New Legislation Removes Penalty Caps for Storm Response Violations
Expedites and Clarifies the Franchise Revocation Process Following Repeated Failure to Provide Safe, Reliable Service
Requires the PSC to Cap the Amount of Money Ratepayers Contribute to Utility Executive Salaries
Also Requires the PSC to Study Whether Private Water Suppliers on Long Island Should Come Under Municipal Control
State Legislature's Long Island Delegation Voices Support for Bill
Governor Cuomo: "The people of the state gave the utility company the right to operate. If the people of this state allow the utility company to operate, the people of the state can revoke their right to operate. So you have a penalty or you have a revocation. Both are very hard to affect right now by the current law, and we need to change the law."
Cuomo: "The abuse of the utilities has to end. They're not too big to fail. They're not going to bully consumers. It's over."
Cuomo: "The Long Island delegation and I have spent time working together on this and they are committed to making this happen in their respective bodies and they're going to co-sponsor this legislation with me and I want to thank them."
Earlier today, Governor Andrew M. Cuomo proposed new legislation to strengthen the State's enforcement tools to hold utilities accountable in response to widespread failures to prepare for and respond to the reality of more frequent and extreme weather events such as Tropical Storm Isaias. If passed by the Legislature, the new law would dramatically increase penalties to shareholders for failing to adhere to emergency response plans and other violations of the Public Service Law, regulations or orders of the Public Service Commission. The new law would also expedite and clarify the process of utility franchise revocation for recurring failures. In addition, the bill requires the PSC to cap the amount of money ratepayers contribute to utility executive salaries. Finally, the bill would also require the PSC to study whether private water suppliers like American Water on Long Island should come under municipal control. The majority of the State Legislature's Long Island delegation joined the announcement, pledging to sponsor the bill and help ensure its passage.
AUDIO of today's remarks is available here.
A rush transcript of the Governor's and legislators' remarks is available below:
We have had an ongoing issue with utility companies and it has been getting worse, not better. Now, New Yorkers are fair people, smart people, they're open-minded people — but New Yorkers will not take bullies and the utility companies have been bullying the people in the State of New York. I believe that. They have an attitude that they're too big to fail, that there's nothing the consumer can do and many of these utility companies, not all, but many have been abusive to the consumer. Remember, it's the consumer that pays the utility bill and the consumer has a right to expect service for their payment; that's how life works. Every time we have a storm we've had excessive delays in loss of power; it's gone on for weeks. The utility companies all say the same thing, "well, we had a storm." Yeah, I know and we pay the unity company to be prepared for a storm. It doesn't say on the bill, "we only provide power on sunny days." You pay a bill 365 days a year, and if there's a storm they have to be prepared for it.
And yes, the snowfalls on the branch, and the ice falls on the branch, and the branch breaks, and the branch hits the wire and the wire comes down. I know, but that's what we pay them to do and we've had excessive delays all across the state, but especially in downstate, especially in New York City, and especially Long Island, because Long Island is prone to storms, right just by its geographic location. And we've gone around and around, and now it's time to take dramatic action. The recourse for government is basically twofold: one, when a utility company doesn't perform repeatedly we can penalize them, which the PSC has been doing; Or two: if it is repeated and serious we can revoke the franchise.
God did not give the utility company the franchise - the people of the state gave the utility company the right to operate. If the people of this state allow the utility company to operate, the people of the state can revoke their right to operate. So you have a penalty or you have a revocation. Both are very hard to affect right now by the current law, and we need to change the law. On the penalties, the penalties by law are limited to either $100,000 per incident or 0.02 of 1% of annual intrastate gross operating revenue, capped at $500,000 or 0.04 of 1%. Why? Why is there a legal cap on the penalty? The penalty should be commensurate with the damage done by the utility company. This law was done for the utility companies years ago. So, you can be penalized, but there's a cap on the penalty that you can receive. What has happened is the penalty has just become a cost of doing business; that's what it is.
I said it once before, not everyone was on the phone, I spoke to a delivery company that was amassing tremendous parking violations. The delivery company would always just double park the truck, or park in an illegal zone to go deliver the package and they'd get a parking ticket, and they'd pay the parking ticket, but it was creating a real traffic problem. And the delivery company basically said to me, "look, we'd rather pay the parking ticket than change our delivery mechanism, because it's cheaper to pay the parking ticket." It's cheaper for these utility companies just to pay these limited capped penalties than to actually change their behavior. So, every storm there's an investigation, they get charged a penalty, the penalty has a cap, they pay the penalty, they go about their business. Change the law. Remove the cap. They should pay a penalty that is commensurate with the damage. Period.
