can be interrupted for bill collection purposes.  The Public Utility Law Project of New York, Inc. filed initial comments in the case generally opposing most of the relief sought by Time Warner in its petition, and supplemental comments.

Time Warner asked the Commission in Case 13-C- 0193 to expand shutoff times to include Saturdays and evenings until 9 PM.  This required waiver of the Commission's Telephone Fair Practices Act Regulations, which limit the days and times when phone service can be shut off.  According to the Commission Press Release,

“We are saying ‘no’ to Time Warner’s request to waive our rules regarding when it would be authorized for suspensions and terminations of its telephone customers,” said Commission Chair Audrey Zibelman. “The Commission’s rules applicable to Time Warner are consistent with the hours of operation of the Commission’s consumer call center which receives consumer complaints’ and requests for assistance. To ensure telephone consumers’ rights are protected, especially core customers such as the elderly and disabled, it is essential customers are afforded the opportunity to contact our call center if their telephone service is threatened with a potential suspension or termination.” 

Time Warner also sought a waiver of Commission regulations requiring service repair quality reports, arguing that competition and the ability of customers to switch telephone service providers now makes reporting of service repair time and other data unnecessary.  The Utility Law Project pointed out in its comments that the ability to switch providers is not an adequate substitute for enforcement of minimum service quality standards, and that even if one believes real competition makes service quality regulation unnecessary, phone service is oligopolistic and not truly competitive.

The Commission Press Release indicates PSC acceptance of Time Warner's argument:

Finally, the Commission conditionally granted Time Warner’s request for a waiver of its monthly service quality reporting requirements because, in Time Warner’s case, the need for regulatory action to ensure timely repairs for voice service has diminished due to the prevalence of competitive alternatives and the ability of residential and business customers to move to a different service provider. 

The Commission did require six months of reporting to establish a baseline of service quality data for future reference and comparison, and the Press Release indicates that "[i]f the data meets Commission staff approval, the company’s request for a waiver of certain service quality 

reporting requirements may take effect."  Thus, the Commission appears to have delegated to its staff, which has generally favored deregulation, the final say whether there will be meaningful enforcement of minimum service quality standards for Time Warner's home phone customers.

The Commission also granted Time Warner's request to limit distribution of residential white page directories to those customers who request them, and to waive Commission rules regarding allocation of undesignated partial payments from customers facing disconnection among various services, such as phone, broadband, and cable TV. Time Warner was allowed to have a "two bucket" system in which undesignated payments are allocated first to preserve phone service, and then to a second bucket of charges for all other services.  As a consequence Time Warner may be able to block customers from receiving phone plus cable tv or phone plus broadband services unless outstanding charges for both cable tv and broadband are paid.  The Commission rules that were waived generally allowed customers to choose which service they wish to preserve with partial payments and allow blocking of only unpaid services.

An order will be issued later explaining the Commission's reasoning.

Prior posts:

New York PSC to Consider Impact of Changing Technology on Phone Consumer Protection, 10/15/2013

Utility Law Project Opposes Time Warner Petitions for Waiver of Consumer Protection Rules on Telephone Shutoffs, Billing Practices, Customer Service Standards, 8/6/2013


Gerald A. Norlander

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New York PSC to Consider Impact of Changing Technology on Phone Consumer Protection

The advent of alternative technological platforms for the provision of phone and other telecom services has generated consumer protection issues now on the agenda at the New York Public Service Commission for its October 17, 2013 meeting.

The Time Warner Petition to Relax Customer Protection Rules for VoIP Cable Phone Service
For years, cable TV providers have provided home phone service, typically over the same coaxial cable used for television and broadband.   With some exception, notably the need for external electric supply, cable phone service (Voice over Internet Protocol, or VoIP) is  relied upon by consumers as the functional equivalent of landline service. Until very recently it has not been regulated.

Indeed, as more conventional phone service migrates to internet technology, there is increased effort to escape all state regulation under the questionable notion that use of alternative technology can take service out of reach of regulation, or that the transition from monopoly to multiple providers made state regulation unnecessary.  As stated by the Colorado Governor several years ago when vetoing a VoIP deregulation bill:

As this progression from landlines to VoIP occurs, Colorado cannot be left without the power to regulate such an important technology. Should the need arise, regardless of movement at the federal level, the PUC must have the latitude and authority to regulate the price, quality of service, and availability of VoIP in order to prevent significant harm to the consumers of this State.

