Stronger Consumer Protections Proposed for Next Phases of Transition to Competitive Energy Markets

 In March 2000, the Public Service Commission instituted a proceeding to develop the policies and plans to address the next, and perhaps, final stages of the transition in New York to competitive electric and gas markets.  The presiding officers for this proceeding issued their Recommended Decision (``RD") on July 13, 2001.

 The July 13 RD suggests many significant initiatives for implementation by the Commission in the coming months.  Several would substantially improve the consumer protections provided to customers as competitive markets emerge in New York.  Specifically:

 •  The RD proposes the elimination of the ``two-tiered" system of consumer protections.  Under existing PSC decisions, utility companies must provide residential and gas service to customers and may terminate that service only in conformity with the rules established by the Home Energy Fair Practices Act (``HEFPA").  Non-utility suppliers of gas or electricity (the ``ESCOs"), however, have been exempted by the Commission from HEFPA-compliant service and their customers do not have the benefit of these rules.  The RD concludes that two sets of consumer protections is confusing to customers and unlikely to foster confidence in service from ESCOs.  It recommends that all suppliers provide service according to the same rules.  To better implement this recommendation, it also recommends that ESCOs be directly regulated by the PSC, and that all complaints between ESCOs and their customers be resolved administratively through the PSC using the same procedures as are currently in place for the resolution of complaints from utility customers.

 • The RD proposes that that all ESCOs would have the obligation to serve all customers within the customer classes and geographic area for and within which the ESCO is providing service. ESCOs would be permitted to designate the geographic area in the State within which they intend to provide service and the class of customers that they will serve within that area, but would not be otherwise able to limit their customer class.  Thus, the RD strongly disapproves of ESCO discrimination between customers based on the customer's income or ability to pay.

 • The RD proposes that the PSC explicitly adopt a ``universal service goal", i.e. a goal that seeks to have gas and electric service available to all.  While such a goal has been adopted for telephone service and is implicit in many of the Commission's actions and in some elements of the Public Service Law, it has not yet been explicitly adopted by the PSC.  The RD suggests that this omission should be corrected.

 • The RD recommends that PSC policy recognize that ``workably competitive retail and wholesale markets" must be created before the utilities' responsibility to supply electricity or gas to customers can be ended.  The RD also recognizes that markets will not be workably competitive until more electric generation is available to supply the market, more electric and gas transmission sources are available to serve the markets, and a demand side market exists to compensate competitive demand side measures.  According to the RD, these conditions may mean that competition for residential customers may not occur for a decade or more.

 • The RD further recognizes that, in the absence of workably competitive wholesale and retail markets, the utilities may be required to build the additional transmission facilities. Under these circumstances, utilities should not be expected to rely solely on short term or spot purchases to meet customers' needs and may be required to continue to provide commodity price stability by ``hedging" the prices of supply resources for several years through long term contracts or other financial transactions. 

 • The RD recommends that, while the transition to competition may, in the long run, eventually create benefits for consumers, steps should not be taken to enhance the competitive market unless consumers will see short-term benefits as well.  In considering strategies to support the transition to competition, the RD rejects, except in those markets where the conditions for competition already exist, the use of incentives to promote customer switching.

 • The RD recognizes the continuing value of low-income energy efficiency and research and development programs. Although markets may some day permit the discontinuance of these programs, for the foreseeable future the RD suggests that the current SBC may have to be extended.  It recommends that the scope of the current System Benefit Charge (``SBC") be expanded so that SBC funds are collected from gas as well as electric customers.

 • The RD explicitly identifies the concept of ``energy burden" as the best method of measuring the effects of high energy costs on low income customers, and this is defined as the percent of a customer's income which must be used to pay the energy bill. 

 • The RD endorses the use of low income rates to provide broad based assistance to low income customers.  It recognized that rate discounts can be an efficient way to retain economically distressed households on the gas or electric system.  It noted that the ``system and societal benefit justifications [for low income rates] are very similar to those that have been advanced in favor of economic development programs for financially strapped businesses.  Those programs differ from low-income programs chiefly in the class of distressed customer targeted."  The RD recognizes PULP as a lead advocate for low income rates and observes that ``PULP describes well the `Hobson's Choice" faced by low-income customers whose household expenses exceed their budgets.  Customers who forgo purchases of food or other necessities to stay current on their energy bills are not ``free riders" (i.e. being given a benefit they do not need) and are no less in need (and deserving) of assistance than those customers who choose the opposite course of action."  The RD recommends that lifeline rates be considered an ``integral component of low-income programs crafted in the future."

The full text of the Recommended Decision can be found by clicking on the link.  The next steps in this proceeding are the filing of briefs on exception on August 10, 2001 and of briefs opposing exceptions on August 28, 2001.  The Public Service Commission would be expected to issue its decision in the early fall.