As Utilities Push for Higher Energy Bills, Will New York Fund the Watchdogs Pushing Back?

 

New York’s consumer advocacy groups struggle to compete with well-funded utilities and corporations. Lawmakers want to level the playing field.

 A lot to say about their energy bills.

 But fighting utility rate hikes is not easy, or cheap. It takes lawyers, expert witnesses, and — among other things — a whole lot of photocopies.

Laurie Wheelock, executive director of the Public Utility Law Project, or PULP, estimates that her small consumer advocacy nonprofit spends upwards of $5,000 a year just printing documents for the court-like proceedings that state regulators hold to decide utility rates. (Groups testifying at hearings have to bring paper copies of certain documents for everyone in the room.)

That’s no small expense for most climate and consumer advocates participating in utility proceedings. But photocopying costs are only the beginning. It takes far more money to hire economists, accountants, and other experts to mount a serious challenge to utilities’ requests to hike rates.

Nonprofit groups have persuaded regulators to block hundreds of millions of dollars in gas infrastructure and won alternatives, like programs to subsidize heat pumps for low-income customers. Yet they say they’re hamstrung by a lack of capacity. Even the most active have only about 10 people on staff and can rarely afford to hire outside consultants, while the utilities and corporations they’re going up against spend millions on each case.

This June, for the third year in a row, the New York state legislature passed a bill aiming to level the playing field by reimbursing advocacy groups for some of their expenses from participating in rate proceedings. That could add up to millions of dollars in funding each year, paid by utilities themselves and bringing consumer groups slightly closer to what the companies spend in their own defense.

“Utilities have lawyers, economists. If they don’t have the expertise in house, they go out and pay for consultants,” said Bill Ferris, legislative representative at AARP New York, which advocates on behalf of the aging. “Residential ratepayers don’t have the ability to do that.”

The bill faces an uphill battle after Governor Kathy Hochul vetoed it two years in a row. Hochul has argued that New York already has “robust and well-funded” entities advocating on utility customers’ behalf, including divisions of two state agencies.

But those offices are far smaller than New York used to have — and many other states still do. The state’s formal watchdog in utility proceedings, the Utility Intervention Unit, is even smaller than some of the nonprofit groups that work alongside it. Its closest counterpart in California has nearly 20 times more staff.

Asked about the bill, Hochul’s office said only that she was reviewing it. Utilities have lobbied hard against the legislation, with electric, gas, telecom, and water companies all banding together to fight it.

The bill’s third-time passage this year is just the latest in a long fight over how to protect everyday New Yorkers from excessive rate hikes. The intervenor funding bill itself first passed the Senate in 2010, but took over a decade more to pass the full legislature. A related bill, which would have created an independent consumer advocate office for utility customers within state government, passed both houses in 2019 and 2021, but was nixed — first by then-Governor Andrew Cuomo and then by Hochul when she took over.

Proponents of the two bills are perplexed by the chilly reception they’ve gotten from the governor’s office, particularly given Hochul’s stated emphasis on energy affordability.

Hochul has said that diverting funding to nonprofits could actually end up increasing energy bills, because utilities will be on the hook for covering nonprofits’ expenses and would pass the cost down to their customers.

As it stands, customers are already paying for utilities to represent themselves. A 2022 analysis by AARP found that New York’s nine major electric and gas utilities spent an average of $2 million each on lawyers and consultants to win their latest round of proposed rate hikes, adding up to $19 million over the span of a few years — all of which they charged to customers through increased rates. ConEd alone spent $6.5 million in fees on a 2019–20 case that ended up netting it $1.2 billion in new revenue over the first three years of the pandemic.

Utilities aren’t the only big players throwing their weight around. Big businesses that consume a lot of energy — including manufacturers, retailers, and real estate — also lobby energy regulators, both on their own and through trade groups. (In each rate case, regulators have to weigh what share of overall utility spending will be shouldered by residents versus businesses, so the two groups of customers have competing interests.) In ConEd’s latest rate case, those businesses included no less than the largest US company, Walmart.

“I don’t think residential ratepayers can compete,” said Ferris. Even AARP — a national organization that ranks among the top 10 lobbying spenders in the state — can muster only a fraction of the resources brought by companies like Walmart, he said. “We’re outnumbered every time.”

New York ratepayers used to enjoy greater backing from the state.

From 1970 to 2011, New York had a Consumer Protection Board, a state agency that fielded customer complaints about everything from gas bills to faulty fridges. It had more than 40 staff in the early 1990s and played a similar role in energy battles to the ratepayer advocacy offices that still exist in more than 40 other states.

 According to John Howard, who was the agency’s second-in-command in the mid-’90s and went on to serve on the state’s Public Service Commission, roughly half of the agency’s staff focused on utilities. In its heyday in the 1980s and early ‘90s, the board won rate freezes its then-director estimated saved customers $1 billion.

“Do you win every battle? No, but certainly the pencils get a lot sharper,” Howard said. “In these rate cases, you need enough horsepower in order to make a meaningful difference.”

Crucially, he noted, the Consumer Protection Board had the power to sue the state for failing to live up to its consumer protection mandates. But, during Republican George Pataki’s three terms as governor, the agency was cut back and flexed its muscle less, Howard said. By 2011, it had shrunk to half its former size, before a newly elected Governor Cuomo gave it the axe, splitting it into smaller offices within the Department of State.

Among them is the Utility Intervention Unit, tasked with representing customers in rate cases and other proceedings. It has just eight budgeted full-time staff — up from six a few years ago — as well as one consultant and a part-time lawyer. As of June, it did not have a director, and another full-time position was also vacant. (The Department of State did not respond to requests for an updated roster.)

“I don’t think it’s big enough, and it’s not independent,” Howard said. “It’s another division in the Department of State, [which is] sort of a hodgepodge of stuff.”

The unit’s counterpart in New Jersey, the Division of Rate Counsel, is an independent agency with a staff of 26, half of whom are attorneys. California’s analogue — the Public Advocates Office — has a staff of 179.

The Golden State is also one of sixteen states with an intervenor compensation program for outside groups. It’s the country’s largest such program, awarding 10 to 15 million dollars each year and growing.

Groups participating in the program say it’s been key to giving residents a fair say in the rate process — an assessment largely backed up by a 2013 audit — and ultimately saves them money. The Utility Reform Network, or TURN, California’s largest ratepayer advocacy group, gets about $5 million from utility customers, covering most of its budget. In return, the group says, it helped block more than $3 billion worth of unnecessary utility spending just last year, by proposing more affordable alternatives.

“We’re talking about a fraction of a penny on the dollar that the utilities spend” on their own lawyers and consultants, said Mark Toney, TURN’s executive director. “If the net result is that rates are lower than they would have been, then it’s worth it.”

Toney said it’s been a boon for California to have a large consumer advocate’s office and well-funded outside groups working toward the same goal. The state office is required to participate in every utility proceeding — several hundred a year — while TURN does about 100.

In cases where they overlap, Toney said, his group and the Public Advocates Office coordinate to ensure they’re not duplicating each other’s work. That’s partly by necessity. California’s law blocks groups from being reimbursed for work that another group is already doing.