Colorado Governor Vetoes VoIP Deregulation Bill, June 11, 2010.

Earlier this year, Time Warner conceded its VoIP home phone service is fully subject to state utility regulation. Time Warner swiftly petitioned the PSC for waiver of certain consumer protection rules, in PSC Case 13-C-0193.  See Hello? Hello? Hello? Hel...  Time Warner looks to make it easier to shut non-payers' phones off,  By Larry Rulison, Albany Times Union Aug. 27, 2013.

The Public Utility Law Project of New York filed comments in opposition to the waiver petition, opposing the relaxation of customer protections and customer service standards, and supplying information obtained in discovery regarding service terminations.  The Project also filed supplemental comments.

Case 13-C-0193 is on the October 17 PSC Consent Agenda and so the action being taken in the case will not be discussed at the meeting.

See Albany Times Union Editorial: Protect phone customers, October 10, 2013.

The Verizon VoiceLink Case - Substituting Wireless "VoiceLink" for Copper Landline Service
 In Case 13-C-0197 Verizon filed a new tariff with the PSC that would have allowed it permanently  to replace traditional twisted pair copper landline phone service with its VoiceLink wireless service on the western part of Fire Island rather than repair the landlines damaged during Hurricane Sandy related storms.



 In addition, Verizon's tariff as filed would have allowed deployment of wireless phone service in other areas where the utility found it to be a cost effective alternative to repairing landlines.  Similar action was taken by Verizon in New Jersey.

Hurricane Sandy devastated this barrier island community of multimillion-dollar homes, but in Peter Flihan’s view, Verizon Communications has delivered a second blow: the telecommunications giant did not rebuild the landlines destroyed in the storm, and traditional telephone service here has now gone the way of the telegraph.  **** The changing landscape has Verizon, AT&T and other phone companies itching to rid themselves of the cost of maintaining their vast copper-wire networks and instead offer wireless and fiber-optic lines like FiOS and U-verse, even though the new services often fail during a blackout.The vision I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper,” Lowell C. McAdam, Verizon’s chairman and chief executive, said last year.

 On a New Jersey Islet, Twilight of the Landline, NY Times Oct. 14, 2013
 The New York PSC opened an investigation and trimmed back the tariff to limit it to temporary VoiceLink service on Fire Island while the broader issues of eliminating traditional copper landline service are examined.

Responding to the protest against substitution of the less robust VoiceLink service, Verizon announced that it would install a new wireline fiber optic system, withdrew the portion of the tariff that would have allowed permanent substitution of its wireless VoiceLink for wireline service, and argues the matter is moot. Many comments were received, before and after Verizon's change of position, including those of the Attorney General,  Common Cause/New York, Communications Workers of America, Consumers Union of U.S. Inc., Fire Island Association and AARP, represented by Richard Brodsky, former New York State Assembly Corporations Committee Chairman.

The Utility Law Project filed comments seeking clarification of the regulatory regime for the new wireline fiber system regarding universal service, consumer protection, affordability, and service reliability standards.  PULP also recommended that the Commission review how its relaxed service repair standards are working.  Under those standards the Commission-imposed  financial consequences for poor repair service are only imposed when service metrics are failed with respect to "core" customers who predominantly are those who receive low-income Lifeline  assistance.

The case is on the PSC Agenda for October 17, 2013, for discussion and possible action


Gerald A. Norlander

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PSC Power to Order Refund of Earnings Above Authorized Return at Issue in National Fuel Case

In the pending National Fuel Gas Distribution Company case the New York Public Service Commission  set temporary rates when it found that NFG may be earning more than anticipated when rates were last set in 2007. A proceeding at the PSC is now underway to fix permanent rates, which will be effective as of the date the temporary rates were set.

The Commission observed that in recent years, while National Fuel earned higher returns than the Commission anticipated, at the same time significant costs were deferred, in the expectation that they could be collected from customers in the future, when new rates are set.The Commission stated:

National Fuel’s earnings level indicates that its gas rates may be higher than needed to provide safe and adequate service, particularly in light of the recently allowed ROE and earnings sharing provisions established for other utilities. Further, absent action, National Fuel’s deferral balances may continue to escalate during a period of time that the Company is earning a return in excess of its cost of equity. These circumstances may result in National Fuel customers paying higher rates than are just and reasonable.

The PSC also asked the Department of Public Service administrative law judges to examine whether refunds could be made to customers under a little used provision of the Public Service Law, Section 66(20).  That law gives the PSC power to order refunds when a utility earns more than the profit anticipated when rates were last set.

