Energy costs will take center stage in upcoming legislative session

 ALBANY — New York’s legislative leaders spent much of the last year railing against rising utility bills. When the new legislative session begins in early January, they’ll have an opportunity to do something about it.

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Energy costs are “the heart of the affordability crisis in my district, it’s as much of an issue as groceries,” state Sen. Shelley Mayer, a Westchester County Democrat, told the Times Union earlier this year.

 

Lawmakers have a range of ideas to solve the problem. Some want to double down on the state’s clean energy and greenhouse gas reduction transition or target utility companies. Others want to take a step back from green energy mandates to provide some relief for consumers.

 

More than 1 million New York households are in debt to their utility company, according to the Public Utility Law Project. At the same time, three utility companies are seeking approval to raise electric and gas rates.

 

Some lawmakers are frustrated that utility companies are increasing bills while raking in “outrageous profit margins,” according to state Sen. James Skoufis, a Hudson Valley Democrat.

 

Utility shareholders are entitled to earn a return on the equity they invest in the companies — usually around 9.5%. National Grid shareholders receive a dividend of about $3 per share. 

 

Currently, profit earned above the agreed return on equity is mostly kept by the utility with the customer getting a small portion. One proposal would send all funds earned above the approved profit margin back to customers. 

 

“This obvious inequity results in utilities being allowed to keep the vast majority of excess earnings,” Mayer, the Westchester County Democrat, wrote in a memo in support of the legislation. The bill passed the state Senate with bipartisan support this year. 

 

Another set of bills targets utility shareholder profits directly. Skoufis’ plan would only allow a 4% profit margin for utility investors. It’s an idea riddled with pitfalls

 

The utility industry is relatively risk-free, so it doesn’t require substantial profit margins to generate investment. But a 4% margin hardly beats what can be earned through government bonds. If the utility industry can’t compete for investments it can’t generate the money necessary to make billion-dollar improvements to the grid

 

Mayer is suggesting a more measured approach. The Public Service Commission would craft a public facing formula to determine a fair profit margin under her bill.

 

New Yorkers could save around $55 a year if utility profit margins were reduced by 2 percentage points, according to the Rocky Mountain Institute, which bills itself as an independent, nonpartisan nonprofit “that transforms global energy systems through market-driven solutions to secure a prosperous, resilient, clean energy future for all.”

 

Other lawmakers are looking to curb the Public Service Commission, which they allege has been complicit in allowing utility rates to spike.

 

“The (commission) has consistently failed to put ratepayers first,” said Assemblyman Angelo Santabarbara, a Schenectady County Democrat.

 

Santabarbara wants to give the state Legislature authority to overrule utility rate hikes approved by the commission. He said that would democratize the energy rate process with elected representatives making the final call. The commission is currently appointed by the governor with legislative approval.

 

All of those proposed solutions are focused on the delivery section of a household utility bill. That’s the cost of building and maintaining the infrastructure needed to move electricity or gas. 

 

Lawmakers also have ideas to lower the supply side of a bill — which represents the cost of generating power. 

 

State Sen. Kevin Parker, a Brooklyn Democrat, is proposing allowing utility companies to own and operate power facilities. 

 

Currently, New York utilities purchase power from independent producers. In many states the utility company owns both power plants and the distribution system under a regulated monopoly. New York operated the same way until the mid-1990s.

 

The state needs “an all-hands-on-deck approach” to develop large-scale renewable power fast enough to meet clean energy mandates, Parker said. To lower costs, utility companies would be required to give some of the revenue from power facilities they build to low-income customers in the form of bill credits.

 

Lawmakers are also looking to push the New York Power Authority to bolster its efforts to build renewable energy. The Legislature gave the authority the ability to build new solar and wind facilities in 2023. Some have been left disappointed by the amount of projects included in the authority’s plans to this point.

 

To inspire action, Democratic state Sen. Kristen Gonzalez is sponsoring legislation to expand the authority’s board to include members selected by the Legislature. Gonzalez introduced the bill to “increase democratic oversight of the authority and deliver affordable rates and clean energy to New Yorkers.”

