AARP and Utility Project File Comments on NY PSC Staff Track I “Straw Proposal” in “REV” Proceeding

The New York Public Service Commission (PSC) spawned a major new initiative called “REV,” which stands for Reforming the Energy Vision. Through information technology and clean energy solutions, the objective of REV is to achieve a new, state-of-the-art 21st Century power grid that might enable customers to better manage and reduce their electricity costs while protecting and preserving the environment.  This would go beyond the existing solar net metering trend and the burgeoning growth of the “internet of things,” with which we can operate remotely, with smartphones, HVAC systems and major appliances connected to home WiFI.  Hundreds of parties have joined in the PSC proceeding to discuss ways in which utility electric service could be modified or further “unbundled” for participation by ESCOs or ESCO-like third parties who are not utilities.

Some have said that a desired outcome of the PSC REV proceeding is also for “electricity to remain affordable“. As we have reported, New York electricity rates are not affordable now to many New Yorkers.  New York has the highest electric rates in the continental United States, even passing Alaska. Collection activity reports filed with the Commission by the nine investor-owned utilities plus the Long Island Power Authority show that many New York consumers have fallen behind in making payments for essential utility electric and gas services.  As a consequence, they face added late charges, threats of service termination for bill collection purposes.   As of May 2014, 1.1 million residential customers  more than 60 days in arrears owed more than $900 million to the utilities, more than 600,000 shutoff notices were sent in May 2014, and  annually service is shut off to more than 250,000 customers as a bill collection measure.

In August 2014 comments, AARP and the Utility Project identified defects in the process by which the REV initiative is being undertaken, as well as identified numerous key questions. Subsequently, the Department of Public Service (DPS) Staff issued its Track One “Straw Proposal” on August 22, 2014. AARP and the Utility Project submitted comments on the “Straw Proposal” on September 22, 2014 with these primary recommendations:

  1. Process concerns: the lack of customer participation, inattention in the staff report to concerns previously expressed by consumer groups, and concern the PSC is rushing this.

The Commission should ensure that ratepayers realize the net benefits from the optimal use of distributed resources at minimal cost to integrate these resources into the electric system.  The Commission should document the basis for any assumption that the programs and initiatives reflected in the REV initiative will benefit residential customers with more affordable electric service compared to the ongoing mandates and costs that are being imposed on ratepayers. The Commission should require that any proposed Distributed Energy Resource (DER) program recommended by a utility with cost recovery from ratepayers be first evaluated with a well-designed demonstration or pilot program that will obtain data about customer engagement, impact on usage, impact on peak load demand, and potential bill impacts with sufficient diversity of participation to distinguish differences among key demographics, such as income, age, housing type, and usage characteristics. Any utility that seeks to propose a demonstration project with recovery of costs from ratepayers should be required to obtain pre-approval from the Commission and include the basis for any assumption that the project, if successful, is likely to be cost effective if implemented on a larger scale.

  1. Our joint concern that rates will increase. Rates are not affordable to many New Yorkers now: customers are in debt to utilities, pay high late charges, incur shutoff notices, and are shut off for bill collection purposes.

With regard to the benefits and costs identified by Commission staff in its discussion of the forthcoming Cost Benefit Analysis (CBA), AARP and the Utility Project propose two essential changes to the Staff’s proposal to better protect residential ratepayers. First, any CBA should include an analysis of the proposed investments on direct bill impacts and affordability of service. The potential cost of REV related investments could be very significant, and New York customers already pay some of the highest rates in the Nation.  The impact of cheaper natural gas on future electric prices is unknown and fraught with risks relating to pipeline capacity and transportation costs. The CBA should require the utility to include within their business case analysis an evaluation of the bill impacts associated with the cost of proposed investments for all customer classes and over the period during which the investments are proposed for recovery in rates. When household income is stretched to the limit to pay for necessities such as health care, education, transportation, shelter, food, interest on debt, late charges and the energy bills, there is often not much left over for investments in new technologies or home repairs and other measures to reduce or control energy usage.  Furthermore, tenants and those who reside in multi-unit buildings have no incentive to make investments in the landlord’s facilities. The Staff “Straw Proposal” acknowledges that “[t]he responsibility of the Commission and utilities to ensure reliable service at reasonable rates is fundamental.” AARP and the Utility Project appreciate this recognition. Collection activity reports filed with the Commission by the nine investor-owned utilities plus the Long Island Power Authority show that as of May 2014, 1.1 million residential customers who are more than 60 days in arrears owe more than $900 million to the utilities, more than 600,000 shutoff notices were sent in May 2014, and annually service is shut off to more than 250,000 customers as a bill collection measure. It does not appear that affordability and concern about bill impacts are reflected in the overall policies and implementation steps recommended in the Staff “Straw Proposal.”

  1. Joint concern by AARP and the Utility Project with saddling lower income customers with utility system costs through revenue decoupling mechanisms in current rates, if higher income customers pay less of the fixed utility costs when they shift to subsidized solar generation or DER programs.

The Commission should require the utilities to evaluate the impact of REV investment costs to ratepayers on other benchmarks of affordability.  These include whether bills and costs will increase, or be shifted from DER participants to nonparticipants, due to REV.  This could result in higher debt owed to the utility, and higher costs due to increased incidence of nonpayment, more shutoff notices, the need for more customer contacts with payment plan negotiations and other contacts associated with disputed bills and attempts to avoid disconnection or restore service.

  1. Concern that new third party providers of resold or augmented distribution system services will harm customers without adequate consumer protection, as ESCOs have done.  

The Commission should reject any proposal to allow third parties to market and advertise its products on the regulated utility bill. These same objectives were promised to consumers with the onset of retail electric competition and the development of appropriate regulatory oversight of ESCOs.  However, the ultimately ineffective development of licensing and consumer protection regulations to govern ESCOs has failed to provide the necessary assurances and protections that consumers need.  New York has not yet adopted the necessary regulatory reforms and has not enforced existing weak regulations with swift and fair prosecutorial actions.  In part, this disappointing history is due to the lack of clear statutory authority and the failure to allocate sufficient resources and priorities to the consumer protection function necessitated by the implementation of retail energy markets. In fact, the Commission’s initiative to respond to the onslaught of customer complaints about ESCO services and prices starting in 2013 has still not resulted in needed substantive reforms in regulations and licensing requirements. There is unfortunately no basis for concluding that a  result similar to the ESCO debacle would not occur with the opening of distribution and other utility functions to “DER providers.” Prior to any further unbundling of distribution utility functions to third party DER providers or expanding the role of ESCOs with regard to DER programs and policies, the Commission should identify or obtain clear statutory authority and additional resources to implement the Staff’s proposals with regard to registration, licensing, and consumer protection policies and regulations applicable to DER providers.  This process will require proceedings to obtain public input and recommendations prior to their adoption. The Comments of AARP and the Utility Project on the DPS Staff Track 1 “Straw Proposal” are here. Gerald Norlander Follow New York’s Utility Project  on Twitter

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