The statute provides:

Notwithstanding any general or special law, rule or regulation, the commission shall have the power to provide for the refund of any revenues received by any gas or electric corporation which cause the corporation to have revenues in the aggregate in excess of its authorized rate of return for a period of twelve months. The commission may initiate a proceeding with respect to such a refund after the conclusion of any such twelve month period.

The ALJs asked parties to brief the applicability of Section 66(20) to the case.  On September 13, 2013 National Fuel argued in its brief to the ALJs the rarely invoked law should not apply and, alternatively, there should only be a one year look-back period for potential refunds.

Department of Public Service trial Staff argues in its brief that the law does apply, and says "It is up to the Commission to determine where the relevant facts, in combination, compel a finding of past unjust and unreasonable rates such that a refund to customers of excess revenues is necessary as provided for by Article 4 of the Public Service Law."

The Public Utility Law Project of New York, Inc. argues in its brief the statute applies.  The Project also discusses in detail the unusual situation in which deferred pension and OPEB costs, which may be collected from customers in the future, grew rapidly while earnings received by National Fuel were above the anticipated 9.1% return.  The Project argues that rates can be reduced if some of the deferrals are reduced, and for refunding earnings above the authorized return, which are estimated to be approximately $24 million since 2010.

NFG earnings since the last rate case are discussed in the Commission's Order to Show Cause initiating the case:

and in the Commission Order SettingTemporary Rates.  The PSC case file with all the filed papers is here:  13-G-0136  

National Fuel is expected to file a reply to the Staff and Utility Law Project briefs, and the ALJs will then decide whether the refund statute applies.  The exact amount of any refunds would be decided in further litigation.

There is also a court case pending in Erie Co. where NFG is challenging constitutionality of Section 66(20).  PULP is not a party there.  NFGDC v. Public Service Commission, (Erie Co. Sup. Ct. Index No. 20130015148).  

Gerald A. Norlander

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With Millions of Phone Numbers Still Unused in 315 Area Code Region, PULP Urges PSC Not to Add New Area Code Now

Background
In December 2007, the New York PSC issued an order launching its move to create a new area code in what is now the 315 area code region, which encompasses Syracuse, Utica, Watertown and many smaller communities in north central New York. Adding a new area code creates a burden for consumers, whether it be done as a geographic split of the region (requiring area code prefix changes) or as an "overlay" whereby new numbers are added with a new area code, with the result that different family members in the same household might have different area codes.  In another case, the PSC summarized some of the inconveniences placed on large numbers of customers when area codes are changed. explaining that

area code changes ... are a major burden on consumers. New area codes cause confusion to callers and potential safety issues when hospitals, ambulances, and public health and safety institutions are required to change their telephone numbers. The records for 911, which include telephone numbers, need to be changed when area codes change. Errors in record changes can result in serious health, safety and welfare concerns. The accuracy of telephone numbers is also a security issue. If contacts are not reachable because of outdated area codes on old contact lists, security may be compromised. Businesses suffer economic harm when their area codes are changed. They are required to advertise the new numbers, contact existing customers, and revise all stationery showing their new telephone number. They face the possibility of losing business during area code transition periods when customers use an old number.

Also, there is a finite number of usable area codes, and if the day comes when they are all used, the North American Numbering Plan (NANP) would need to be revised, to add more numbers than the current ten numbers used throughout the US and the 20 countries in the NANP, i.e., (518) NXX-1234, where NXX is the local central office code prefix.  Thus, it is important not to waste numbers.  As stated recently by the Federal Communications Commission in an order regarding numbers for cable VoIP telephony,

Telephone numbers are a valuable and limited resource; access to and use of numbers must be managed judiciously to ensure that they are available as needed and to protect the efficient and reliable operation of the telephone network.

PULP opposed the PSC's 2007 proposal to add a new area code in 315 because only about one third of the usable numbers in 315 - 2.7 million out of 8 million - were actually used.  See PULP Network, PSC Considering “Area Code Relief” For 315 -- Where Did All The Numbers Go?, March 5, 2008.  PULP urged more careful distribution of numbers and more proactive efforts to make unused numbers available in localities where they are needed, and made a motion to stop the push for a new area code and for further investigation.  See PSC Puts 315 Area Code Changes on Hold Pending Investigation, March 24, 2008.

