Albany, NY – Votes on state budget bills are underway, and one of the hot topics under discussion in the state legislature this year has been soaring utility bills. Assemblymember Shrestha shares a summary of measures that were secured by the legislature in a budget bill that was passed in both houses yesterday:

“The way investor-owned energy utilities are allowed to recuperate 100% of the costs from customers, and are then authorized to make large amounts of profits for their shareholders through investments in capital projects is largely opaque to most customers who pay their energy bills,” said Shrestha, “And this year, because of the soaring utility costs our constituents are facing, the legislature has had to revisit, with some urgency, whether state regulation has been effective at protecting ratepayers. The answer the Assembly has made clear in its one-house budget resolution is that it has not been effective. As such, both houses have been pushing for immediate legislative fixes, and with the provisions passed through a budget bill yesterday, we’ve come further than we have in a while.

The basic thing to understand about investor-owned utilities is that they can maximize profits in two ways: first, by over-spending on capital projects, and second, by requesting a higher return on equity rate. Below is a summary of the new laws that will go into effect on January 1, 2027:

• Increase the burden of proof on utilities to justify proposed capital expenditures, including a new requirement to provide an alternate budget constrained proposal that does not increase the utility’s aggregate revenues by more than the average of the annual consumer price index increases over the last 3 years; the PSC must then provide a detailed explanation for approving costs higher than what’s in the budget constrained proposal
• Require the utility to disclose executive compensation, and for the PSC to tie compensation for the CEO and senior management to performance-based targets that consider affordability
• Limit the utility’s ability to make ratepayers pay for the costs associated with rate increase requests, such as lawyer fees, witness or consultant fees, and more
• Require the utilities to refund excess revenues in the form of bill credits—currently, when the utility makes more revenues than the authorized level, they keep it
• Prohibit utilities from charging ratepayers for: lobbying costs, membership dues to entities such as trade associations, political contributions, contributions to chambers of commerce or charities, travel expenses that exceed the most recent federal per diem rates, entertainment or gifts, chartered aircrafts, and public relations campaigns and advertising geared towards improving the public image of the utility
• Under certain circumstances, allows the PSC to suspend new rates from going to effect for up to 14 months instead of only 120 days
• Allows litigated rate cases to approve rate changes for three years instead of just one – currently, when rate changes are approved through settlement negotiations, they cover three years, but when they are litigated they cover only one year
• Makes explicit that when the PSC votes no on a joint proposal for negotiated rate increase, the current rates stay in effect – currently, the PSC claims that voting no on the negotiated joint proposal would automatically kick in the utility’s original rate increase request
• Creates a new energy affordability index that shows the energy burden a utility places on residential customers, which the PSC must address during rate cases
• Authorizes the PSC to install an independent affordability monitor at a utility when rate changes result in an energy burden of greater than 3% for residential electric service or gas service, or greater than 6% for combined electric and gas service; such a monitor will have substantial access to records, will be required to report on the primary cost drivers on energy burden, cost saving opportunities, and more, as well as flag widespread errors to trigger an investigation

Additionally, the budget bill will send utility rate payers a one-time relief rebate check and create a commission that examines the state regulation of energy utilities and reports on:

• Causes of rising utility rates
• Examination of current regulatory model involving the PSC
• Examination of the rate-making process
• Impacts of increased demand on supply and delivery costs
• Actions being taken in other states and jurisdictions that have lower rates
• The governance structure of system operators
• Effective cost management and cost control practices for utilities
• Energy and capacity market design
• Options for what can be subsidized by the state
• Ways to reduce costs passed onto ratepayers on the supply side
• Recommendations made to the legislature and the Governor on actions that can be taken to stabilize utility rates

Short-term and long-term solutions to the utility crisis must be pursued simultaneously to provide relief to our constituents, which is why I have advocated for these measures, but in the meantime, we must continue to fight for public ownership of energy because that is the only long-term solution that gets to the root of the problem – that energy should not be for profit – and gets us the reliable 21st century grid we need at cost.”