Second change: well, we'll revoke the franchise. When you go to revoke the franchise the utility claims that they own the infrastructure, meaning the pipes, the wires, the generators, the poles. So if you revoke the franchise, their point is, "well, we own all the infrastructure, which makes it all but impossible to revoke the franchise." No. They don't own the infrastructure. The infrastructure was paid for by the ratepayer. When they put in new pipes, that cost goes into the rate. If the ratepayers paid for the infrastructure, then it should be owned by the ratepayers. And the utilities should not have the right to profit from it, especially if they're having the franchise revoked. To the extent their shareholders paid or invested, fine. Give them back their shareholder money, but, on a revocation they have no right to profit from the infrastructure paid for by the consumers in the rate. So, the law would change that also.
Third change in the law, the rate reimburses the utility for expenses. Right now, there is no salary cap. So if they pay the head of the utility $10 million, the ratepayers pay $10 million. It goes into the cost of the utility. The PSC should set a salary cap that the ratepayers will only pay up to X for salaries. If the utility wants to pay someone multiple millions of dollars, let the shareholders pay the CEO. But the ratepayers shouldn't do that. And then there's a specific situation, this would apply to utilities all across the state. But again, Long Island has had specific issues. And there's a specific issue with a company on Long Island called American Water, which I know, frankly, from my time back as attorney general. The PSC in this bill must look at the American Water situation. The differential on what American Water charges is just astronomical. There is, for example, a water bill for the same size house or property in Glen Head can be $2,400. In Jericho, it can be $500, alright.
There's also been significant questions about the safety and quality of the water that American Water company has been providing. This bill says PSC has to review two options. One, the municipalization of American Water, or two, the revocation of the franchise of American Water. And if the franchise is revoked, it will be revoked with the provision that the infrastructure, paid for by the ratepayers, will stay with the state and the ratepayers, and it is not an asset of American Water. To the extent American Water shareholders paid, fine.
But this has to end. The abuse of the utilities has to end. They're not too big to fail. They're not going to bully consumers. It's over. And look, I have said to them a number of times, in a number of different ways, they have to perform a better service. Every storm, it's the same thing. And it can be Con Ed, it can be PSE&G, it can be RG&E, it can be any of them. It's all been the same. And the consumer has had no real recourse, because the law limits the penalty, and they don't fear revocation because they think it's an impossibility.
Taking on the utilities is no small feat. They are very powerful. They have a lot of money. They have big lobbyists. They make numerous campaign contributions. They're very connected to the local community. They're one of the great institutional powers in society. This is going to greatly disrupt the utilities and they are going to push back very hard. Why doesn't government make change? Because when you take on powerful institutions that are making billions of dollars, they fight back.
The Long Island delegation and I have spent time working together on this and they are committed to making this happen in their respective bodies and they're going to co-sponsor this legislation with me and I want to thank them. At this time I want to ask representatives to make a statement and then I'll go through the delegation that's on the phone to affirm that they're going to co-sponsor the legislation. Let's first hear from Senator Gaughran and then we'll hear from Senator Kevin Thomas, then we'll hear from Assemblyman Chuck Lavine. Jim, do you want to start? Senator Gaughran?
Senator Jim Gaughran: Thank you very much, Governor. It's a pleasure to join everybody today even though it's socially distanced. I want to thank my colleagues in the legislature for joining as well. It has been a pleasure to work with you and Long Islanders and New Yorkers can rest assured that we are in good hands working on these and so many other problems.
I especially want to thank the Governor for being the leading force behind this legislation. I have worked in government for years and I can say definitively this bill will fundamentally flip the power dynamic. It will take us one step closer to a major win for the rate payers. As a long time believer that access to clean, safe drinking water is a human right - all citizens should have access to public water - I am thrilled that we are taking the necessary steps forward to stop private water companies from profiting off the backs of Long Islanders.
Utilities do not have a mandate. They are legally required to provide adequate and reliable service that is in the public interest, as the Governor has said. They have dropped the ball for way too long. This legislation drastically reforms how we regulate utilities by providing PSC with the tools and oversight authority to hold them accountable.
Let it be known that today Governor Cuomo has put public utilities on notice. It's a major win for New Yorkers, a major win for Long Islanders and I couldn't be prouder to be a sponsor. Come this time next year, we will have passed this bill that holds public utilities accountable to the people. On behalf of the Long Island delegation, Governor, we are all prepared to co-sponsor and pass this legislation. Again, I thank you very much for your leadership.
Governor Cuomo: Senator, thank you. Thank you for - look, it's a difficult issue and you're right, it's been a long-term issue. This American Water situation specifically, we've been talking about for years. It's my pleasure to work with you and we will get it done. I like your pledge by this time next year. Maybe even sooner. Senator Kevin Thomas - are you with us, Senator?
