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LIPA lawyer: Utility shouldn't 'act like Big Brother' in setting rate classes

Towers carrying PSEG Long Island transmission lines are

Towers carrying PSEG Long Island transmission lines are silhouetted by the setting sun in Centereach on May 26, 2016. Credit: Newsday / John Paraskevas

A top LIPA lawyer says PSEG Long Island should not “act like Big Brother and tell customers what’s best for them” by switching them to potentially cheaper rate classifications.

LIPA was responding to a Newsday report last month that found numerous changes between the first draft and the final version of a management audit of the utility by an outside consulting firm. The audit was sanctioned by the state Department of Public Service. 

Among changes from a draft to a final version of the report was that PSEG, which took over the Long Island power system in 2014, "does not have sufficient processes to assure customers that they are assigned to the correct rate." This statement was replaced in the final version with a shorter line that said the utility complies with PSEG legal findings. 

LIPA deputy general counsel James Miskiewicz at a trustees meeting Sept. 27 said PSEG should not proactively shift customers to different rate classifications, even if doing so could save the customers money. Miskiewicz said the utility relied on a previous case case before the Public Service Commission to make that determination. LIPA is not subject to PSC jurisdiction. 

"The Public Service Commission looked at that in 2010 and decided, no you don’t act like Big Brother and tell customers what’s best for them," Miskiewicz said. "You give the customer as much information as possible and you let them make a decision as to which rate class they should be in.” 

NorthStar Consulting Group, which conducted the audit, recommended that PSEG examine users' past 12 months usage to determine which rate class is best to assign them to the proper rate. The utility also does that if it finds certain customers are using larger amounts of power that warrant shifting them to a more expensive rate class. 

Business and residential customers are generally assigned a rate class when they sign up for service. The rate class determines how they will be billed for electricity. In 2015 PSEG found that some 600 customers, primarily businesses, were misclassified in a way that could save them thousands of dollars  by switching to a new rate. The utility sent letters to customers and even pushed for changes in LIPA rules to facilitate the switch.

The early draft report said PSEG “views it as the customers’ responsibility to ensure they are on the correct rate," a finding altered from the final report. 

Miskiewicz asserted that NorthStar’s recommendation was “that we as a governmental agency should take that discretion away from private citizens and just do it because we’re the government and we know better.” The original draft makes no such recommendation. LIPA requested alterations in the final report, Miskiewicz said, to reflect its interpretation of the law. 

LIPA chief Tom Falcone noted the rate-change generally applies to businesses, not residential customers. "We're talking about pretty big users of energy," he said. 

PSEG officials declined to comment.  

Two state lawmakers, Assemb. Fred Thiele (I-Sag Harbor) and Sen. Kenneth LaValle (R-Port Jefferson), have called for hearings before the legislature to investigate alterations in the management audit.

 Miskiewicz took issue with other sections of the draft report and the Newsday story.

A line in the original report noting there was “no voice of the people” in LIPA management decisions was removed after LIPA argued that the utility makes “vigorous efforts" to ensure that "we hear what the public, what customers want.” He noted the draft report was mistaken in saying customers were not able to comment on board consent agenda items.

Miskiewicz also noted that the final report included information about PSEG missing two critical measures of outage duration and frequency in recent years, but he did not mention the final report’s exclusion of a full-page chart showing the number, type and origin of specific outages over three years.

Nor did Miskiewicz address elimination of a line saying the LIPA board “does not have sufficient relevant functional expertise for an organization of its size, complexity and revenue,” while the board’s activity level is “relatively low," among other excluded findings.

LIPA trustee Elkan Abramowitz, who has served as criminal attorney for the office of Gov. Andrew M. Cuomo who appointed him to the LIPA board, called the Newsday story “fake news.”

“I read the Newsday article as an attempt by LIPA and PSE&G to affect the independence of an audit, not illegally but improperly,” Abramowitz said. “That’s the import of the article, and I think that was outrageously unfair.”

The story noted that PSEG and LIPA never saw the January report, and no references were made to how the changes were made or improprieties.

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