The "need" for a new area code is driven by the improvident allocation of central office codes (the "NXX" in the telephone number (518) NXX-1234) to sparsely populated areas.  This occurred as part of the failed effort to create robust local telephone competition, when the PSC approved giving new companies numbers 10,000 at a time.  As a result, local phone centers in tiny communities that were once served by one NXX code that had ample spare numbers received multiple NXX codes with 10,000 numbers each, most of which were never used.  For example, Star Lake, population 860, got three additional NXX codes in addition to the original Verizon NXX, totaling 40,000 numbers.  There are so many numbers in Star Lake there is no room for fish.  Other areas saw even greater squandering and stranding of number resources.

The mistake of issuing large blocks of numbers to new phone companies in rural 315 areas was belatedly recognized, and in 2006 the FCC empowered the New York PSC to reduce blocks of new numbers to 1,000 in all areas, including 315, where number exhaustion was projected within five years.

Once an office code has even a few numbers in it, it cannot be easily moved to another area, and to "decontaminate" it, numbers may need to be changed.  In many instances, though, the numbers used by the competitive companies in their NXX codes are unseen shadow or "ported" numbers, with the customer retaining the original number from Verizon, so the shadow number could be shifted to an NXX that would remain in the local community, and the customer number would not need to be changed.  Also, technological advances may make it possible to free up numbers in lightly used NXX codes now stranded in rural areas. Recent advances now allow porting of old wireline numbers to wireless numbers, in the process de-linking numbers from the original NXX, and so PULP believes it may be feasible to shift some lightly used NXXs to other areas in the 315 area that need them more, with no customer inconvenience, and at lower cost when compared with the massive disruption of a unnecessary and avoidable area code overlay.

The PSC denied PULP's motion for more investigation and an on the record technical conference to examine ways to forestall a new area code.  See PULP Network, PULP Asks PSC to Reconsider Refusal to Investigate Alternative to New Area Code in 315, May 07, 2008.

An Administrative Judge ruled that a new area code should be implemented as an overlay, and not a geographic split, as some had recommended.  See PULP Network, ALJ Recommends “Overlay” Telephone Area Code Requiring 11-Digit Dialing, Despite Plentiful Numbers and Exchange Codes in Central New York’s 315 Area, December 8, 2008.

A bill was introduced in both houses of the New York Legislature to require the PSC to take stronger steps to avoid the inconvenience of area code changes to consumers in the 315 region.  See PULP Network, Bill Would Require PSC to More Closely Scrutinize Area Code Changes, April 10, 2009.

PULP submitted further evidence regarding a change in the projected number exhaustion date.  See PULP Submits New Evidence to PSC Showing No Need for Area Code Changes Now in Central NY 315 Area, April 29, 2009

The PSC then realized that the issuance of NXX codes had slowed since commencement of the proceeding, and called off implementation of the new area code.  See PULP Network, PSC Acknowledges 315 Area Code Change is Not Needed, June 15, 2009.   The Commission cited the Great Recession as the reason for the halt.  See PULP Network, PSC Didn't Provide Complete Explanation When it Ended its 315 Area Code Proceeding, June 19, 2009.

Revival of the Proposed New Area Code Overlay
Since the 2009 halt of plans to put in a new area code, approximately fifty net new NXX codes were issued, and earlier this year NANPA gave notice to New York that 315 was likely to need more central office codes by the first quarter of 2015.  The PSC issued an order reviving the proceeding, which had been dormant, and announced that it intended to reinitiate the proceeding to hold further hearings and to receive further comments on the ALJ's Recommended Decision to implement a new overlay code, in the belief it "would benefit from additional information concerning changes in technology or usage patterns."

On August 7, 2013, PULP submitted its Comments Regarding Options to Make Additional Central Office Codes Available.  Pointing out that the majority of potentially assignable numbers in 315 remain unused due to improvident distribution of NXX codes, PULP asked for a new Department of Public Staff Report or White Paper to discuss measures taken since 2009 to limit issuance of new NXX codes and reclaim unused numbers. In the absence of a White Paper, PULP issued discovery requests to Department of Public Service Staff, which are not yet answered.

PULP urged that the Commission move deliberately and that it conduct further inquiry into number conservation and reclamation measures to avoid inconveniencing households and businesses in the 315 area. There should be time to do that because no new NXX codes have been issued since October 2012.  There are still 57 NXX codes unassigned in 315, representing 570,000 more numbers available, even if there is no reclamation.

