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SpotlightShut 'em down! NY Gov wants more power over under-performing utilities
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Jan 10, 2013
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Quick Take: I understand sticks, but shouldn't they come with carrots too? New York Gov. Andrew Cuomo wants to give his government a very very big stick indeed – namely, the ability to shut down utilities that don't meet his standards. First, I think that is an empty threat – no one would realistically tell a utility to shut up shop and go away, stranding its customers. Second, it would be much more effective if it came with a carrot as well. If you're going to punish utilities that don't meet your standards, you should also reward those who exceed them. - By Jesse Berst
Claiming that the current system is "skewed in favor of the utility companies," New York Gov. Andrew Cuomo wants his state to have an easier path to rescind the ability of poorly performing utilities to operate, according to the Buffalo News.
Cuomo is using the outrage over outages from super storm Sandy as leverage. "We want to have a situation where we truly regulate them and, to truly regulate them, I believe you have to be able to terminate the relationship. Otherwise, you have no ultimate sanction."
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Use the Talk Back comment form below to tell us what you think about the governor's plan.
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Jesse Berst is the founder and chief analyst of Smart Grid News.com, the industry's oldest and largest smart grid site. A frequent keynoter at industry events in the U.S. and abroad, he also serves on advisory committees for Pacific Northwest National Laboratory and the Institute for Electric Efficiency. He often provides strategic consulting to large corporations and venture-backed startups. He is a member of the advisory boards of GridGlo and Calico Energy Services.
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Sandy fallout: Utility exec resigns, NY governor demands answers, lawsuit filed
| Shut 'em down? |
| Society should always retain the right to withdraw a corporation's charter for unacceptable social behavior. That should include utility companies. There have been too many examples of companies who routinely break the law and treat fines as a cost of doing business. In these cases withdrawing their charter is the only option and should be available. |
| Kai Millyard - 01/10/2013 - 06:23 |
| NY Gov, Cuomo |
| Thursday's piece about NY Gov. Cuomo's comments on utilities is right on when it suggests carrots are needed when sticks are threatened. NY electric companies have been allowed to earn returns on equity that rank among the lowest of all states, with the Staff of the PSC insisting (and the PSC itself apparently agreeing) on using methodologies (DCF & CAPM) that produce low returns and refusing to consider any company sponsored testimony that suggests other methodologies. Isn't it time for a new look and consideration of tools widely used in other states by regulatory bodies? |
| Carl H. Seligson - 01/10/2013 - 06:33 |
| Shut 'em down? |
| Thee concept of "shutting down" a utility does not consider the end user - the customer or rate payer. All state regulators utilities have tools and use them to assure compliance with rules. Cusomers may complain if they feel they are "unfairly" treated. |
| Carl H. Seligson - 01/10/2013 - 06:38 |
| The Root Problem |
| Notwithstanding the need to ensure appropriate oversight of utilities, Gov. Cuomo's "stick" on utilities overlooks the root problem. Our principal challenge is that we have all our societal eggs in the basket of utilities. We need greater redundancy if what we seek is resiliency - alternatives to utter dependence on a single infrastructure for a vital service. We need to invest far more in the built infrastructure - our buildings need to be capable of operating longer without grid power. More frequent, more disruptive storms are on the horizon. Yelling louder at utilities to work faster and harder will not make us any more resilient to the threats posed by natural disasters. |
| John Cooper - 01/10/2013 - 07:07 |
| Regulators have shared responsibility |
| Isn't it funny how these government officials want to act like they have your back. In my opinion, these regulators and government officials are equally responsible. This is what happens when you have government agencies that really have no clue what they are regulating. This sounds more like the BP oil spill where the MSHA had no idea that these integrated oil and gas producers were unprepared to handle a blow-out disaster. It didn't take long for them to start the blame game. If they want to get serious about the problem, then government needs to install an agency that understands how to construct, operate and maintain a robust electrical system. As well as, ensuring they have a plan to respond to these disasters. |
| Todd Sumner - 01/10/2013 - 07:15 |
| Am I missing something? |
| Maybe the Governor should yell into a mirror. After all, the Governor IS ultimatey in charge of the state authorities like NYPA and LIPA, and certainly, at the very least, greatly influences their budgets. He even can divert some of their funds ( http://niagara-gazette.com/local/x106231055/NYPA-suit-swept-away ). To some extrent I think this is intended to divert attention from the State's own contributions to the problem with the volume turned way up to make sure no one looks behind the curtain. Why did LIPA only have an Acting CEO for the last two years. Wouldn't an acting CEO be even more subject to external state pressures on their spending plans and budgets. |
| Patrick M Duggan - 01/10/2013 - 07:32 |
| NY Gov Cuomo - Shutem down! |
| Regulated utilities earn exceptional rates of return without many of the risks faced by unregulated companies. However, regulated utilities also are required to provide services that are essential, with little tolerance for outages,even under the worst weather conditions. Performance standards are reasonable and they should be combined with carrots and sticks. I wonder if Gov. Cuomo would be willing to subject his own "state government" to the same standards he expects from his "state utilities". My guess is that the "state government" would have been shut down long ago. |
| Roger Levy - 01/10/2013 - 07:33 |
| Shut 'em down? |
| You need both the "stick and Carrot". The problem is the industry needs to have a better relationship with all parties. Address the needs of the ratepayers, the utility investors, the regulators. In the case of Sandy, all the issue were local, and in most cases infrastructure damage is local to a distribution feeder. The utilities and regulators need to work to address the issue on how to build a robust distribution system AND understand a build a system to expect long-term outages. The current system will never be 100% reliable. State regulators, Utilities, local government, the public need to design and plan this robust system and the contingent system. These plans are the "investment plan" for the local government WHEN the next outage happens, and it will happen. One good document to consider with alternative approaches is: http://www.nycedc.com/resource/integration-solar-energy-emergency-planning |
