Consumer Groups Urge New York PSC to Release Annual Reports Showing Profits of “Lightly Regulated” Electric Companies

AARP, Consumers Union, New York Public Interest Research Group (NYPIRG), and New York’s Utility Project today filed a Letter of Support urging the Secretary of the Public Service Commission to reverse a determination of the agency’s Records Access Officer (RAO) which allows electric companies “lightly regulated” by the PSC to maintain secrecy of the information in their Annual Reports  filed under the Public Service Law.  The information in the Annual Reports shows the revenues and profits of the electric companies, and is of great importance to New York consumers seeking to understand why they must pay the highest prices for electricity in the continental USA.

The electric companies involved include “merchant power” companies that bought power plants from traditional electric utilities under encouragement from the PSC beginning in the late 1990’s after the PSC issued its “vision order.”  The traditional utilities sold off their power plants and in exchange were allowed to reorganize into larger holding companies.  For example, Con Edison sold nearly all of its power plants and was allowed to have new subsidiaries selling wholesale and retail energy (Con Edison Energy and Con Edison Solutions), and other subsidiaries which have since folded (Con Edison Communications, and a Con Edison power generating company that operated in other jurisdictions).  The New York PSC implemented its 1996 “vision” without legislation by waiving or forbearing enforcement of many provisions of the Public Service Law in its “light regulation” regulatory regime.  There have been numerous incidents in which power producers have allegedly gamed or manipulated electricity markets to inflate wholesale prices ultimately passed through in higher retail rates to consumers.  See, e.g.,MARKET MONITOR SUGGESTS ELECTRIC POWER PRODUCERS PRICE GOUGED IN JANUARY 2014 SPIKES.  The New York PSC is now re-examining its prior deregulatory “vision” in a major proceeding underway called “Reforming the Energy Vision.”  Consumer groups recently filed comments expressing concern that “reforms” now under consideration may exacerbate hardship and the already high energy burdens faced by low and fixed income consumers.

The Commission adopted a “light regulation” regime for the companies that bought the spun off power plants and for new companies building new plants.  There is no specific statutory authorization or definition of a “lightly regulated” electric company in the Public Service Law, and no law specifically requires keeping any information in electric company annual reports secret.  The Commission has allowed the “lightly regulated” electric companies to sell at wholesale only, without requiring them to sell any portion at reasonable retail prices under state jurisdiction, and so their prices are now subject to FERC jurisdiction over wholesale electric sales. The Commission’s “light regulation” regime of these electric companies still covers “matters such as enforcement, investigation, safety, reliability … system improvement …. [p]ower in the market … and any actions that contravene the public interest,” according to the decision of the New York Court of Appeals in Matter of Astoria Gas Turbine Power, LLC v Tax Commn. of City of N.Y., 7 NY3d 451, 455 – 456 (2006).  For more background on the PSC’s “light regulation” regime, see NY COURT OF APPEALS SAYS PSC “LIGHTENED REGULATION” OF NEW ELECTRIC COMPANIES JUSTIFIES LOCAL PROPERTY TAX REDUCTIONS, Utility Project Blog, November 21, 2006.

For years, the Public Service Commission deemed filing of reports with FERC to be compliance with the state statute’s Annual Report filing requirement.  After FERC gave many sellers “market based rate” permission and reduced its filing requirements, however, the “lightly regulated” electric companies were not required by federal or state authorities to file reports.  After legislation passed the assembly to require PSC enforcement of the longstanding state statute requiring Annual Reports, the PSC acted and  in Case 11-M-0294 the companies were again required to file Annual Reports with the PSC, beginning in July 2013 for calendar year 2012.  In the Order, the Commission suggested that the electric companies could seek protection of any information claimed to be trade secrets by filing confidential reports, which would be subject to public disclosure through the FOIL process for evaluating claims of trade secrets.  When the companies filed their Annual Reports, they filed versions redacting virtually all data and information fields on the entire report forms.  As a consequence there is no adequate public information regarding basic matters such as the  costs, revenues, and profits of the electric companies supplying most of the electricity in the state.

The Chairman of the Assembly Corporations Committee, James Brennan, asked the PSC for the Annual Reports without redaction of information through a records request under FOIL.  The PSC Records Access Officer issued a Determination denying the Chairman’s request, finding that the “lightly regulated” companies are ‘competitive” that the information in the Annual Reports would harm the filers, and cannot be released under the FOIL “trade secret” exemption from disclosure.   Assemblyman Brennan appealed the RAO determination to the PSC Secretary, who is designated by the PSC to hear appeals from the RAO.   The electric companies and their association filed their opposition to the appeal in PSC Case 13-01288.  Much of their argument is based on sheer conjecture that armed with the information in the Annual Reports — filed in July for the prior calendar year — competitors might deduce the current marginal operating costs of each other’s generating units and then use that cost information to implement  anti competitive bidding strategies in the NYISO spot markets. They do not, however, actually show how information useful in gaming the NYISO market could be derived from the Annual Reports of prior years, and they assume that a gaming strategy based on the derived information would not be detected or why it would not be identified if attempted and stopped by the NYISO market monitor, the NYISO Board, the FERC, or other law enforcement agencies.  Also, with readily available specifications of the power plants which show their capabilities and heat rate efficiency, and with readily available information about current costs of fuel, it is possible to estimate the costs of operations of the plants without resorting to examination of aggregated prior year data based on prior year fuel costs.  Also, prior year revenues are likely to be determined by the prices set in spot markets where the price is set by other sellers whose bids clear the market in a given hour.  Thus, the revenues are not indicative of what price was demanded by the sellers.  What is really at stake may be the reluctance of the sellers to divulge their revenues and profits from the New York PSC’s “vision” that is now generating the nation’s highest electric rates outside Hawaii.

The consumer groups state that without release of the information in the Annual Reports, the public can have no confidence that the high electricity rates they pay are reasonable, or that Commission is performing its role to assure that the electric companies are acting in the public interest and not reaping large financial rewards while many New York consumers suffer great hardship from the state’s high electricity costs.  See CATCHING UP IS HARD TO DO – NEW YORK’S UTILITY CUSTOMERS AND THE GREAT RECESSION, Utility Project Blog,  February 3, 2014.

The next step in the review process is a decision by the PSC Secretary on the appeal from the initial determination of the RAO.

Gerald A. Norlander

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