BILL NUMBER: S10667A
SPONSOR: COONEY
 
TITLE OF BILL:
An act to amend the public service law, in relation to establishing a
presumption that certain refunds received by public utility companies
shall be passed on to ratepayers
 
PURPOSE:
This bill establishes a rebuttable presumption that the portion of a
refund attributable to costs previously recovered from utility consumers
shall be passed on to those consumers. The bill also limits the circum-
stances in which such funds may be used for another purpose, deducted
for recovery costs, or retained for the benefit of utility shareholders.
 
SUMMARY:
Section one amends subdivision two of section 113 of the public service
law.
Paragraph (a) authorizes the Public Service Commission to determine the
portion of a refund received by or credited to a regulated public utili-
ty company or municipality, or applied as an offset against an existing
or future liability of such public utility company or municipality, that
is attributable to costs, taxes, fees, charges, or other amounts previ-
ously recovered from consumers through commission-authorized rates or
cost recovery mechanisms, and the just and reasonable disposition of any
remaining portion.
Paragraph (b) establishes a rebuttable presumption that the ratepayer-
attributable portion of the refund shall be passed on to consumers, less
any reasonable costs approved by the commission.
Paragraph (c), requires the commission to direct the refund, to the
extent practicable, to the consumers who bore the underlying costs or to
the appropriate customer classes. It authorizes distribution through
bill credits, direct refunds, reductions in future rates, or another
method providing a direct and equitable consumer benefit.
Paragraph (d) permits the presumption to be rebutted only upon a demon-
stration by the public utility company or municipality and a finding by
the commission that direct distribution is impracticable and an alterna-
tive disposition will provide consumers with a reasonably equivalent or
greater benefit, or that an alternative disposition is necessary to
prevent an imminent and material impairment of safe and adequate utility
service. Any disposition authorized to prevent such an impairment must
be limited to the amount necessary and used solely for that purpose.
Paragraph (e) prohibits any ratepayer-attributable portion of a refund
from being retained as profit or used for the benefit of shareholders.
Paragraph (f) permits the deduction of refund-recovery costs only when
the utility demonstrates that the costs were reasonable, documented,
prudently incurred, and directly necessary. Costs resulting from inade-
quate internal controls, a lack of reasonable care, or noncompliance may
not be deducted.
Paragraph (g) requires the commission to issue specific findings
supporting any approved cost deduction or departure from the statutory
presumption.
Paragraph (h) authorizes the Public Service Commission, upon application
by a municipality and the finding of undue fiscal hardship, to approve a
payment schedule of up to two years for municipalities required to pay
refunds under this section.
Paragraph (i) clarifies that the Department of Taxation and Finance
makes the refund payment immediately and the municipality or county
shall reimburse the department in accordance with any payment schedule
pursuant to paragraph (h).
Section two provides an effective date.
 
JUSTIFICATION:
Utility rates include taxes, fees, operating expenses, and other costs
incurred in providing service. When these costs are included in rates,
consumers ultimately pay them through their utility bills.
If a utility later receives a refund of an amount previously recovered
from consumers, the resulting benefit should presumptively be returned
to those consumers. Current law gives the Public Service Commission
broad discretion over the disposition of utility refunds but does not
establish a clear ratepayer-first standard.
Recent proceedings involving substantial utility sales and tax refunds
have demonstrated the need for greatest clarity. Disputes may arise over
how much of a refund should benefit consumers, whether recovery expenses
should be deducted, and whether shareholders should receive a portion of
the funds.
This bill provides that funds attributable to costs previously paid by
consumers should generally be returned to consumers. It preserves the
commission's authority to determine the appropriate method of distrib-
ution and allows the deduction of reasonable and necessary recovery
costs. At the same time, it prevents utilities from retaining ratepay-
er-funded refunds as shareholder profit or,deducting costs caused by
their own inadequate controls or lack of reasonable care.  
LEGISLATIVE
HISTORY: N/A
 
FISCAL IMPLICATIONS:
This bill will have an indeterminable fiscal impact on the State and
local governments.
 
EFFECTIVE DATE:
This act shall take effect immediately.

Statutes affected:
S10667: 113 public service law, 113(2) public service law
S10667A: 113 public service law, 113(2) public service law