Electric Bill Surcharge Reform Proposals to Collect and Spend Billions Do Not Address Affordable Service to Low Income Customers

On September 23, 2014 the New York State Energy Research and Development Authority (NYSERDA) filed with the New York State Public Service Commission (PSC) a new  Proposal for a “Clean Energy Fund (CEF),” which, it says, is designed to complement and align with the long-term electric industry policy objectives to be established in the PSC’s “Reforming the Energy Vision” (REV) proceeding and in the Draft New York State Energy Plan.

The State Energy Plan is not finalized and the PSC’s “REV” plan is in flux, with a final policy decision expected in early 2015, with new requirements to be implemented by electric utilities, perhaps in their next rate plan filings.  For example, Con Edison may file for new rates in February 2015, which would take effect in 2016, and that would be the time when implementation of new REV policies would occur.

The Draft State Energy Plan calls for improved energy affordability for New York’s energy consumers, who pay some of the nation’s highest rates for electricity.  See DRAFT NY PLAN CALLS FOR ENERGY AFFORDABILITY FOR LOW-INCOME CUSTOMERS, COMMENTS INVITED,  NYUP Update February 11, 2014 Here is what it says:

Improving Energy Affordability
• Keep New York residential customer electric bills as a percentage of household income at or below the national average (% of median
household income)

• Reduce the percentage of household income devoted to energy bills for low-income New Yorkers (% of low to moderate household income)

The Draft State Energy Plan, at page 120 of a Technical Appendix on “Impacts and Considerations,” further amplifies these concerns and affordability goals:

Economic Effects of Energy Costs
Because the cost of energy has a regressive impact on lower income households, special care must be taken to protect these households from any direct and indirect negative impacts caused by spiking energy prices. Currently, in New York, lower income households receive bill credits to offset the costs of energy. The amount of credits available to lower income
households vary from utility to utility. The variation often depends on the inclination of the utility and how the issue is approached in PSC rate cases. Establishing a more substantial bill discount, such as California’s . . . . uniformly throughout the State would help protect lower income households from the economic burden of energy prices.

The Draft State Energy Plan specifically references California’s Alternative Rates for Energy (CARE) program, under which low-income customers pay approximately 30 – 35% less than other residential customers.  The CARE rate reduction includes some environmental surcharges which low-income customers are exempted from paying.  In the New York low-income rate programs there are limited enrollment targets in PSC-approved rate case agreements, and so only a small portion of eligible customers obtain the lower rates.  In contrast, the California Public Utility Commission seeks to achieve full enrollment of all customers eligible for the low-income rates and requires vigorous outreach and enrollment efforts by the California utilities.  Reports of PG&E and Southern California Gas, for example, indicate they are enrolling more than 90% of low-income customers eligible for the 30-35% lower CARE rates, with the aid of community organizations compensated to assist in enrollment efforts. The California utilities also have programs to ensure ample provision of energy efficiency services to low-income customers.

Implementation of the affordability aspect of the Draft State Energy Plan with a program comparable to California’s would be welcome news indeed for many New Yorkers struggling to pay their unaffordable electric and gas bills.  See Utility Project Update, CATCHING UP IS HARD TO DO – NEW YORK’S UTILITY CUSTOMERS AND THE GREAT RECESSION, regarding the debt owed by customers in arrears, shutoff threats, and actual shutoffs.  Thus far, however, despite its stated ambition to set a new comprehensive paradigm for electric industry organization and regulation, neither the initial REV order  issued by the PSC, nor the Department of Public Service  (DPS) Staff Report and Proposal, nor the DPS Staff Straw Proposal on Track 1 issues seriously addresses the electric bill affordability crisis in New York or the Draft Energy Plan recommendations to address it.

Under a May 8, 2014, Order, the Commission instructed NYSERDA to develop a framework for funding that establishes a transparent upper limit on contributions from ratepayers.In its CEF Proposal to revise the electric bill surcharges, NYSERDA asks the PSC for permission to  (1) reallocate  funds in the Energy Efficiency Portfolio Standard (EEPS) and System Benefit Charge (SBC) Programs for continuation of programs in 2015; (2) establish the new  Clean Energy Fund to supplant the SBC, EEPS, and other programs and take related actions; (3) establish annual electric bill surcharge collections caps, permit collections up to but not exceeding those caps, and permit the use of currently uncommitted funds and collected funds on a “bill-as-you-go” fund management approach; (4) establish new collections for a “NY-Sun” program for the period 2016 to 2023; (5) establish collections for the new New York “Green Bank” (NYGB) program; (6) establish a Market Development program and collections, funding, and management rules for that program; and (7) establish a Technology and Business Innovation program and collections, funding, and management rules for that program.

The Commission requested these recommendations from NYSERDA on annual ratepayer electric bill surcharge collection levels for each year of the 2016–2020 program cycle and beyond. The proposed annual collection levels, as envisioned by the Commission, would be below the authorized 2015 levels for the RPS (Renewable Energy Portfolio Standard), the EEPS (Energy Efficiency Performance Standard), the SBC (Societal Benefits Charge), and the T&MD (Technology and Market Development) programs , which totaled $925 million in 2015—all of which were funded by ratepayers, via surcharges imposed by the PSC on customer bills for electric service, collected by the utilities, and remitted to NYSERDA for expenditure on its non-utility programs under PSC direction.

