Sandy still looms over Con Edison’s push for rate hike

Foiled before by their performance during Superstorm Sandy, Con Edison is once again seeking to raise electricity and gas rates across New York City and Westchester County. And while the storm hit New York nearly three years ago, it still hangs over the proceedings as the utility makes its case to the state Public Service Commission over the next seven months.

The company can earn profits to lure shareholders, but as a regulated utility, the PSC gets the final word on things like customer rates. And if past years are any indication, the company has reason to fear its proposal may not be approved. Con Edison’s electric rates haven’t budged since April 2012. Officials last year extended a two-year rate freeze negotiated in 2013, when Gov. Andrew Cuomo took the unusual step of publicly calling on the PSC to reject a hike, citing a need to hold the utility accountable.

Con Edison’s 2013 proposal for a rate increase came just months after Superstorm Sandy hit the coast. The governor and others criticized the utility for its performance during that storm, which plunged everything in Manhattan below 39th Street into darkness, stranding many who could not take the stairs. When the rate freeze was negotiated, Cuomo called it “a clear victory for consumers and business, particularly those who suffered through power outages from Superstorm Sandy last year.”

Sandy’s impact is still being felt in the rate hike proceedings today, with Con Edison’s proposal citing the high cost of ensuring a resilient power grid able to weather storms. The proposal also touts improvements, claiming that 100,000 customer outages have been avoided due to changes made in the last three years, and that a quarter of a million customers in Manhattan who lost power during Sandy would be unaffected if a similar storm were to hit again today.

“I represent neighborhoods in Southern Brooklyn that are not just vulnerable to coastal storms, but are also vulnerable to financial storms,” New York City Councilman Mark Treyger said. “Climate change – and how we deal with it – shouldn’t price people out of these communities. There needs to be federal investment in how to make our infrastructure more resilient, and this is a cost that shouldn’t be passed down to the most vulnerable New Yorkers.”

Other elected officials have been critical, even without mentioning Sandy. Assembly Consumer Affairs Chairman Jeffrey Dinowitz decried the “unnecessary” rate hike in a February press release and slammed Con Edison for its “high costs, low quality service, and no accountability.”

If Con Edison’s proposals are approved, the electricity bill of a typical residential customer in New York City would rise by a little more than 5 percent. According to the company, an average monthly bill for 300 kilowatt-hours would be $82.63, up from $78.52 at the current rate. Commercial customer rates would rise 3.7 percent, making a typical monthly bill $2,118, up from $2,042 per month.

Con Edison is proposing an even larger hike – 8.2 percent, on average – for its gas delivery customers. That means a typical customer paying for natural gas heating would see a monthly bill of $153.30, up more than ten dollars from $142.31. Those using gas just for cooking would see their average bill jump from $26 to $29.75.

While Con Edison provides electricity for all of New York City except the Rockaways and for most of Westchester County, its gas coverage area is smaller, including just Manhattan, the Bronx and much of Northern Queens. National Grid, the gas provider for Brooklyn, Staten Island, and much of Queens, is proposing a rate hike of 14 percent. That proposal is expected to follow a similar review timeline as the Con Edison proposal, with both wrapping up around November of this year in time to take effect on January 1, 2017.

Making the pitch

A half-dozen dark-suited Con Edison representatives testified for more than three hours before the PSC in a technical conference last month, highlighting the system-wide improvements and new initiatives that could be offset by the $500 million revenue increase the rate hikes would garner. The March 2 hearing was often highly technical, but it provided a view into the operations of the $40 billion dollar company and changes that may come for its customers.

The main driver behind Con Edison’s proposed rate hike is the company’s desire to introduce new hardware called Advanced Metering Infrastructure, or AMI. According to Mike Murphy, general manager of customer operations at Con Edison, these “smart meters” can be monitored remotely. For the utility, that means getting real-time data systemwide, replacing the models it currently uses. And budget-conscious consumers could get notified if their usage is trending higher in the middle of a pay cycle in order to cut back before the bill comes in.

The technology is not new to the industry. Almost half of the country has it. Although New York City would be the last large city in the United States to adopt it, Murphy said that gives Con Edison “the luxury of learning from everybody.”

AMI does not come without controversy. The program is expensive and the benefit to Con Edison seems to far outweigh the direct benefit to customers. One attendee at the hearing wondered aloud if most customers even looked at their meter enough to notice they got a new one.

Beyond AMI, the company described other initiatives in its case for the rate hike, including improvements to its website and the “digital customer experience,” continued updates to transmission infrastructure and storm resiliency efforts.

Looking ahead

Con Edison made a similar pitch last year, but the PSC decided against a rate hike, freezing rates through the end of 2016 and citing a desire to wait until the state-level Reforming the Energy Vision, or REV, plan was farther along.

“This one-year extension is good because it's an acknowledgement that things will change," PSC Commissioner Diane Burman said at the time, as Politico New York reported. And things have changed with REV, a strategy in part aimed at boosting renewable energy. Since the beginning of 2016, the PSC has released a framework for how utilities should weigh the costs and benefits of investments in the grid and an order from the PSC to emphasize renewables in the retail energy market.

The sides are not scheduled to meet again until May 27, when the PSC receives testimony  from interested parties, including agencies like the MTA and interest groups like AARP. There has not yet been a coordinated effort from elected officials to publicly weigh in on the proposal, but Treyger suggested one is “in the works” in the City Council and expects a multi-tiered approach from the city and state governments as the process continues.

Con Edison declined to guess whether the rate hikes would be approved. “I don’t think you’ll find anyone here willing to speculate on that,” said Michael Clendenin, a spokesman for the company. “We’re going through the process, and we’ll see where it winds up.”