PSC Opens Investigation Into Affordability of Gas and Electric Bills

Background

AARP, the Utility Project, and other consumer groups have been sounding the alarm that despite some signs of an improved economy, New York’s utility customers have fallen far behind in payment of utility bills, large amounts of debt are owed to the major utilities by residential customers unable to afford bills, large amounts of additional late payment charges are added to bills in arrears, massive numbers of shutoff notices are issued by the utilities — putting many consumer households into crisis and reliance upon higher cost loans to stave off service termination, and large numbers of customer households lose utility service when it is shut off as a bill collection measure.   See

• CATCHING UP IS HARD TO DO – NEW YORK’S UTILITY CUSTOMERS AND THE GREAT RECESSION, 
• MANY CENTRAL HUDSON CUSTOMERS IN DEBT, FACING HARDSHIPS, LATE CHARGES, SHUTOFF THREATS, AND SHUTOFFS OF ESSENTIAL UTILITY SERVICE, 
• UTILITY PROJECT URGES PSC REFORMS TO REDUCE HARM TO UTILITY CUSTOMERS FROM PRICE SPIKES

 Concerns about current and future affordability of service were raised last year by AARP and the Utility Project in their comments   in the New York State Public Service Commission’s “Reforming the Energy Vision (REV)” case, with its emphasis on greater deployment of distributed generation, such as California has done to encourage more customers to install solar photovoltaic rooftops. See

•  AARP AND UTILITY PROJECT FILE COMMENTS ON NY PSC STAFF TRACK I “STRAW PROPOSAL” IN “REV” PROCEEDING, 
• AARP AND UTILITY PROJECT REPLY COMMENTS HIGHLIGHT CUSTOMER PROTECTION, AFFORDABILITY IN NY PSC REVISED ENERGY VISION “REV” CASE, 
• CAPUC REPORT: ROOFTOP SOLAR “NET METERING” PROGRAM BENEFITS HIGHER INCOME CUSTOMERS AND IS SHIFTING ADDITIONAL COSTS TO LOWER INCOME CUSTOMERS, 
• SOLAR PV MAY RESULT IN HIGHER NY ELECTRIC RATES

 In anticipation of implementing its REV initiatives, the PSC also began a new  “Clean Energy Fund (CEF)” proceeding.  The basic premise of that case is to free up existing electric bill surcharge funds for more flexible deployment in furtherance of the as yet undetermined REV objectives and programs.  The surcharge funds currently yield approximately $925 million a year above the cost of providing electric service.  The surcharges are added to utility bills by PSC order, and then paid over by the utilities to NYSERDA   to support NYSERDA’s energy efficiency programs (funded by the current “System Benefits Charge (SBC)” surcharge) and the authority’s renewables programs (now funded by the “Renewable Portfolio Standard (RPS)” surcharge).  The PSC asked NYSERDA to propose reduction, consolidation and repurposing of these funds, and then sought public  comment on the NYSERDA proposal to consolidate the surcharges into a new “Clean Energy Fund (CEF)” to be deployed in furtherance of eventual REV objectives to subsidize more local, distributed generation (DG) and demand response (DR) at the customer level.

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.  The AARP and Utility Project Comments and Reply Comments reference 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 are 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 are received by customers. 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 occur 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.

Under the AARP and Utility Project proposal, the combined existing utility bill surcharges, in addition to funding new“Clean Energy Fund” 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 urges a primary focus to ‘improve energy affordability’ and   specifically refers to the California Alternative Rates for Energy (CARE) program which substantially reduces bills for lower income customers, with  funding from California “Public Goods Charge,” which supports both affordability and clean energy initiatives.

The New Affordability Proceeding

At its January 8, 2015 session, the Public Service Commission, in a very welcome move, commenced an industry-wide “generic” investigation into the affordability of New York residential consumers’ gas and electric utility bills. (CASE 14-M-0565 – Proceeding on Motion of the Commission to Examine Programs to Address Energy Affordability for Low Income Utility Customers). Citing the state constitutional provision for the needy, and its history of gradual improvements in aff ordability and reduced rate programs, which evolved over decades on a case by case basis through negotiated rate case settlements, the Commission.  The Commission noted that

“[a]s of November 30, 2014, over 1.2 million residential electric and gas customers were more than 60 days in arrears, carrying more than $756 million owed to utilities, and nearly 277,000 residential electric and gas customers statewide had service disconnected for non-payment during 2014. Energy utilities also wrote off nearly $195 million in uncollectible expense during that period. Low income customers experience a disproportionately high amount of arrears and service terminations for non-payment.”

The Commission put the proceeding on a fast track so that the policies being developed can be implemented in this year’s utility rate cases:

“Staff, in consultation with interested parties, to conduct an investigation of utility low income programs, to identify best practices, and develop a set of recommendations for how best to optimize the implementation of utility low income programs, for party comment. Such recommendations shall include a proposed process for incorporating the recommendations into ongoing rate cases before the Commission in 2015. It is our expectation that this will lead to adoption of a consistent, more uniform approach to the design and implementation of these programs; that will ultimately save parties the effort and expense devoted to litigating these issues in each utility rate case. Staff should proceed with deliberate speed in order to maximize our ability to inform pending and soon to be filed rate cases.”

On January 16, 2015, Department of Public Service Staff issued a detailed list of questions to be considered in development of its forthcoming report and affordability recommendations.  Responses to the questions are due February 17, 2015.

AARP and the Utility Project have intervened as active parties in this proceeding that may lead to major improvements in affordability of utility service for vulnerable, low and fixed income households. Also among the active parties is the Center for Working Families.

Public comments are invited, and can be made online at the PSC online case file for the proceeding.

If all goes well we may see much needed improvement in New York’s utility service affordability programs.