New Focus on Low Income Working Families
New York Governor Eliot Spitzer recently announced creation of a multi agency Cabinet to coordinate policies designed to assist working families living in or near poverty. See Spitzer Targets Working Poor in `Economic Security’ Plan. According to a press release, the objectives are to
- Reduce New York’s high cost of living;
- Establish educational and workforce development opportunities for a highly competitive economy
- Improve services that target low-income, working New Yorkers at risk of falling into the social safety net, and
- Bring back jobs into our communities.
The 17-agencies involved include the Public Service Commission (PSC). The other agencies are: Office of Temporary and Disability Assistance; Department of Agriculture and Markets; Banking Department; Division of Budget; Office of Children and Family Services; State Education Department; Empire State Development Corporation; Department of Health; Higher Education Services Corporation; Division of Housing and Community Renewal; Division of Human Rights; Insurance Department; Department of Labor; Public Service Commission; SUNY/CUNY System; Department of Taxation and Finance; Office for Technology.
While the focus is on working families, the Cabinet should recognize that many households fall into poverty for periods of less than a year, often due to health reasons, temporary disability, loss of employment, change of household composition due to separation or divorce, and so forth. It is during these periods that families often fall into arrears in paying for essential services, such as utilities. Indeed, loss of utility service is often a precursor to homelessness. It is hoped that the new inter agency Cabinet will bring a broader vision to bear upon PSC policies to promote self sufficiency and affordability, rather than burdening households at risk with additional charges and termination of utility service that may undermine household and family stability, frustrating the education of children and the provision of social services by other agencies.
PSC Decisions Directly Affect Affordability of Utility Service
The PSC is a crucial actor in policies affecting affordability of utility service for low income energy and telecommunications consumers. While incomes of lower income households have stagnated, energy costs have been rising. In response, PSC decisions in utility rate cases over the past decade have gradually required some low income rate or program designed to reduce monthly bills for energy and telephone service at each utility, often at the urging of PULP. See, for example, Reduced Electricity Rate for Low Income Con Edison Electric Customers.
PULP estimates that the total amount of PSC – authorized utility rate relief for low income customers is now in the neighborhood of $75 million per year. In addition, the PSC requires some of the funds collected from electricity consumers for the System Benefit Charge administered by NYSERDA to be allocated for low income energy efficiency measures that can help reduce consumption and bills, and has required additional utility-specific efficiency programs that also benefit low income households.
California and Massachusetts have far more robust programs designed to reduce energy and telecommunications cost burdens for lower income households. In contrast, New York’s low income rates and programs reach a smaller percentage of low income consumers, and the amount of bill reductions is generally smaller. As demonstrated in a report annexed to PULP rate case testimony, Utility Ratemaking to Meet the Needs of Low- and Fixed-income New Yorkers, much more can and should be done by the New York PSC to address the energy burdens of economically vulnerable households, through rate relief and efficiency measures.
It is clear that utilities have not received a consistent, strong message from the PSC to enhance low income rates and programs to make service more affordable for working poor customers. For example, in a pending case, Con Edison is proposing rate increases that will raise rates more for the customers on the low income rate. See Con Edison Asks PSC for 17% Increase in Residential Electric Rates: Low Income Customers Would Pay Even More. Also, in the prior rate case, the PSC allowed Con Edison to restrict eligibility triggering categories so that working poor families that do not receive cash assistance, but receive only Child Health Plus benefits, or only Medicaid benefits, lost their eligibility. See Reduced Electricity Rate for Low Income Con Edison Electric Customers.
New York No Longer a Leader in the Telephone Lifeline Program
New York once led the way with innovative strategies to improve telephone service subscribership and affordability. In recent years, however, enrollment in the New York telephone lifeline program, which provides rate reductions for low income households of over $16 per month, dropped from over 700,000 households to less than 500,000 households. The consequence is that telephone service subscribership is decreasing, and far more than $25 million per year is being paid for telephone service by households that should be eligible for reduced telephone lifeline rates, with these funds coming out of tight budgets and contributing to economic hardship.
The PSC does not issue regular reports on the lifeline program, participants, and subscribership, and appears to have no plan to deal with the fall off of participation. In contrast, the Vermont Department of Public Service commission issues an annual telephone lifeline report monitoring trends in lifeline enrollment. The PSC has not been responsive to PULP efforts to examine the decline in telephone Lifeline rate customers. See, for example, PULP testimony on lifeline eligibility and PULP Comments on Verizon Incentive Rate Plan.
Inmate Telephone Issues
When the PSC refused to correct excessive and unreasonable rates paid by the relatives of prison inmates, who are often struggling to make ends meet, it was necessary for the Court of Appeals and the legislature to correct the rates that had been allowed by the PSC. See N.Y. Court of Appeals Revives Suit to Recover Excessive Charges for Inmate Telephone Calls. While the high rates for calls from state prison inmates are now being addressed, some other institutions (local jails and mental hospitals) still collect high commissions from inmate calls, with no meaningful PSC review of the rates for reasonableness. Also, based on customer calls to PULP, the PSC apparently does not act upon bill complaints from customers disputing the amount of charges. For example, when a call is dropped by the carrier and then redialed – a not infrequent occurrence – additional substantial per-call charges may be imposed for the reconnection, with no effective remedy for the consumer for the poor service or over billing.
Electricity and Natural Gas Rate Stability and Predictability
A large proportion of households in New York state lack the savings needed to absorb unpredicted spikes in their energy costs. Probably for this reason, rate stability and predictability is well embedded in the Public Service Law. For example, the law specifies that
- the PSC will establish maximum rates that cannot be changed without future notice and regulatory review
- rate increases of more than 2.5% require major rate case hearings, which typically take 11 months to conclude
- time of use pricing must be voluntary, and
- seasonal electric rates may only be charged for amounts used in excess of 250 kwh per month.
