High Spiking Prices Are Harming Low Income New York Utility Customers

Gerald NorlanderExecutive Director

Public Utility Law Project of New York, Inc.

NY Residential Customers Deeply in Debt to Utilities, Owing $652+M Before the Recent Spikes

12% of Customers Were 60+ Days Late in Paying Before Recent Price Spikes

590,000 FTNs Per Month And Rising, Before the Recent Spikes

Monthly Number of Final Termination Notices Issued to Customers of NYS Utilities, 2011-13(12 Month Moving Average)

Dec-11, 610,446(64.0%)

Dec-13,590,860( 60.2%)

550,000

562,500

575,000

587,500

600,000

612,500

625,000

Dec-11Feb-12

Apr-12

Jun-12

Aug-12Oct-1

2Dec-12

Feb-13Apr-1

3Jun-13

Aug-13Oct-1

3Dec-13

Feb-14

55.0%

56.0%

57.0%

58.0%

59.0%

60.0%

61.0%

62.0%

63.0%

64.0%

65.0%

# of Final Termination Notices Issued to Customers (Left Axis)

Final Termination Notices Issued as a Percent of Customers w ith Arrears > 60 Days (Right Axis)

March ?

21,000 Monthly Residential Customer Shutoffs, Before the Spikes

Monthly Number of New York State Residential Utility Customer Accounts Terminated, 2011-13 (12 Month Moving Average)

Dec-11,21,997(2.3%)

Dec-13,21,308 (2.2%)

19,000

20,000

21,000

22,000

23,000

24,000

Dec-11Feb-12

Apr-12

Jun-12

Aug-12Oct-1

2Dec-12

Feb-13Apr-1

3Jun-13

Aug-13Oct-1

3Dec-13

Feb-14

2.0%

2.1%

2.2%

2.3%

2.4%

2.5%

# of Residential Utility Customer Accounts Terminated (Left Axis)

Terminations as a Percent of Customers w ith Arrears > 60 Days (Right Axis)

March ?

Trends

• FERC administratively abandoned filed rate and filed contract regulation and allows “market-based rates” for wholesale producers and traders.

• Post divestiture, wholesale electric market prices in New York dominated by NYISO spot markets. Spot pricing informs pricing of long term contracts which may be indexed to spot NYISO or spot gas prices

• Gas fired plants clear NYISO markets in many hours • Bidding conventions or purchasing practices of peaker owners

may incorporate next day gas spot market prices• When short term gas prices spike, NYISO electricity spot prices

spike for all

Natural Gas Fuels Only 37% of NY Power Generation

NYISO Price Peaks Based Upon Gas Power Plant Prices Based Upon Short Term Gas Market Prices

NYISO “Power Trends”: Electricity Prices Follow Natural Gas - Natural Gas Costs and Electricity Prices in New York State: 2000 – 2011

$100.00

$90.00

$80.00

$70.00

$60.00

$50.00

$40.00

$30.00

$20.00

$10.00

$ 1 2 . 0 0

$ 1 0 . 0 0

$ 8 . 0 0

$ 6 . 0 0

$ 4 . 0 0

$ 2 . 0 0

$ 0 . 0 0

Typical Bills and Arrears Rising

The Traditional Statutory Framework Reflects New York State Public Policy Favoring Rate Stability

• NY law adopted a public policy favoring rate stability for utility services essential to households and businesses, e.g.:

• PSL Art. 4 - requires advance public notice and 11 month hearing process for annual price increase over 2.5% ;

• Seasonal (summer/winter) residential rate variation is limited to the portion of usage above 250 kwh/month;

• No mandatory residential TOU rates;• FAC was to permit going forward adjustments for

incremental cost changes of diverse fuels.

Recommendations• Low Income Rates. Provide larger bill reductions, expand eligibility to include MA for all utility low income and

Lifeline programs, and establish goal to enroll all eligible low-income customers in the correct rate class• Universal Service Fund. Collect a universal service charge on all NYISO transactions to equitably fund increased

low income assistance• Other Funds. Require SBC and RGGI funds collected from low-income customers to be used for their benefit• Continuous service. Create performance metrics to reduce terminations for bill collection purposes• Reconnections. Require all utilities to implement plan for same day reconnection of shutoff customers who pay

or make arrangements to pay by 5 PM• Customer assistance in accessing other bill payment aid. Incentivize utilities to help customers obtain SSL 131-s

assistance and urge reform of 131-s program restrictions.• Default service supply portfolio and fixed rate option. Require a supply portfolio approach for residential and

small commercial default service and reduce reliance on spot price purchasing, and a reasonable fixed rate option

• Long term contracts for electricity and gas. Encourage longer term electric supply contracts not indexed to NYISO or spot gas prices, and encourage longer than one year purchasing ahead for residential gas customers. Incentivize utilities to seek and if necessary litigate for just and reasonable contracts at less than ISO prices.

• Gas Procurement Practices of Generators. Determine if generator purchasing and ISO bidding practices are in the public interest and take appropriate action if some generators lack credit to buy gas at other than next day spot prices.

• Market gaming. Examine gas and electric markets for anomalous pricing, withholding, or gaming and take appropriate action at FERC, courts, and exercise public interest jurisdiction over lightly regulated wholesale utilities. Incentivize utilities to seek refunds of overcharges for benefit of default service customers.

• Constellation Disgorgement Fund for wholesale power advocacy. FERC approved $1 million/yr for 10 years in Oct. 2012 for consumer advocacy on wholesale issues, but the program is not implemented.

• Intervenor funding. Support legislative initiatives to create well resourced independent residential utility consumer advocacy.