Our Green Energy Future

CU urges New York to fairly allocate Constellation settlement

Consumer and senior advocates have called on Governor Cuomo and the Public Service Commission to provide immediate and direct relief to New Yorkers struggling with high electric bills as part of the funding awarded to New York by the Federal Energy Regulatory Commission (FERC).  As part of a recent national settlement of its investigation of alleged manipulation of electricity market in New York by Constellation Energy Commodities Group, Inc,   FERC has set aside $78 million for the benefit of electricity customers.

The groups, including Consumers Union, AARP, and New York State Association of Area Agencies on Aging, have recommended the settlement be used to increase funding for New York’s Weatherization and Home Energy Assistance Programs and the Energy Efficient Appliance Rebate program.  They also urged funds be used to provide a voice for consumers by establishing an independent office or organization that provides consumer advocacy in lengthy and complex regulatory proceedings  at the state and federal level that can impact prices, terms, and conditions of residential electric service.  Consumers Union’s full statement is below.

Energy Settlement Should Benefit New York Consumers

Statement of Chuck Bell, Programs Director
Consumers Union, 5/31/12

 

Consumers Union, nonprofit publisher of Consumer Reports, is pleased to join with AARP, NYPIRG, the New York State Association of Area Agencies on Aging, and Assembly Member Kevin Cahill to call for a fair and equitable allocation of the New York’s share of the Constellation settlement with the Federal Energy Regulatory Commission (FERC).

The total settlement paid by Constellation Energy Commodities Group to resolve allegations of market manipulation with the Federal Energy Regulatory Commission — $245 million – was the largest of its kind, ever.  Constellation agreed to pay the settlement in March, on the same day that Chicago-based Exelon Corp. closed on its $7.9 billion takeover of Constellation, creating the largest non-utility energy provider in theUnited States.  Under the settlement’s terms, Constellation agreed to pay a $135 million civil penalty and “disgorge” — or give back — “unjust profits” of $110 million.

 

New Yorkstate now has a great opportunity to use our share of the settlement dollars from the Constellation energy price-fixing case to benefit residential ratepayers.  In this case, the federal government recognized that consumers were seriously harmed by Constellation’s activities to manipulate energy prices — so consumers should now get their due.

 

When you hear about the details of the Constellation case, it raises a question about what is going on in our electricity markets,  that would enable any company to amass $110 million in unjust profits.    We thank the Federal Energy Regulatory Commission for recovering the Constellation settlement, $245 million overall, including $78 million forNew Yorkstate.  Constellation’s collusion in manipulating the electricity market and setting prices was a huge Lemon for consumers that emptied our wallets.   Now is the time to turn that Lemon into Lemonade.

 

The appropriate solution is to use the Constellation settlement funds to protect and advance the interests of ratepayers, by fundingNew York’s Weatherization and Home Energy Assistance Programs, the Energy Efficient Appliance Rebate Program, and consumer-oriented advocacy in state and federal utility proceedings.

Of all the things we are asking for today, one of the most important is for the uncompromised right of consumers as a group to speak and to be heard in an effective way in utility rate proceedings.   There is an enormous disparity between public representation

budgets available to consumers, on the one hand, and the resources of utilities, on the other.   Large utilities such as Con Edison, National Grid, and NYSEG are able to deploy hundreds of professional staff to advance their interests at the regulatory agencies and in legislative bodies, including technical experts, attorneys, lobbyists and media relations staff.  By contrast, state utility advocates and nonprofit utility advocates can only exercise voice and influence on behalf of consumers if they are entrusted with sufficient resources to engage in research, analysis and advocacy.

 

So we say to Gov. Cuomo, to Attorney General Schneiderman, to regulators and legislative leaders — it’s time to go big, or go home for consumers.   If you want to protectNew Yorkratepayers against future price-fixing, future market manipulation, and other unfair practices that drive up utility rates – now is the time to put some substantial dollars on the table for consumers to be represented on a respectable, more equal footing with the utilities.