Regarding changes in technology, PULP asked for further inquiry into whether obstacles to transferring misallocated NXXs could be overcome with new technological capabilities.  PULP noted that technology similar to that used for number porting between wired and wireless numbers may have made it possible to change the location of a lightly used NXX in a rural area without changing customer numbers.  According to the Number Portability Administrative Center,

Before LNP [local number portability] was established, the NPA-NXX of a telephone number identified the state and rate center where the number was originally assigned, the service provider and the carrier type (wireline or wireless). Today, because telephone numbers have been ported between wireline and wireless service providers, the NPA-NXX of a telephone number only identifies the state and rate center where the number was originally  assigned. **** Because LNP allows a number to be moved from one switch to another, the NPA-NXX of a telephone number is no longer a reliable indicator of the serving switch and service provider's identity.

PULP urged further inquiry whether similar technology would allow the transfer of a lightly "contaminated"  NXX from a rural location where it is not really needed to a location where it is needed, or whether there may be other technological solutions to free up numbers trapped unused in rural areas.

PULP urged the Commission to adopt the general policy of the Pennsylvania PSC to avoid new area code implementation by vigorously policing the issuance of new numbers and more aggressively seeking return of unused numbers.  PULP suggested that New York take the lead nationally by seeking added authority from the FCC to give out and reclaim numbers in blocks of less than 1,000 to improve saturation of existing NXX codes before allowing new ones in 315.

Comments on the case can be made online at the PSC online case file for Case 07-C-1486.  Papers filed in the proceeding are also at that site.

Gerald A. Norlander

Update

COMMISSION PUTS 315 AREA CODE CHANGES ON HOLD
— Revised Forecast Results in New Area Code Exhaust Date —
Nov. 14, 2013

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Utility Law Project Opposes Time Warner Petitions for Waiver of Consumer Protection Rules on Telephone Shutoffs, Billing Practices, Customer Service Standards

On August 1, 2013 the Public Utility Law Project of New York, Inc. filed comments opposing the petition of Time Warner Cable Information Systems (Time Warner) for waivers of New  York State Public Service Commission rules limiting the days and times when telephone service can be shut off for bill collection purposes, billing and collection rules that require separation and selective service blocking when customers in arrears make partial payments, service quality standards for repair service, and directory issuance.  See PULP Network, Time Warner Asks PSC to Greenlight Prime Time Evening, Friday Afternoon and Saturday Phone Shutoffs for Collection Purposes, and to Relax Other Consumer Protections, June 20, 2013.

The Utility Law Project argues that the Commission should not further "streamline" enforcement of its telephone consumer protection rules, as it has been doing for more than fifteen years of "price cap" or "performance regulation" in the name of promoting deregulation and competition. The performance standards do not measure effectiveness of telephone companies in providing discounted Linkup and Lifeline service to low income customers, and do not measure the number of interruptions of service for bill collection purposes, or the effecitiveness of companies in working with customers to arrive at deferred payment plans to help continue service during periods of temporary household financial difficulties.

In exhibits attached to its comments, the Project pointed out that during this era of deregulation or regulatory forbearance, according to FCC statistics New York household telephone subscribership,  which once was above the national average, has sunk to the point that it is not only below the national average but is now fourth lowest of the 50 states.

The Utility Law Project asks for further proceedings to investigate and correct Time Warner's billing and collection practices, which do not give customers in arrears information about how a partial payment can be designated to preserve a priority service while others may be selectively blocked due to arrears, and the means to designate the payment on payment forms.  Also, Time Warner notifies customers on their bills that nonpayment of charges for cable TV or broadband service may result in shutoff of telephone service, without providing information about how telephone service or other services may be selectively preserved if a customer cannot afford full payment.

The Utility Law Project opposed the requested waiver of service repair quality standards.  Time Warner seeks to limit applicability of repair timeliness to its customers who are "core" customers, and does not include in the proposed definition of "core" those who may lack other landline options.   The Project argues that the existence of competition does not mean basic service standards can be jettisoned, and that there is no real landline competition, because telephone markets in New York are at best a duopoly between the local phone companies and the local cable company, and in some situations still a virtual monopoly.

The Utility Law Project initiated discovery to learn more about Time Warner's proposals, which, if granted, may vitiate the performance regulation standards. See PULP Asks for More Information from Time Warner Regarding its Petition to Relax PSC Regulations on Snips and Allocation Priority of Part Payments,  July 25, 2013.

