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Toothless No More? Cuomo positions state energy regulator to flex its muscle By Jon Lentz argely overlooked in the hoopla over this year’s third straight ontime state budget—which featured a minimum wage hike, middle class tax cuts and education reforms—was another measure that gives more power to the state’s little-noticed energy regulator. The changes, which were recommended after an investigation into the performance of utility companies during Superstorm Sandy, give the Public Service Commission a new toolbox to work with: larger penalties for violations by utilities, more comprehensive reviews and higher standards in preparing for emergencies. So far Gov. Andrew Cuomo’s efforts to bolster what he referred to earlier this year as a “toothless tiger” have gotten a mixed response. “The Public Service Commission having more oversight powers is going to make utility companies spend more money to basically play defense, and the real question will become how much does the cost of oversight end up being passed on to
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Continued from page 20 storms. Additionally, the company has already made a number of improvements in time for the 2013 hurricane season. At the same time, we must control costs for our customers. With weather changing and violent storms becoming more frequent, we expect our storm-hardening program to evolve for years to come.” 5. People are still pretty mad about how things played out during Sandy. So far the Public Service Commission has only received a handful of public comments related to the rate increase, but the ones that have come in illustrate a general frustration with how Con Edison has conducted itself—especially during and after Superstorm Sandy. A sampling: • “Con Edison left me and other New Yorkers in the dark, without consideration, to be honest, on why it took weeks and weeks to give us straight answers on when help [would] be available.” • “Following Sandy, we were inconvenienced by this utility for almost one week. During that time we did not have electricity, nor were we able to contact the utility using the systems that they had put in place for communication of outages. Furthermore, the information that the utility did provide to us was inaccurate and misleading.” • “I have lost count of emails and
ratepayers as part of overhead? That’s an issue yet to be decided,” said Jerry Kremer, the chairman of the New York Affordable Reliable Electricity Alliance, an industry trade group. “The governor envisioned that the PSC would be a lot more aggressive; he’s now pushing that concept, and there are impacts of this all over the place.” State Sen. George Maziarz said having a stronger, more involved energy regulator could be positive. But at City & State’s State of Our State conference last month, he argued that the Public Service Commission should have to adhere to higher standards in addition to imposing higher standards on utility companies. “I do caution, though, that you have to put some accountability in the PSC on returning of requests or guidance or approvals or disapprovals,” said Maziarz, who chairs the Senate Energy and Telecommunications Committee. “In the Article X bill that we did, the DEC actually has a 12-month window now to approve or disapprove an application for a new generation siting. Without that particular piece
phone calls addressing my fluctuating power problems on my block.” • “The heroes of the Sandy recovery are Con Ed workers, and their fellow utilities workers from other states. The victims of the storm are Con Ed consumers who suffered losses from power outages. The incompetents were the Con Ed administrators, executives who were called out by Gov. Cuomo for their poor performance.” In his testimony on behalf of the New York Energy Consumers Council, former executive director David Bomke agreed with some customers that they should not have to pay for stormproofing efforts that have always been the company’s responsibility. “Con Edison’s failure to prepare adequately for [Superstorm] Sandy cannot be used as a justification for significant and exorbitant rate increases,” he said. Said McGee about the utility’s response during and following Sandy: “We had over a million customers who were without power after Sandy, five times more than what was caused by any other weather event in the company’s history, and we had utility workers come to the aid of our 13,000 employees from all over the country and Canada to help us address this unprecedented disaster. We had all customers restored within two weeks, but unfortunately there were some customers who were unable to accept power from us.”
22 june 17, 2013 | www.cityandstateny.com
in there, it would have taken DEC years to do it. The PSC is worse now than the DEC. It can be better.” The changes included in the budget give the Public Service Commission a number of new powers: The threshold for any action qualifying as a violation is lower; larger penalties can be assessed; regular audits can result in stricter terms; and the PSC can revoke an operating certificate if it determines that a utility should not continue to be a service provider in a given territory. Kremer said that the Public Service Commission had long been “nothing more than a rubber stamp for every application that came before it” and that for years nobody wanted to bother with it. “The time has finally come for somebody to take ownership of the PSC, to try to figure out what their role is going to be, especially in assessing storm damage claims of all the utilities,” he said. “But it’s moribund, because the politicians of the time have said, ‘Why do we want to bother with the PSC? It’s another head-
ache. Like LIPA, we thought we got rid of it in ’89 when we got rid of the Long Island Lighting Company, and now you’re bothering us with LIPA again.’ Well, these things rear their head periodically. Now it’s time for the PSC to become a different agency.” Matthew Cordaro, a trustee of the Long Island Power Authority board, said the PSC had been performing adequately, and that the furor over LIPA’s poor performance during Superstorm Sandy unfairly drew attention to the utility regulator—particularly since it had no oversight of LIPA at the time. “You can’t blame the PSC for what happened on Long Island,” Cordaro said. “I think the PSC does a very decent job, and one reason for saying that—look at the Con Ed system. The Con Ed system is one of the most reliable in the United States and the world. So the PSC has done something right in overseeing Con Ed. Now, the rates are probably higher than people would like. But to have that degree of reliability in a service territory as complicated as New York costs money.”
Bracing For The Next Storm By Jon Lentz
There is little disagreement that New York’s electric utilities need to take major steps to prepare for the next major storm— but the unanswered question is how to pay for it. Take Con Edison, for example. The utility company, which covers much of New York City and some surrounding suburbs, submitted a proposed rate increase early this year that would bring in $400 million from customers starting in 2014. The company’s submission to the Public Service Commission also requested permission to spend $1 billion to protect its infrastructure over the next four years, mostly through investments to make the system more water-resistant. But while customers are clamoring for improvements, there is also some resistance to adding to what are already high rates— especially after many customers were left without power for days in the wake of Superstorm Sandy last fall. Kevin Lanahan, Con Edison’s government relations director, said that state and federal regulators have pressured the company to keep costs down, but after Sandy there has also been a push to raise equipment, add submersible systems, construct barriers in flood zones and bury lines in other areas,
among other proposals. “We’re in the unenviable position of always saying, ‘There’s a cost,’ ” Lanahan said at City & State’s State of Our State conference last month. “We’re in this difficult position of stepping into this debate and saying, ‘We’d like to find a middle ground.’ It’s sometimes difficult.” Many policymakers have looked to the federal government to provide funds to protect the state’s utility companies. Lanahan said that Con Edison pushed for federal help too, but that the company’s entreaties were ultimately ignored. Officials at Con Edison, which had $450 million in damage to its system, hoped that federal FEMA money and community block grants would help to mitigate some of the expenses related to the storm and guard against the next event. But key legislation authorizing the funds died in Washington, D.C., and HUD declined to make the money available to utility companies. “This is not our money. This is not to help shareholders,” Lanahan said. “And the guidance that came out related to the funding said the utilities shall not be eligible. Rising rates, reliability and now Sandy costs—it’s a difficult situation.”
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