 

Energy Affordability in New York State

 

The urgency and importance of our coalition’s request is underscored by the serious problem of energy affordability in New Yorkstate.   Many New Yorkconsumers are currently struggling to pay their energy bills, and the affordability of electric service is critically important to them.

In February, the Bureau of Labor Statistics reported that electricity prices were 45.3% higher inNew Yorkthan in the rest of the nation.  According to USA Today, electricity bills across the nation have skyrocketed in the last five years.   In that period, average annual electric bills for consumers have increased over $300.  Electricity is consuming a greater share of American’s after-tax incomes today than at any time since 1996.

 

As noted by AARP, New Yorkhas some of the highest utility costs in the US. A recent AARP survey of New Yorkers over age 50 revealed 41 percent reported that they had difficulty paying their monthly electric bill. This figure was even higher among minority populations with 48 percent of African Americans and 56 percent of Hispanics age 50+ in New Yorkindicating that they experienced difficulty paying their electric bill.[1]

 

The most expensive major utility in the nation is Consolidated Edison, the supplier ofNew York Cityand other downstate communities – at rates of 26 cents per kilowatt hour, according to the federal Energy Information Administration.

Over 1.5 million households inNew Yorkexperience a household energy burden of over 6% of their income, according to a study commissioned by the Low-Income Forum on

Energy in Albany.[2]  The overall Energy Affordability Gap amounts to a whopping $1.55 billion in the aggregate, which is the amount that consumers pay that exceeds the recommended 6% of their income.

 

While 40% of the households experiencing an Energy Affordability Gap are  located inNew York City, other regions of the state are very much affected.  Four regions (Niagara-Frontier, Finger Lakes,HudsonValley,Long Island) had an aggregate Energy Affordability Gap of more than $100 million.  Two regions, (Central Leatherstockingand Saratoga-Capital) had aggregate Affordability Gaps of between $70 and $90 million.  As the report notes:
Home energy unaffordability in New York is a statewide phenomenon. It affects areas of the state both rural and urban. It affects areas of the state both North and South, both East and West. It affects the river valleys, the mountains, and the lake regions.[3]

 

Utility costs need to be considered in relation to the high costs of housing in many parts of the state.  Over 1.65 million renters and over 1.35 million homeowners inNew Yorkpay more than 30% of their income for rent or housing costs, according to the 2010 Census, exceeding the commonly accepted housing affordability guideline.

 

Behind these numbers, one must consider the daily struggle of families to keep the lights and power turned on.   For the 1.5 million households who experience an Energy Affordability Gap, there are probably 1.5 million different stories about how the household budget doesn’t add up, and collides with other spending priorities for rent, food, and medicine.   Particularly in the winter months, high utility bills can contribute to food shortages and hunger:

 

“…[G]reater proportions off poor households,, especially poor elderly households,, experienced very low food security (the more severe range of food insecurity) during times off the year when home heating and cooling costs were high, controlling for important covariates.”[4]

“…[T]here is also evidence that hunger and food insecurity are associated with high utility costs and cold weather.  In theUnited States, data show that families

reporting unheated days or threats of utility turnoffs are more likely to report that

their children were hungry or at risk for hunger than families without either experience.” [5]

 

In conclusion, if New Yorkis among the most expensive states for home electricity, it stands to reason that we should be in the forefront of protecting ratepayers, and investigating electricity price-gouging and unfair overcharges.  We should be number one in consumer representation.  We should be tough on rate increases, and tough on the causes of rate increases.   The fact that Constellation could amass $110 million in “unjust profits” in the Northeastern states, and deceive our electric system operators for several years, does not inspire confidence that the state and federal governments are doing enough to provide rigorous, effective oversight of electric utility operations.

 

We thank AARP and our coalition partners for their leadership in fighting for a fair use of the Constellation settlement dollars for consumers.   We look forward to a comprehensive, favorable decision byNew Yorkstate to deploy these funds to advance the interests of consumers in affordable, reliable electric service.

Charles Bell, Programs Director

Consumers Union

101 Truman Avenue

Yonkers, NY 10703             

Phone: 914-378-2507

www.ConsumerReports.org

www.ConsumersUnion.org

E-mail: cbell@consumer.org

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