PSC Approves Con Edison Rate Deal

On February 20, 2014, the New York Public Service Commission (PSC) approved a non unanimous Joint Proposal for resolution of the simultaneous gas, electric, and steam rate cases filed by Con Edison in January 2013.

New York’s Utility Project opposed the Joint Proposal because it inadequately addressed the needs of customers struggling to pay their bills.  See UTILITY PROJECT OPPOSES PROPOSED CON EDISON ELECTRIC AND GAS RATE CASE SETTLEMENT; PSC SEEKS PUBLIC COMMENT  Arguments for rejecting the plan included that a high premium was being paid for the multi year aspects, the rates are set to yield a return on equity of 9.2% for electric and 9.3% for gas, when the best updated testimony on the issue was that the proper rate, using methodology traditionally accepted by the PSC, is 8.8%.  The Utility Project also identified certain new expenses being allowed for management variable pay that were not in the prior plan.  A lower ROE and disallowance of  the questioned expenses could have reduced rates, which are among the nation’s highest.  Also criticized was the carryover of overcollected funds for no designated purpose, and the $47.7 million increase that will automatically occur at the end of the electric plan even if no new rate case is filed.

More than 1,000 public comments were received, overwhelmingly opposing the settlement proposal, and AARP also joined in opposition to it.

The PSC approved the settlement in its Order Approving Electric, Gas and Steam Rate Plans in Accordance with Joint Proposal.

Minnesota style (“it could be worse”), the Commission’s Press Release notes that it did not grant the increases initially requested by Con Edison, (which were inflated by unrealistic requests for ROEs exceeding 10%), and thus the deal was “far better for customers than what Con Edison had proposed.”  But see Con Ed Rate Deal Far From Perfect, Says AARP: As NYC Residents Pay Some of Nation’s Highest Electric Rates, Deal Hides Hikes for Residential Consumers – Highlights Need for NY Utility Watchdog.”

Though often characterized as a rate “freeze”, it is not.  See AARP: Devil’s in Details of Con Ed Rate Deal.  Rates for delivery service will fluctuate based on numerous factors, as will rates for supply service.  And rates are being increased at the end of the plan.  The Commission did decided to apply the over collected funds to reduce the first year impact of the end-of-plan increase.  See New York Power and Light, PSC eases back-end Con Ed hike as it approves rate deal.

The Utility Project pointed to trends indicating a high and growing level of customer indebtedness to the company for bills over 60 days overdue, and increased threats of service termination for nonpayment, and sought improvement in the low income rates.  See CATCHING UP IS HARD TO DO – NEW YORK’S UTILITY CUSTOMERS AND THE GREAT RECESSION.  The Utility Project also urged that Medicaid be one of the eligibility conferring programs for low-income rate eligibility.  Medicaid is available to households with incomes above the general income eligibility guidelines if they have high medical expenses that reduce their incomes below the standard of need. Medicaid recipients are eligible for Con Edison’s low-income gas rates, KeySpan’s low-income gas rates, and Telephone Lifeline assistance, all of which were previously approved by the PSC.

The Commission rejected the low-income rate improvement proposals, but agreed to reconsider making the receipt of Medicaid assistance one of the categorical eligibility triggers for the low income electric rate at a later time.

 This ended a year of administrative litigation, unless there are rehearing petitions.  Although rates could have been lowered this year, the Commission approved freezing them to avoid  possible increases in the next year, because if rates were only set for one year, Con Edison could immediately file a new case that, after being suspended and reviewed, would take force after the year ends.  The plan allows Con Edison to file for major new rate increases to take effect after the end of two-year plan for electric service and three-year plan for gas service.  As it takes about a year’s lead time  to set new rates, Con Edison will be able to file for new rates next year for electric service and in two years for natural gas.

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