In its rate setting practices, however, the PSC allows the rates of some utilities to become volatile and unpredictable, in a continued effort to foster its misguided deregulation vision. That vision, promoted by Enron and not adopted by any other state since 2000, is that customer needs for stable, predictable electric and gas rates somehow will be met by new electric and gas companies called “ESCOs” in a virtually deregulated gas and electricity marketplace. Neither Congress nor the state legislature authorized such deregulation and residential price destabilization.See Disconnected Policymakers. This has not occurred and PULP has demonstrated that “fixed” price contracts offered by ESCOs are not fixed at all.
The PSC adopted its policy of bill destabilization first with Con Edison, which since 2000 has bought much of the energy for customers at volatile spot market prices. When PULP and AARP petitioned for review of this deliberate introduction of price volatility, the PSC rejected the challenges. This resulted in unpredictable utility bill spikes that cannot be managed by Con Edison customers living in or near poverty
Another area deserving attention by the new Cabinet is more vigorous PSC enforcement of the protections available to consumers under the Home Energy Fair Practices Act (HEFPA). The statutory goal of HEFPA, declared in Section 30 of the Public Service Law, is continuous natural gas and electricity service “without unreasonable qualifications or lengthy delays.” The Legislature adopted this objective because it found that continued electricity and natural gas service “is necessary for the preservation of the health and general welfare and is in the public interest.” The threatened interruption of utility service creates household crises and makes education of children and the provision of other services by other agencies all the harder.
In recent years, the PSC allowed some utilities to create new barriers for service. These include
- closing many customer service walk-in offices
- allowing National Grid to demand deposits in circumstances not allowed by HEFPA
- allowing National Grid to demand large payments as a condition of receiving service when a new applicant for service owes money for prior service, even though payment agreements are required to be based on customer financial circumstances
- not issuing decisions on customer complaints against ESCOs
- requiring customers with complaints to complain twice, by referring the complaint to the utility and requiring the customer to lodge a second complaint when the utility does not change its position.
- allowing utilities to terminate service via court replevin proceedings while complaints regarding disputed bills are pending.
The PSC also attempted to deregulate prices, terms and conditions of the new companies it favored, and administratively exempted them from the coverage of HEFPA. As a result, many vulnerable customers seeking relief from high energy costs were abused. See State Forgot Consumer Protection in Deregulating Gas. The legislature rebuked the PSC on this issue by enacting the Energy Consumer Protection Act of 2002. Although HEFPA provides for Commission determination of customer complaints, PULP is not aware of any reported PSC customer complaint determinations against an ESCO, even though the incidence of ESCO customer complaints appears to be higher than with the traditional utilities.
Service Termination as a Bill Collection Strategy
Termination of service is exceedingly disruptive to the lives of lower income households struggling to live without welfare. It often occurs at times of stress and vulnerability due to loss of income or employment, health problems and other household emergencies. The use of termination of service as a utility bill collection strategy is an extraordinary remedy not available to other creditors, and the decision to seek termination lies within the discretion of the utility. There are wide variations in the number of terminations for nonpayment among the utilities and over time with the same utility.
The PSC usually reacts when there is a significant outage affecting the general population, (see Queens Power Outage Update), but it has not shown major concern with the deliberate cessation of service for bill collection purposes. See Candle Fires: A Symptom of “Rolling Blackouts” Affecting Low-Income Households.
The PSC has embraced lighter regulation of the utilities through “performance regulation” which grants great latitude to the utility so long as performance criteria are met. For example, the PSC measures service reliability by counting the number and duration of customer outages and service interruptions, but may not be assessing enough other factors essential to continuity of service. See Report of the New York State Assembly Queens Power Outage Task Force – Improving the Accountability of Con Edison and the PSC. The New York PSC has not established any performance measure that would incent utilities to reduce the number of deliberate service interruptions made in order to collect bills, in contrast to at least one other jurisdiction, the State of Washington.
Coordination of PSC Policies with Public Assistance and HEAP
Low income customers may receive payments under Section 131-s of the Social Services Law, which authorizes grants to cover up to four months’ utility bills within the last ten months. That amount is sufficient to preserve or restore utility service, and any balance, while still owed to the utility, cannot justify termination once the four-month payment is made. The PSC now allows some utilities to bring on a new termination – perhaps years later – when the customer leaves the public assistance rolls, to collect any arrears that were not covered by the four-month payment. HEFPA was intended to prevent situations where large arrears are built up and then are impossible for low income households to pay, to limit the exposure of public assistance agencies to four months’ bills, and to bring situations to a head promptly so that social services, energy efficiency services, etc. might address a problem. A large unaffordable bill when the customer leaves the welfare rolls may only drive them back to the welfare offices for emergency aid, or, if they struggle to pay it, it may lead to major hardship, inability to pay other bills such as rent, or hazardous situations.
Another area deserving review by the Cabinet is the tailoring of the state’s HEAP plan with PSC policies. Currently, the PSC allows utilities to refuse to accept emergency HEAP payments, and to refuse to restore or continue service, jeopardizing the state’s compliance with the crisis assistance provisions of the Low Income Home Energy Assistance Act, which requires state plans to assure that emergencies are resolved with the HEAP assistance. See OTDA Receives Input at Hearings on Draft HEAP Plan for 2007 – 2008.
The new Cabinet is a welcome opportunity to bring utility and PSC policies into line with broad objectives to assure continuous utility service at prices affordable to families struggling to live without welfare.