Papers filed and an opportunity to make online comments are available at the PSC online case file for Case 13-C-0193.
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Opponents of Central Hudson Takeover File Petitions for Rehearing, Rate Investigation, and Temporary Rates

On July 26, 2013 Citizens for Local Power, Assemblyman Kevin A. Cahill, and PULP filed petitions with the Public Service Commission for rehearing of the June 26, 2013 PSC Order that approved a non unanimous settlement agreement for the acquisition of Central Hudson Gas and Electric Company by a Canadian holding company, Fortis, Inc.  Central Hudson is the utility serving approximately 300,000 electric and about 75,000 natural gas customers in eight counties of New York State's Mid-Hudson River Valley, and delivering electricity and natural gas in a 2,600 square-mile service territory that extends from the suburbs of metropolitan New York City north to the capital district at Albany.

The petitions present procedural and substantive reasons why the Commission erred in approving the takeover and extending, with modification, the rate plan.

The petitions assert that the State Administrative Procedure Act (SAPA) Notice never included notice that the Commission would set future rates in the merger case.  Further, no Revised SAPA notice was filed regarding the "Joint Proposal" of the settling parties, in which the Commission adopted a substantially modified merger proposal, different from the one originally filed by Central Hudson and Fortis, Inc.  Also, no Revised SAPA notice was filed regarding a Letter to Commissioners from Central Hudson and Fortis proposing extension and modification of the rate plan for another year, after all the parties had submitted their briefs to the Commission regarding a Recommended Decision that had recommended disapproval of the merger.  As a consequence there was no SAPA notice or opportunity to comment or scrutinize the revised proposal to modify and set rates for another year.

Citizens for Local Power and Assemblyman Cahill objected to the lack of evidentiary hearings, which had been scheduled but were cancelled by the Commission after some of the parties, including Department of Public Service Staff and Central Hudson and Fortis, Inc., reached their agreement. Citizens for Local Power objected to the refusal to consider evidence regarding the fitness of Fortis, based on its track record in other areas.  Their petition rebuts the Commission's assertion that there was substantial support for the merger, showing that overwhelming majority of public commenters and groups were against it.  They demonstrated that much of the claimed public support was traceable to Central Hudson's campaign aimed to get letters from its employees and non profit groups to which it gives money. The petitions also faulted the merger plan for not providing Central Hudson customers adequate protection from possible future voluntary bankruptcy of the utility under a Fortis-controlled board of directors.

The petitions said the rate plan allowing a 10% Return on Equity (ROE), when standard Commission methodology calls for 8.9%, is unreasonable, and amounts to a potential difference of more than $17 million in excess allowed earnings through June 30, 2015. Demonstrating that Central Hudson has achieved actual ROEs greater than 8.9% for the trailing four quarters in in ten out of eleven past quarters, the petitions asked for an investigation of the reasonableness of Central Hudson's current rates, terms and conditions.  PULP also asked for investigation of Central Hudson's low income rates and practices regarding the interruption of service for bill collection purposes, submitting data showing that shutoffs have risen from 4,688 in 2005 to 13,687 in 2012. Also, the percentage of customers shut off has risen from 1.89% in 2005 to 5.99% in 2012, and  Central Hudson provides fewer deferred payment plans, as a percentage of customers, than any of the major investor owned utilities in the state.

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Utility Law Project Asks Time Warner For Information Regarding Petition to Relax PSC Regulations on Snips and Allocation Priority of Part Payments

Time Warner Cable Information Services ("TSWCIS") has petitioned the PSC for relaxation of regulations governing its telephone service provided to residential customers through its Voice Over Internet Protocol ("VOIP") technology, which uses cable lines to deliver phone service, broad band service, and TV service. See Time Warner Asks PSC to Greenlight Friday Afternoon and Saturday Phone Shutoffs for Collection Purposes, and to Relax Other Consumer Protections, June 20, 2013.

TWCIS also seeks waiver of the obligation to provide directories, and to limit its service quality obligations to a narrowed definition of "core" customers.