The total funding requested for the CEF through 2025 is approximately $5 billion. NYSEDA’s September 23, 2014, proposal breaks down CEF funding into two five-year cycles. Under the first five-year cycle (2016–2020), CEF will operate within a period of transition, during which the older programs (SBC, EEPS, and RPS) are phased out and new programs are launched. Funding allocations and decision making during the second five-year cycle (2021–2025) will be informed, in part, by the experience gained during the first funding cycle. NYSERDA will conduct reviews every three-year review cycle to measure performance and adjust program parameters as necessary and appropriate to improve performance and/or adapt to new information or emerging market conditions.

In its CEF Proposal, for the first three years (2016–2018), NYSERDA proposes a total annual funding amount of $648 million (i.e., a total of $1.944 billion over those three years, which is $267 million a year less than the current surcharge revenues, amounting to $801 million less over the three years). As requested by the Commission, NYSERDA also proposed reduced annual funding levels thereafter over time, falling to $453 million, $428 million, and $308 million per year in 2019, 2021, and 2025 , respectively.

This presents an opportunity:  Modify the proposed CEF to make it a Clean Energy and Affordability Fund (CEAF), using a significant part of it to make rates more affordable to New York’s low-income customers.  This could be accomplished without further raising electric bills.  Instead of the slight general lowering of bills to all customers being proposed, the PSC could significantly lower the bills of low-income customers without raising the bills of other customers.  In this way New York could implement the type of robust low-income programs that California has achieved by using part of the surcharge revenues to defray the revenues forgone by reducing bills significantly for low-income customers.  Also, by tapping the statewide fund created at NYSERDA with surcharge revenue, it would be possible to equalize low-income rate reductions for low-income customers of all the utilities, avoiding undesirable rate shifts to other customers of some utilities that may have a higher proportion of low income customers than others.

The NYSERDA CEF proposal fails to describe specific programs or funding for the benefit of low-income New Yorkers: There is no recognition that energy affordability and containment of NY electricity prices on low-income New Yorkers should be a sicnificant focus. NYSERDA refers to “high overall energy costs in New York State [that] create a cost burden on all customer classes” but does not acknowledge the critically at-risk low-income consumer, as the Draft State Energy Plan does, as a sector needing special relief or consideration. There is also no recognition in the CEF of the potential additional funding that ratepayers will be required to pay for “distributed generation” and other potentially costly REV-related initiatives. In addition, there are no specific milestones and metrics to measure success. The proposal lists three goals: “achieve greater levels of scale for clean energy in the State economy”; “achieve scale, not only through the investment of public funds, but to foster new investment opportunities to attract private capital to invest in clean energy in New York”; and “significant reduction in greenhouse gas (GHG) emissions from New York’s energy sector.” There is no mention of the “investment of public funds” for relief of low-income consumers impacted by New York’s high electric rates.

The REV and CEF proposals seem to be trying to emulate Germany and California in their emphasis on new and possibly costlier distributed generation, but lack the attention given in those jurisdictions to meeting the needs of low-income customers. As proposed, NYSERDA would have substantial discretion to move overall funding between program components without public review and comment. NYSERDA is proposing four new initiatives to implement the objectives established by the PSC in its May 8, 2014, Order: 1) Market Development, to reduce barriers, animate consumer demand for clean energy, and enable the private markets to provide new products and services sought by an animated consumer market; 2) Technology and Business Innovation, to catalyze the development of innovative clean energy solutions while growing New York’s clean-tech sector and accelerate the development and introduction of the new technologies needed to foster increased levels of greenhouse gas reductions; 3) a “Green Bank” initiative to provide capital to private entities for technologies and programs designed to seek “market transformation” in the financial sector to leverage public investments and reach new markets for clean energy services; and 4) NY-Sun, to create a robust and self-sustaining solar market in New York for solar photovoltaic (PV) technologies and build a program approach for other clean technologies. In what is likely to be a controversial proposal, in order to achieve long-term greenhouse gas emission reductions, NYSERDA recommends a fuel-neutral investment strategy. This would allow electric funds to be comingled with gas funds.

On November 8, 2014, the PSC issued a Notice Solliciting Comments requiring NYSERDA to refine its proposal and to file it by November 17, 2014.  The case schedule for determining how billions of dollars will be collected from ratepayers and expended is on a fast track.  the Commission listed the key dates as follows:

 November 17, 2014 – NYSERDA files 2015 Reallocation
Supplement;
 December 8, 2014 – Initial comments filed on NYSERDA
CEF Proposal to reallocate EEPS and SBC funds for
continuation of programs in 2015 and NYSERDA 2015
Reallocation Supplement;
 December 22, 2014 – Reply comments filed on NYSERDA
CEF Proposal to reallocate EEPS and SBC funds for
continuation of programs in 2015 and NYSERDA 2015
Reallocation Supplement;
 January 12, 2015 – Initial comments filed on NYGB
Petition;
 February 2, 2015 – Reply comments filed on NYGB
Petition;
 February 20, 2015 – NYSERDA files CEF Information
Supplement;

March 20, 2015 – Initial comments filed on CEF
Proposal and CEF Information Supplement;
 April 10, 2015 – Reply comments filed on CEF
Proposal and CEF Information Supplement.

 

It remains to be seen whether low-income customers will see meaningful programs and benefits addressing their needs in this process.

 

Gerald A. Norlander

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