Senator Kevin Thomas: Yes, I am. Thank you, Governor. Thank you Senator Gaughran and thank you all. It's a pleasure to be here today. It truly is a huge day for both New York State and Long Island. I want to start by thanking my fellow sponsors of this legislation. Most importantly, I want to thank Governor Cuomo whose leadership and political will have made today possible.
Working alongside you to make this bill a reality has been a privilege and I believe this legislation will truly be transformational. As the Governor mentioned, for far too long utility companies have abused the trust that rate payers and the State have put in them, particularly here on Long Island. In August, the super storm ravaged the Island for weeks. Thousands of New Yorkers got excuses instead of electricity.
The super storms are the new normal and it is high time that our public utilities uphold their end of the bargain by safe and reliable service to rate payers or pay the price. As chairman of the Consumer Protection Committee, I have fought to be a driving force to strengthen consumer protections and safeguards, and I can confidently say this bill will fundamentally change the way public utilities do business in the Empire State. While there is much more work to be done today, it is a major leap forward. I again want thank the Governor for making it all possible; this legislation will be a top priority for us next session, and we will get it done. Thank you.
Governor Cuomo: Thank you very much, Senator Thomas. And that's a great expression - you said it well. For too long, New Yorkers have been getting excuses instead of electricity - that really sums it up. I'm going to appropriate that line, just so you know. And Assembly Member Charles Lavine, thank you for your time and all the effort and all the energy on this. Assemblyman Lavine.
Assembly Member Lavine: Thank you, Governor. It is a pleasure - it really is an honor to be here today with all of you. I want to make a special point for thanking Governor Cuomo for proposing this legislation and leading our efforts to hold public utilities accountable once and for all. Our laws and they currently stand put arbitrary limits on penalties, while lacking the enforcement authorities to oversee other regulated entities including private water companies cable companies and telecommunications providers. By reforming and modernizing the enforcement structure and extending penalty authority to other public utilities, we provided new tools to ensure that utilities will for too long have abused their power, in particular American Water, which serves large parts of Nassau counties including the district I am privileged to represent. They will finally be forced to live up to their legal obligations and provide quality affordable services to our citizens. This legislation also forces the Public Service Commission to study whether large areas of Long Island should come under municipal control to improve water delivery service, while ensuring an easy transition to a new public utility. Again, I want to thank you Governor Cuomo for your leadership. In working together we will get this legislation done. Thanks so very much.
Governor Cuomo: Thank you, thank you very much Assembly Member Lavine. This, as I mentioned, this bill is going to have tremendous statewide impact, because it's every utility in the State. But, as I mentioned why hasn't this been done in the past? Because the utility companies are a formidable foe and do not underestimate the amount of pressure and influence they're going to exert to stop this legislation. I believe with the Long Island delegation, united and committed, that that will be the energy necessary to push this bill through. And that's why I'm very excited that you have this Senate and Assembly coalition that is committed to making this a priority for themselves to get it done. And we have them all on the phone and we've heard from some of them, but let me just check them off with their participation and I'm going to go through who's with us, so you see the strength that this is going to have in the Legislature. We heard from Senator Jim Gaughran, and he's all in, and he knows this - he's worked on water authorities and he knows how this business works. Senator Todd Kaminsky - are you with us?
Senator Kaminsky: Of course, Governor. Thank you.
Governor Cuomo: Senator John Brooks?
Senator Brooks: Yes, Governor. Thank you, and thank you for your efforts.
Governor Cuomo: Thank you - thank you very much, John. Senator Anna Kaplan?
Senator Kaplan: Yes, Governor. Thank you. I'm all in with you and my Senate colleagues and Assembly colleagues.
Governor Cuomo: Thank you, Anna. Thank you very much. Do we have Assemblywoman Judy Griffin with us?
Assembly Member Griffin: Yes, Governor. Happy to help with the coalition.
Governor Cuomo: Thank you, Judy. Thank you very much. Thank you for everything. Assemblywoman Michaelle Solages?
Assembly Member Solages: Yes, Governor. I'm so very excited - a long time coming. Thank you very much.
Governor Cuomo: It has been, but it is exciting and we're going to get this done. Do we have Assemblywoman Taylor Darling? Taylor Darling? We do not have Assemblywoman Taylor Darling or we have a technical issue - I had a conversation with the Assemblywoman and she said she'd support it but I'll figure out the issue. Senator Monica Martinez is not with us but I spoke to her this morning - she unfortunately had a passing in her family and she's in our thoughts and prayers and her family's in our thoughts and prayers - but she also supports it. I think there's going to be widespread support in the Legislature but again there's going to be opposition from these utility companies. But they're not going to beat us on this one - you have my word on that. Thank you to my colleagues from the Assembly and Senate, thank you very much for joining us today.