The notice is as follows:

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure
Act, NOTICE is hereby given of the following proposed rule:

Proposed Action: The Commission is considering a petition of Time
Warner Cable Information Systems (New York), LLC for waivers of
certain Commission regulations under 16 NYCRR.
Statutory authority: Public Service Law, sections 91(1), 94(2), 98
Subject: Partial payments, directory distribution, suspension or termination
of service, service quality reporting requirements.
Purpose: To waive certain sections of 16 NYCRR sections 602, 603, 606,
609.
Substance of proposed rule: The PSC is considering whether to approve,
in whole or in part, a petition by the Time Warner Cable Information
Systems (NY) LLC the waiver of certain sections of 16 NYCRR:
16 NYCRR 602.10(b): to waive the Commission’s rules requiring it to
distribute telephone directories.
19 NYCRR section 609(4)(d): to waive the Commission’s rules pertaining
to the company’s ability to suspend to terminate service to residential
customers for nonpayment of bills between certain weekday or Saturday
hours.
NYCRR Section 606.5: to modify billing categories and the application
of partial payments.
NYCRR Sections 603.3 and 603.4: for the revision of Service Quality
Improvement Plan reporting requirements.

Text of proposed rule and any required statements and analyses may be
obtained by filing a Document Request Form (F-96) located on our
website http://www.dps.ny.gov/f96dir.htm. For questions, contact:
Deborah Swatling, Public Service Commission, 3 Empire State Plaza,
Albany, New York 12223-1350, (518) 486-2659, email:
Deborah.Swatling@dps.ny.gov
Data, views or arguments may be submitted to: Jeffrey C. Cohen, Acting
Secretary, Public Service Commission, 3 Empire State Plaza, Albany,
New York 12223-1350, (518) 408-1978, email: secretary@dps.ny.gov

The SAPA Notice was issued June 19, and the standard 45 day comment period expires August 3, though that could be enlarged or late comments may be accepted after that date.

The Public Utility Law Project of New York has asked for more information in a discovery request to TWCIS.

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Phone Deregulation Bill Slips Through Legislature, Awaits Action by Governor

The Supreme Court has observed that "requirements . . .  that common carriers file their rates ... and charge only the filed rate are the centerpiece of the ... regulatory scheme****Rate filings are, in fact, the essential characteristic of a rate-regulated industry."

In the waning days of the recent legislative session, a telephone deregulation bill slipped through that would allow New York phone companies to change their prices, terms and conditions at will, without filing them at the PSC, for undefined "nonbasic" services.

As a substitute, the bill would require companies to post their service offerings and prices at the phone company website and allow them to change prices, terms and conditions by giving customers 30 days notice of a change.  There is no requirement regarding how conspicuous the notice must be.

The fundamental premise of the bill, that it is needed to level the regulatory playing field between traditional phone companies like Verizon and Frontier and cable companies is plainly wrong.  The memo in support of the bill states that "Today the marketplace is highly-competitive, and most of the providers in the market, including large cable providers that offer telephone services, are not required to file or maintain tariffs....

The bill was filed before Time Warner's Voice Over Internet Protocol (VOIP) phone service was recognized to be a fully regulated telephone service.  See PULP Network, Time Warner Asks PSC to Greenlight Friday Afternoon and Saturday Phone Shutoffs for Collection Purposes, and to Relax Other Consumer Protections, June 20, 2013.

Time Warner acknowledges in its petition to waive certain customer protection regulations that it must provide its VOIP telephone service  "as a fully regulated service...."

Thus, the entire thrust of the bill, to level the regulatory playing field with cable company phone services, has been mooted by this recent development, which occurred in March, 2013, after the bill was filed.  The design of the regulatory paradigm for purportedly competitive services should be left to the PSC which is better able to adjust the degree of regulation with changing industry conditions and changing customer preferences.

If  approved by the Governor, the law would allow phone companies the power  to impose contracts of adhesion without an opportunity for review by the PSC.  There is no potential check against luring customers into subscribing to ever-shifting, slightly different, and difficult to compare repackaged service offerings, and then raising prices.

In essence the bill legalizes what would otherwise constitute illegal "bait and switch" tactics.   It allows companies to tout promotional rates for new service packages in flashy advertising, promising savings, but then, after the customers take the "bait", the seller reneges and "switches" their accounts to higher priced plans.

The provision in the bill regarding notice of rate changes merely says

5.  AT  LEAST THIRTY DAYS PRIOR TO AN INCREASE IN RATE FOR A NON-BASIC SERVICE, A TELEPHONE CORPORATION SHALL NOTIFY ANY AFFECTED  PERSON  THAT SUCH PERSON MAY OPT OUT OF SUCH NON-BASIC SERVICE AT ANY TIME WITHIN THE THIRTY DAYS PRIOR TO THE INCREASE BECOMING EFFECTIVE.

