AARP and Utility Project Urge NY PSC to Include Improved Rates and Utility Assistance for Electricity Customers when it Repurposes $925 Million/Year Electric Bill Surcharge Revenues

Background

On September 23, 2014, the New York State Energy Research and Development Authority (NYSERDA) NYSERDA proposed repurposing current electric bill surcharges totaling $925 million/year to create a new “Clean Energy Fund (CEF).” This was required by the Public Service Commission (PSC) under its Reforming the Energy Vision (REV) Order.  Although the PSC schedule in the REV case has slowed, and the details of the REV programs are uncertain, the CEF case is clearing the way for surcharge funds to be used to advance whatever initiatives may emerge from the REV  proceeding.

In the REV case, AARP and the Utility Project are urging the Commission to take such action. See  AARP AND UTILITY PROJECT REPLY COMMENTS HIGHLIGHT CUSTOMER PROTECTION, AFFORDABILITY IN NY PSC REVISED ENERGY VISION “REV” CASE. NYUP Updates, October 29, 2014.

NYSERDA’s September 23, 2014 Clean Energy Fund Proposal in PSC Case 14-M-0094, and a November revision proposing reallocation of 2015 funds among current programs,is to combine existing electricity bill surcharges into a single “Clean Energy Fund.”   The NYSERDA proposal would replace three existing programs funded with surcharges — the System Benefits Charge (SBC), the Energy Efficiency Portfolio Standard (EEPS), and the Renewable Portfolio Standard (RPS) — with one, the Clean Energy Fund.  The CEF would create four program areas to “advance cleaner, more resilient, and more affordable energy infrastructure.   ” that will The new fund would support a broad array of programs in four areas:

  • Market Development, intended to enable the private markets to provide the new clean energy and products and services;
  • Technology and Business Innovation, intended to catalyze the development of innovative clean energy solutions;
  • a “Green Bank” initiative to provide capital to private entities for clean energy technologies and programs; and
  • NY-Sun, to create a robust and self-sustaining solar market in New York.

In contrast to the four categories of proposed uses, no similarly detailed provisions were made for any low- and moderate-income ratepayer relief.  Such measures are recommended in the State’s Draft Energy Plan prepared earlier this year.  NYSERDA’s CEF Proposal  only briefly acknowledges these hardest-hit communities, saying that it would “[c]ontinue to provide access to clean energy for market segments, including low-income customers, which may not otherwise benefit from the new market activity.” But there is no assessment whether low-income customers, struggling to pay current bills, are already in fact actually obtaining “clean” energy, or any energy, at affordable prices. Indeed, the  data set out below show the afflictions high energy prices impose on low- and moderate-income consumers regardless of the source. In light of the high electric rates, hardship, and household financial stress, NYSERDA’s  statements vaguely suggesting low-income customers should have “access to clean energy” do not provide sufficient detail as to how, if there is “access” it would be affordable, or what programs NYSERDA or the PSC would modify to ameliorate the pressing need for affordable electric service for New York’s low-income customers.

The PSC issued a notice soliciting comments on the NYSERDA CEF Proposal, and consolidated in the CEF case a pending Petition of Multiple Intervenors seeking relief from existing surcharges for energy efficiency and renewable energy that would reduce their members’ electric bills.

AARP and Utility Project Proposal to Expand the Purposes for Existing Surcharges

On December 8, 2014, AARP and New York’s Utility Project filed Comments proposing that the PSC “broaden the purpose of the CEF to include low-income affordability.Then the combined existing utility bill surcharges,in addition to funding the proposed clean energy programs, could enhance low-income rate penetration to reach more eligible customers and make larger bill reductions possible.” This would be in accordance with the State’s Draft Energy Plan that, as AARP and the Utility Project wrote, “urges a primary focus to ‘improve energy affordability’ and mentions consideration of expanded low-income efficiency programs and low-income rate discounts.” The Draft State Energy Plan refers to California’s California Alternative Rates for Energy (CARE) program which substantially reduces bills for lower income customers with funding from California “Public Goods Charge.”