 

Nationally, customers getting energy from publicly owned sources pay 13% less for power, according to the American Public Power Association.

 

New York can also potentially lower energy bills by doubling down on small-scale solar. Rooftop and small community arrays generate electricity for nearby homes and businesses, often resulting in reduced utility bills.

 

They don’t require large upfront expenditures, leading to quick deployment in New York. 

 

Developing small arrays is one of, if not the only, areas of the state’s clean energy mandates progressing ahead of schedule. 

 

State Sen. Pete Harckham, a Democrat from the Hudson Valley, is pushing a bill removing some of the barriers to continued growth. Utility companies often bill community solar developers for necessary grid improvements to support the additional power coming online. 

 

Harckham’s bill allows solar developers to complete the grid upgrades rather than utility company employees. This will lower the cost of those upgrades because developers have a financial incentive to make improvements quickly and affordably, said Noah Ginsburg, executive director of the New York Solar Industries Association. The work would still need to comply with safety and prevailing wage rules to ensure it’s done competently. 

 

Projects using the practice in Maine and Massachusetts were brought online more quickly and at lower cost than if utilities had performed the upgrades.

 

Republicans are calling for a complete paradigm shift in state energy policy to bring costs under control. 

 

“They’re afraid to acknowledge it but it is their (Democratic) policies that are driving up utility costs for ratepayers,” said Assemblyman Phil Palmesano, a western New York Republican. 

 

Palmesano is pushing several policies to delay the state’s clean energy mandates.

 

All school buses purchased in New York must be electric starting in 2027. Palmesano is proposing delaying that mandate to 2045. His bill also requires the state to undergo a cost-benefit analysis for each school district to study what the transition will cost. 

 

State Republican lawmakers are also pushing a bill to delay the state’s greenhouse gas emission reduction mandates by a decade. The policy would also allow for further delays if the mandates raise utility bills more than 5%.

 

It will cost more than $9 billion to convert the state’s school bus fleet by 2035, the Empire Center for Public Policy reported. 

 

Another proposal from Palmesano and other Republicans would require a monthly report from the state on the costs and benefits of all policies related to the Climate Leadership and Community Protection Act of 2019, which set clean energy mandates that many industry experts said are unattainable. 

 

Whatever the Legislature agrees to will need support from Gov. Kathy Hochul. She’s been mercurial on legislative efforts to bring down energy costs in the past.

 

She chose to sign a bill last week repealing the so-called “100-foot rule,” which had required utility companies to pay for the installation of the first 100 feet of a gas line for new hookups, a cost that is absorbed by all ratepayers in the system.

 

Removing the rule will save ratepayers about $600 million annually, according to the Public Utility Law Project. Opponents, including National Grid, say the repeal will discourage homeowners from switching from fuel oil to natural gas for heating, which lowers emissions. 

 

But several energy affordability measures pushed by consumer advocacy groups have been vetoed by Hochul. She vetoed a bill passed last legislative session that would have created a State Office of the Utility Consumer Advocate. The office would have advocated on behalf of residential customers when utility companies seek to raise rates.

 

Hochul vetoed the bill in conjunction with several other pieces of legislation she says will cost money not allocated in the most recent state budget.

 

“These unbudgeted costs would create significant staffing and other programmatic burdens on state agencies,” Hochul wrote in a veto message. 

 

“Rather than having a strong, independent voice to fight for them, consumers will instead continue to pay millions of dollars for utility companies to defend their rate increases without a meaningful seat at the table,” AARP New York Director Beth Finkel said in a response to Hochul’s veto. 

 

Photo of Ezra Bitterman

Ezra Bitterman

Investigative Reporter

Ezra Bitterman is a Joseph T. Lyons Investigative Fellow for the Times Union. He is from Los Angeles and studied Journalism at the University of Missouri. Ezra previously reported for the St. Louis Post-Dispatch, Columbia Missourian and Euractiv. He's reachable at Ezra.Bitterman@TimesUnion.com.

 

Energy affordability to take center stage next legislative session

 

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