There is no requirement in the bill how this information is to be presented.  There is no requirement that the notice of change that will govern the future price or scope of services be conspicuous, in large type or in plain language. There is nothing to prevent burying notice of price changes or service limits in boilerplate fine print of bills, or put into the fine print bill inserts that often go unread by busy consumers paying their bills. A growing number of utility consumers have chosen automatic payment options offered by the utilities to deduct payments from their checking accounts, so many customers spend little or no time looking at their bills or bill inserts.

Many elderly persons with weak eyesight and non English speaking customers, lured by phone solicitations promising bargain prices, will not get effective notice of the price changes.  More effective notice would require large print, multiple methods (email if the company has the customer's email address), or phone if that is how the customer switched to the service in the first instance.

Even assuming customers are aware of forthcoming price hikes, the notion that abusive bait and switch practices will be deterred by competition -- that informed consumers would bolt to alternative providers when faced with price hikes in the plan to which they subscribed -- is pure fantasy.

There is no real competition in the New York landline phone markets. Rather, these markets are oligopolistic at best.  In most places the market is duopolistic, consisting of the incumbent copper landline phone company (e.g., Verizon) and the local cable provider (e.g., Time Warner).  Game theory teaches that the result will not be competitive prices and service offerings.  Rather, the players will reach Nash equilibria closer to monopolistic pricing.  This leaves customers with little choice but to accept changes in terms and conditions of service, with reduced potential of monitoring by the PSC.

As a substitute for regulation, the bill requires phone companies to publish their rate changes on their websites.  This is not an effective means of information for many New Yorkers because broadband penetration in New York households is woefully far from universal.  According to the State Broadband Office,

An estimated 700,000 New Yorkers (325,000 households) lack access to broadband at home. This is more than the entire population of many States. Many of New York’s gaps in broadband service exist because of the high costs of building networks in areas where population is sparse. For example, in the geographically challenged North Country region of the State, 10% or 43,000 New Yorker’s do not have access high-speed Internet.

Also, many elderly persons do not the internet at all, or only use it for limited purposes such as email.  For those who have broadband, the internet may be an effective way to obtain pricing and service offering information.  But this bill is not needed to accomplish that.The PSC could and should require all utilities to maintain in plain language a description of all service offerings and prices at their websites. This would aid consumers with more transparency regarding prices and terms of competitive offerings, as the PSC  has recently begun with the competitive energy providers (ESCOs).

The bill also is ambiguous because it does not define "nonbasic" service. The PSC regulations, Part 609 define "basic local exchange service" as 

(e) The term basic local exchange service shall include the following charges for residential service:

(1) customer access line, including any usage bundled in this charge;

(2) local measured service;

(3) local measured units;

(4) locality rates;

(5) mileage;

(6) late payment charges on local exchange service;

(7) subscriber line charge;

(8) taxes and surcharges prorated to reflect only the taxes and surcharges associated with local exchange service;

(9) nonpublished service;

(10) touchtone;

(11) local exchange service restoral charge;

(12) NSF check charge for local exchange service or any part of local exchange service;

(13) service order charge for local exchange service;

(14) construction charges for local exchange service; and

(15) intra LATA toll service and interregional calls unless intraLATA prescription is offered and selective intra-

LATA access is available.

Some services are not readily sorted into "basic" and "nonbasic".  The trend in recent years has been to blur the pricing of "basic local exchange service" by combining --"bundling" -- it with long distance, so that the price of the local service is not readily transparent.  Many people now buy flat rate bundled local and long distance services which combine "basic local exchange" service and Intra-LATA and Inter-LATA long distance service at a flat rate, and further bundle that phone service with other services such as DSL or cable broadband, and other services.

Traditionally, the PSC asserts jurisdiction over bills that combine "basic local exchange" service with other offerings, and regulates the allocation priority of payments when customers in arrears make part payments to preserve the more basic communications services. These services may have varying degrees of regulation by different regulators, e.g., the PSC and the FCC, which are in flux.  As a policy matter high speed broadband will eventually be seen as a "basic" telecommunications service too, requiring universal availability, and this is State broadband policy now:

New York State is poised to eliminate the digital divide and ensure every community, business, resident and visitor has the digital resources necessary to live, work and enjoy all that New York has to offer through the Internet.

In sum, the bill would limit future PSC regulation of "nonbasic" service.  What is "basic" and "nonbasic" is not defined in the law.  The degree of regulation over "nonbasic" regulated services is in flux, and may shift over time as state and national policies evolve. The bill unnecessarily adds to ambiguity and may limit future regulatory options.


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