In 1996 the California legislature partially restructured (or deregulated) its electric power industry. The legislation established the nonbypassable PGC surcharge on the purchase of retail electricity, which includes funding not only for green energy projects of the type envisioned for the proposed New York CEF, but also substantial funding for low-income rate assistance and low-income energy assistance. In contrast to California, in 1996 the New York PSC adopted its initial “Vision” Order”  in Opinion 96-12, which “restructured” the New York electric industry, without any enabling legislation and without addressing universal service and affordability.  The PSC may at the time have hoped its deregulation efforts would reduce electric bills for all without specific measures to ensure affordability.

The promised lower rates and customer benefits of restructuring and partial deregulation under the PSC’s initial 1996 “Vision Order” did not materialize — far from it.  In 2014, New York’s utility customers now pay the second-highest electricity costs in the country that by their nature affect low- and moderate-income residential consumers hardest. Electric bills are not now affordable to many New Yorkers, and as a consequence they suffer frequent financial hardship, incur large debts to utilities, face service shutoff threats that create household budget crises, borrow at high interest to avoid shutoff, lose service due to shutoffs for collection purposes, and pay higher costs for late charges and reconnection fees. The AARP and Utility Project Comments cite data from the monthly utility collection activity reports of New York’s major utilities, which show:

  • Many customers in debt to utilities.  More than 1 million residential customers of investor-owned utilities in New York State were 60 days or more past due on their utility bills in August 2014, 29.5% more than 2005; this despite the fact that the number of residential accounts increased only 2.1% over the nine-year period.  It is at 60 days that the utilities send their final past-due termination threats, frequently sending low-income households into disruption due to the need to either go into debt to pay the bill or face loss of vital utility services. The result was that the percent of residential utility customer accounts past due more than 60 days jumped 2.6% percentage points from 9.5% in 2005 to 12.1% in 2014.
  • Large amounts owed. The amount that these customers were past due was $745 million, a 46.8% increase versus August, 2005.  The annualized increase was 4.4%, twice the 2.2% annual rate of overall consumer price inflation in the Northeastern U.S., and 150% higher than the 1.7% rate of Northeast household energy inflation.  The average amount each of these customers owed was $739 in August, 2014, 69.6% more than August, 2005, a 6% annual increase in arrears over the nine-year period —a rate 250% higher than Northeast household energy inflation.
  • Millions of shutoff notices. More than 7 million final termination notices were sent to residential customers of investor-owned utilities in New York State during the prior twelve months ending August, 2014—46.8% more than the same period in 2005.  The annualized increase was 4.4%.  The result was that 7.3% of residential customers were issued termination notices in 2014, versus 5.0% in 2005.
  • Many shutoffs for collection purposes.  265,711 residential utility customer accounts were terminated in the twelve months ending August, 2014, 5.5% more than the 251,898 terminations in 2005.
  • More customers with deferred payment plans. The number of residential utility customers with active deferred payment accounts (DPAs) was over 450,000 as of August, 2014, 40.6% higher than 2005.  The number of customers with active DPAs rose at a 3.9% annual rate during the nine-year period.  Customers with DPAs are at heightened risk of shutoff if they are late in paying or miss a payment.

In concrete terms, those hardest hit include children, who need electricity in the evening to do homework; the ill and disabled who need power for medical devices; seniors, who are often on fixed incomes and can ill afford these exorbitantly high rates; and low-wage workers, particularly in high-cost communities such as New York City. Additional costs that these communities can ill afford include food spoiled during power outages. At a time of high food costs — and increasing rates of obesity due in part to the consumption of cheap high-fat foods by low-income communities—the added burden of high utility costs can have far-reaching indirect consequences, with sometimes tragic results.

While NYSERDA’s CEF Proposal refers generally to “high overall energy costs in New York State [that] create a cost burden on all customer classes,” it does not acknowledge these critically at-risk consumers, as the Draft State Energy Plan does, as a sector needing special rate relief or consideration, nor does it prescribe specific investment measures for them in response to New York’s high electric rates. There is also no recognition of the potential additional funding that ratepayers will be required to pay for “distributed generation”— or the alternative energy programs to be funded by the newly created NYSERDA programs — and other potentially costly REV-related initiatives that are reflected in the Commission’s REV policy statements to date.  AARP and the Utility Project underscore that despite detailed descriptions of the use of funds for specific market assistance, a “focus on affordability is missing from the NYSERDA CEF Proposal.”  This failure may work to the profound detriment of low- and moderate-income ratepayers unless the PSC revises its policies for use of the surcharge revenue.