| State Energy Resiliency Regulator - 01/10/2013 - 07:39 |
| Carrots, yes, but how measured? |
| Regulation has always existed in part as a stand-in for competition in monopoly situations. But it seems regulation has not kept pace with technology or society's requirements. Nor has regulation evolved to provide the rewards for strong performance -- or penalties for poor performance -- that free markets offer. So yes, reward strong performance and penalize poor performance. But how should we evaluate distribution performance? Reliability? Yes. Outage restoration? Yes. How about cost to serve? How about grid efficiency? How about preparedness to reliably manage growing penetration of distributed generation? How about customer options and the facilitation of efficient markets, from pricing to data availability? What about network security? These are the new metrics of distribution business performance. It is time to advance best practices in distribution utility regulation; let's start a pay-for-performance conversation with performance evaluation as its centerpiece. |
| Paul Alvarez - 01/10/2013 - 07:40 |
| I Was There... |
| ...the day after the storm came through. There were dozens of trucks from tree trimming companies that had come from outside the region, and dozens of utility trucks (including one from Pacific Gas and Electric) from outside the region. Debris from cutting up downed trees was everywhere. On a two mile walk we encountered several pole-mounted transformers that had leaked oil. There was no pattern to the areas that were still blacked out and the areas that had power. The Governor of New York has political appointees in key posts at LIPA, and both LIPA and its predecessors have been convenient whipping boys in the contact sport of New York politics for years. In that particular instance, he's clearly trying to pull the wool over people's eyes because LIPA is a state agency, not a private utility. In other areas of the state, state law should be changed to either require the utilities to trim trees properly and indemnify them from frivolous complaints by property owners, or require the property owners to reimburse utilities for damage caused by trees they won't allow to be trimmed according to a formula that is not subject to judicial discretion. You've now solved most of the problem. Low-lying portions of New York City, Long Island and New Jersey require a different, more expensive and potentially controversial solution, which is to get people out of those places permanently. Having experienced Hurricane Donna as a child in Long Beach, I wasn't at all surprised at the havoc wreaked by the storm surge, and I don't think there's any way to hold it off. Jack Ellis, Tahoe City, California |
| Jack Ellis - 01/10/2013 - 08:59 |
| Political Grandstanding |
| Politicians love to talk tough, especially about things they know nothing about. Lawsuits, criminal charges, fines, and other sanctions might be available, and would be more effective and less disruptive. Cuomo should be explaining why willing repair crews were sent home because they were non-union. |
| Paul D. Olivier - 01/10/2013 - 10:55 |
| The State of New York |
| and its Governor should just shut up. Arguably the worst service-restoration performance last year was by LIPA. LIPA is a creation of the State of New York, apparently answerable to no one. They keep showing up on the "worst" list. Bring back LILCo! |
| Dave Gilmer - 01/10/2013 - 16:29 |
| View from afar |
| I'll admit that I don't know things work there, but I can bring a perspective from over in the UK. There is a legal separation between the Supply Business (open to competition a bit like Texas I think) and the "lines" business, which is obviously a monopoly. The lines business charges to the suppliers are regulated based upon performance. There are literally hundreds of metrics taken into account - I know because I've been involved in supplying them. One of the measures is "customer time lost" and allowance is made for extreme events (your storm would have been one). The profits therefore are based upon the performance of the distribution company. There is a trade-off between the amount spent on "1 in 200 year" events versus the pain of not coping with them. It's a balancing act but encourages investment in reliability. |
| Paul Scotson - 01/11/2013 - 07:01 |
| Cuomo's Big Gov. Solution |
| Obviously Cuomo isn't talking about shutting down the under-performing utilities, he intends to take over the operation of these companies. Can anyone remember an instance when a government-run entity did it better or cheaper than the free market. I know they give the illusion of doing it better, but honest scrutiny always proves it is not cheaper. When the natural disasters happen, Big Government is always just as incapable of dealing with it as the company they replaced. |
| Gary Swank - 01/11/2013 - 10:21 |
| RE:Big government solution |
| How soon we forget! Big companies can also have big problems. Remember TEPCO? (Tokyo Electric Power Company) In the end Japan was effectively forced to take ownership because TEPCO the confidence of the citizens and was nearly bankrupt. It isn't an issue of big government or big company as much as it is preparedness and good people in place to respond when the big disaster hits. * Big companies can also forget the need to be prepared and instead focus on their bottom line, just as big government projects can become bureaurcatic. FWIW from what I read - it sounds like one of the proposals is to privatize LIPA - remove them from "big government control". As for shutting down utilities - that of course would not happen - it would more likely be a forced merger with a stronger utility which is more responsive --- much the same way as the FDIC closes a bank and/or finds another bank to take over its customers. But of course this wouldn't even be a topic if the executives running the various Sandy impacted utilites had been following their own procedures for emergency preparedness ...(they did have them right?) |
| Dennis Heidner - 01/11/2013 - 13:11 |
| Sticks work |
| The problem of covering consumer needs is across all industries. GM went chapter 11 and took Detroit by meeting needs that required wars to ensure fuel supply. Look at General Mills and Coke today as the snack industry sells "bliss food" to kids and bankrupts the public health treasury. Sticks like CAFE standards and sugar restrictions guide companies away from the regulated and subsidized bottom line toward new technological models. CA has shown that consumer choice does forces the direction of technology. Ideally only the consumer would choose through for example cap and dividend. |
| Gladwyn d'Souza - 02/26/2013 - 08:04 |
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