Utility Project Opposes Proposed Con Edison Electric and Gas Rate Case Settlement; PSC Seeks Public Comment

The Utility Project filed its Statement of Opposition and Testimony in Opposition to the “Joint Proposal” for settlement of the Con Edison rate cases, which was announced December 31, 2013.  The proposed settlement, which is subject to approval by the PSC, provides for a “freeze” of gas and electric rates during a two and three year period, respectively.  The Project argued that  an opportunity to lower rates would be missed because

• the allowed Return on Equity of 9.2% and 9.3% proposed is much too high, well above the 8.7% recommendation of DPS Staff based on approved PSC methodology,
• some expense items like $48 million in management bonuses could be trimmed,
• it was premature to forecast an increase for a second year based on the record made for this year,
• the “levelization” plan lets Con Edison hold  over collections of $126 million of customer money for the first year, paying 3%, to be applied against a second year increase, while more than 200,000 customers are paying 18% on late charges.
• electric rates will go up at the end of the two years by $47.7 million even if no new rate case is filed,
• Reforms of the low-income rates are needed to make bills more affordable to the poor,
• Reliance on service termination as a bill collection measure should be reduced
• Performance measures need to include assessment of customer protection measures related to getting and keeping service and HEFPA compliance,
• Evidence indicates customers may be paying much more for ESCO service, and the Commission should investigate the extent to which Con Edison charges for ESCO services that are more expensive than full service from Con Edison are contributing to low-income customer arrears and payment difficulties.

The Commission can modify the proposal or reject it.  If rejected, or if parties who agreed to settle do not consent to modification, the case would revert to the litigation track, with a Recommended Decision by Administrative Law Judges and a final decision on the merits by the Commission.

The Utility Project’s Statement in Opposition to the Joint Proposal points out that customer bills could go up if the plan is approved, despite its label as a rate “freeze.”  This is due to many rate adjustments still allowed in tariffs that would not be affected by the “freeze”.  For example, the Monthly Adjustment Charge (MAC) contained in Rule 26 of the Con Edison tariffs allows adjustment between rate cases, monthly, based on 37 categories of cost, some of which can be substantial.  Also, the plan allows for additional “reconciliations” and “true-ups” for various capital items.  Finally, by its terms, the “freeze” proposal would actually increase electric base rates for delivery service $47.7 million  at the end of the two years even if Con Edison does not file new rates next year to take effect after the plan is over.

The Project submitted testimony showing  that many customers are having a hard time affording Con Edison service:

• 312,489 residential customers (10.8% of total residential 5 customers) were more than 60 days behind in paying their bills as of November 30, 2013,
• They owed approximately $251.8 million in total,
• 248,082 final termination notices were issued to residential customers (8.57% 8 of total number of customers) in November 2013,
• 61,258 (2.12%) of residential customer accounts were eligible for field action [to terminate service] in November, 2013,
• there were 182,081 active Deferred Payment Agreements [DPAs] as of November 30, 2013 (6.29% of customers),
• 15,546 (0.54%) of customers defaulted on their DPAs in November 2013,
• service was terminated to 6,875 residential customers in November 2013.

Household economic matters appear not to be improving for many of Con Edison’s residential customers.  Rather, trends in the number of customers behind in paying utility bills,  the amount of overdue arrears, and the number of final termination notices sent are all rising.

In additional testimony, the Project urged substantial reform of Con Edison’s low=income electric and gas rates to make service more affordable to lower income customers.  Utilities in other states, such as National Grid in Massachusetts which provides a 25% reduction, provide significantly more affordable service to their low-income customers. The Project  urged that Medicaid be included in the list of eligibility-conferring categories of public aid that qualify customers for reduced utility rates.  The Public Service Commission previously approved Medicaid as an eligibility-conferring category for Con Edison’s gas low-income rates, the low-income rates of KeySpan-NY and KeySpan-LI, and telephone Lifeline and Link-up programs.

The Project also urged the Commission, in light of pressures being placed on the utility to cut costs, to take steps to continue customer services to customers,  to measure and assure adherence to customer protections affecting access and continued utility service, and to reduce reliance on service termination as a bill collection measure.  There are no existing performance “metrics” for such matters in the current or proposed plan, which is a “performance based rates” type plan.

No modified SAPA notice was filed with respect to the Joint Proposal, which contains many provisions which significantly vary from the originally notice rate filing.  Under SAPA, the public has 45 days to comment.  Hearings on the Joint Proposal were held January 14, 2013, two weeks after the Joint Proposal was filed. At the hearings, the Administrative Law Judges questioned Department of Public Service Staff and Con Edison proponents of the Joint Proposal regarding its details, the Project cross examined the proponents, and the Project submitted  testimony of its witnesses in opposition to  and seeking modification of the Joint Proposal.

The Commission is expected to rule on the Joint Proposal for settlement at its February 20, 2014 session, which will be webcast.

A Notice Seeking Public Comments on the December 31, 2013 Joint Proposal for resolution of the case was issued January 3, 2014, with comments due January 24.  In practice, the PSC usually receives public comments up to the time of a decision.  The Notice explains how comments may be submitted. Online public comments can be submitted via the PSC DMM page for the case, which also has links to the Joint Proposal and papers filed in the case.