NYSERDA’s CEF Proposal outlines a steep reduction in the amounts currently assessed and collected through the new fund. AARP and the Utility Project propose instead that the PSC institute a lower reduction and repurpose a portion of the surcharge funds for low- and moderate-income ratepayer assistance programs similar to California’s CARE  and Family Electric Rate Assistance (FERA) programs.  As mentioned previously, these are supported through a “Public Goods Charge,” a surcharge on all kWhs used by all customers that also supports programs for renewable energy and efficiency.  The California rate reductions, as discussed in ELECTRIC BILL SURCHARGE REFORM PROPOSALS TO COLLECT AND SPEND BILLIONS DO NOT ADDRESS AFFORDABLE SERVICE TO LOW INCOME CUSTOMERS, NYUP Update November 12, 2014, provide for up to 35% lower bills for hard-hit low-income ratepayers and relief from surcharges aiding new energy source development. In their Comments on the NYSERDA CEF Proposal, AARP and the Utility Project press the Commission to broaden the purpose for which surcharge funds may be used and to “expand the definition of ‘low income’ to include households with annual income of 200% or less compared to federal poverty guidelines (similar to Massachusetts and California).”

In their Comments, AARP and the Utility Project also urge the PSC to avoid past practices of relying on individual, periodic, and unpredictable rate cases brought by investor-owned utilities to consider aid for low- and moderate-income customer communities. In the same vein that the PSC seeks, as noted in its initial REV report, to “monetize, in manageable transactions, a variety of system and social values that are currently accounted for separately or not at all” for the utilities, low- and moderate-income consumers must have a reliable — manageable — means of achieving consistently affordable utility costs. The need to rely on episodic rate cases and for extensive and costly involvement in those proceedings regularly threatens the well-being of low- and moderate-income ratepayers who are ill situated to participate.

Multiple Intervenors’ Petition for Surcharge Rate Relief

Shortly after the CEF case was begun at the PSC, Multiple Intervenors. an association of “high-load” industrial and commercial customers, filed a Petition claiming hardship and seeking expedited relief to use an estimated balance of  $700 million from unallocated surcharge revenue to lower the bills of its members. See BUSINESS GROUPS SEEK ELECTRIC RATE BREAKS AS PSC REPURPOSES $925 MILLION/YEAR SURCHARGES, NYUP Update, November 20, 2014.   As mentioned above, the PSC consolidated the Multiple Intervenors petition into the CEF case. In their Comments, AARP and the Utility Project urge the Commission to reject Multiple Intervenors’ petition and their request  to use existing unallocated fund balances and future proposed surcharge reductions to reduce their members’ surcharges and electric bills.

AARP and the Utility Project specifically responded to the “hardship” complaint by Multiple Intervenors, whose members pay a surcharge of less than a penny per kWh.  New York’s industrial customers’ rates are 11% lower than the national average, while New York’s residential rates are more than 60% higher than the national average.  The AARP and Utility Project Comments say the situation of industrial customers “pales in comparison to the hardships faced by New York’s low-income customers.” Also, in contrast, they note, “[t]he ongoing REV proceeding raises considerable risks that additional costs and surcharges will be authorized to pursue new and potentially expensive investments that will appear on the distribution bills for all customers [that will harm] the ability of low- and moderate-income families to pay their monthly electric bill without more targeted programs and robust bill payment assistance programs.”

Conclusion

AARP and the Utility Project have challenged the Public Service Commission to create specific programs to address the current affordability crisis, including the enhancement of low-income rates for essential electric service, energy efficiency assistance, and bill payment assistance programs as identified in the Draft Energy Plan and in their prior comments in the REV proceeding.  Those initiatives could be encompassed now, during the Commission’s revision and repurposing of the $925 million/year surcharges.

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