Association Probe of Utility’s Rate Hike Proposal Reveals Doubling of Basic Service Charge Hits Consumers Hard
Long Island’s energy supplier wants to raise rates on the backs of many low-usage consumers and saddle ratepayers with more of its expenses, according to an AARP analysis of PSEG’s three-year rate hike proposal.
In a detailed report AARP submitted today as its public comments on the case to the state’s utility-regulating Public Service Commission (PSC), the association urges the PSC to dismiss PSEG’s proposal in its current form and to reject wholesale the company’s proposed near doubling of the basic service charge, which customers must pay no matter how little energy they use.
In addition, AARP proposed increasing the funding for LIPA’s low-income program.
AARP submitted the report following a rally outside Long Island Power Authority headquarters – and after more than 7,000 AARP members submitted comments against the proposal in the weeks leading up to today’s event.
Several dozen Long Island AARP members were joined at the rally by the Association’s state director and president, along with representatives of Consumers’ Union and New York’s Utility Project.
“When we dug deep into PSEG’s rate hike proposal, we were even more concerned than when we faced the initial sticker shock of a PSEG costly rate hike proposal,” Beth Finkel, State Director of AARP in New York State, said at the rally. “The PSEG plan really hits those least able to afford it and includes what could be big hidden costs.”
“Long Islanders can’t afford this increase, plain and simple,” added Joan McCarty, AARP’s representative for Long Island – home of the highest concentration of suburban AARP members in the nation. “Every extra dollar that goes to a utility bill is a dollar less for food and medicine.”
“The proposed PSEG rate plan is harsh, unfair, and unworkable, and is on a collision course with economic reality,” said Chuck Bell, programs director for Consumers Union, the policy and action division of Consumer Reports. “AARP’s detailed analysis shows how the burden of the proposed rate increases would particularly fall on the shoulders of seniors, working-class families, and other ratepayers on limited incomes. Energy has become unaffordable for too many Long Island families, and this plan could make the situation even worse. We urge the Department of Public Service and the LIPA Board to modify and reformulate the rate plan to eliminate increases in basic service charges, prevent unfair shifting of financial risks, and expand protections for vulnerable customers at risk of losing service,” continued Bell.
“In January, the Long Island Power Authority and its agent PSEG proposed a historically vast series of rate increases that would hit Long Island’s most vulnerable citizens—including seniors, the disabled, and veterans—the hardest,” stated Richard Berkley, Executive Director of the Public Utility Law Project. “Their proposal would increase basic service charges by almost 40% in the first year, and then raise them by double digits in each of the following two years. Since the base rate is charged regardless of the amount a consumer uses, low-income and low-usage communities would be immediately and profoundly, the worst hit.” Berkley continued, “LIPA/PSEG’s rate increase proposal not only uses the kinds of regressive charges that would fall most heavily upon Long Island’s low-income and fixed-income population, it also completely rejects New York’s and Long Island’s historic goal of promoting conservation and wise energy use. I commend AARP for spearheading this investigation, and for increasing the transparency of LIPA’s opaque rate setting process. We join AARP and other consumer advocates in opposing LIPA/PSEG’s proposed increases.”
“Long Islanders are getting hammered by high utility rates and the PSEG rate hikes will put more families over the edge,” said New York Public Interest Research Group attorney Russ Haven. “To make matters worse, PSEG wants to boost the basic ‘stay-on-the-grid’ charges, which will really hit folks on limited incomes the hardest.”
AARP, with 600,000 members in LIPA’s service territory, found widespread evidence that too many Long Islanders have been struggling to afford the basic necessity of utilities:
- They already pay the third highest electric prices in the continental U.S., even though a quarter – more than 250,000 – earn less than the $58,003 statewide median income.
- More than 12% of LIPA’s residential customers – almost 130,000 – were over 60 days in arrears at the end of last year. Collectively they owed $90 million, about $700 per customer. That’s 33% more than six years ago after the Great Recession, when they owed about $68 million, or $520 per customer.
- Over 17,000 LIPA residential accounts were terminated last year – about 46 households a day, or two every hour.
- The number of households earning less than $35,000 in LIPA’s service area that received public assistance such as SNAP (Supplemental Nutritional Assistance Program) soared, and the unemployment rate among them jumped by 45%, from 2009 to 2013.
- Various forms of public assistance to LIPA’s senior citizen households, which account for 25% of the LIPA service area, increased 42.8% to 84.1% between 2009 and 2013.
These struggles were reflected in an AARP survey of Long Island voters 50 and older last year that found 46% “extremely” or “very” concerned about being able to pay their utility bills in the coming years, and more than 77% not believing the interests of residential utility customers are represented and taken into consideration when utility rate increases are proposed.
Although PSEG claimed its proposal would result in only modest increases on low-usage customers, AARP found PSEG would achieve its entire residential rate increase by almost doubling basic service charges – which would mean customers using 500 kilowatt hours would pay 6% more per year. AARP is urging a freeze on the basic service charge while the state re-examines New York’s electric systems.
PSEG’s rate plan also proposes continuing a mechanism that shifts responsibility onto customers for revenue declines attributable to any cause, not just from losses due to conservation and efficiency efforts – as is normally the case. PSEG’s plan could lead to large surcharges on customer bills outside of any formal PSC proceeding or review. AARP recommends a $15 million cap on these charges to customers until a more transparent process is in place.
Lastly, AARP found that LIPA’s low-income discount plan (“Household Assistance Rate”) is an inadequate buffer against electricity rates that are already unaffordable, since it enrolls only 16,000 customers at most, despite stated criteria that should make 10 times that number eligible.
AARP is a nonprofit, nonpartisan organization, with a membership of more than 37 million, that helps people turn their goals and dreams into real possibilities, strengthens communities and fights for the issues that matter most to families such as healthcare, employment and income security, retirement planning, affordable utilities and protection from financial abuse. We advocate for individuals in the marketplace by selecting products and services of high quality and value to carry the AARP name as well as help our members obtain discounts on a wide range of products, travel, and services. A trusted source for lifestyle tips, news and educational information, AARP produces AARP The Magazine, the world’s largest circulation magazine; AARP Bulletin; www.aarp.org; AARP TV & Radio; AARP Books; and AARP en Español, a Spanish-language website addressing the interests and needs of Hispanics. AARP does not endorse candidates for public office or make contributions to political campaigns or candidates. AARP Foundation is an affiliated charity of AARP that is working to win back opportunity for struggling Americans 50+ by being a force for change on the most serious issues they face today: housing, hunger, income and isolation. AARP has staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Learn more at www.aarp.org.