On March 4th, Nassau County Comptroller George Maragos testified at the NY State Department of Public Service Hearing in Mineola. Comptroller Maragos outlined a lack of initiatives by PSEG Long Island to improve productivity and reduce costs. Echoing the sentiments of Nassau’s ratepayers, the Comptroller asked for the proposed rate increase request to be denied and PSEG be requested to present a new budget plan that demonstrates management results in place of a rate increases. Comptroller Maragos stated that Long Island electric rates are already the highest in the nation and the proposed rate increases will only make them even higher and unaffordable.
TESTIMONY-
A year and a half ago Governor Cuomo stated in a press release, prior to entering into the agreement with PSEG to operate the Long Island Power System, that the intent was to achieve more a resilient and reliable electrical service and to bring rising costs under control from some of the highest rates in the Country.
PSEG was entrusted with this responsibility and given financial incentives to ensure achievement of these goals. PSEG was expected to bring their extensive expertise and resources in order to improve system reliability, improve organizational productivity and control costs.
One year later, I read the proposed budget testimony by the PSEG Director of Finance requesting the rate increases with dismay. PSEG is requesting a rate increase over the next 3 years beginning with 2016 of approximately 4% annually on the delivery charge. Combined with other revenue enhancements, this rate increase will result in an overall effective average revenue increase of 5.9% on the delivery charges.
What is concerning from the budget testimony of the PSEG Director of Finance and the proposed budgetary multi-year plan is the lack of initiatives to improve productivity and reduce costs through technological innovations, improved management practices and to align expenditures with those of well-run comparable utilities.
There is no recognition of management’s responsibility to align overhead cost ratios, direct cost ratios, maintenance cost ratios, capital investment ratios and other management performance measures as compared with those of well-run comparable utilities.
There is not a single mention in the PSEG Budget testimony of any management re-organization, improved staff deployment, improved system monitoring and problem isolation, improved system resiliency or initiatives to reduce costs. It appears that PSEG is simply perpetuating the old management practices and operating philosophies of LIPA.
The few improvements contemplated by PSEG as significant include tree-trimming, and 80 foot poles rather than 40 foot poles. These initiatives are almost embarrassing. As an aside, the 80 foot poles are aesthetically ugly, can potentially harm our water supply and endanger our children due to potential exposure to and contact with toxic chemical treatments. I urge the commission to ban them.
For this poor demonstrated performance and lack of vision, the PSEG proposed budget includes a 60% performance fee increase from $45 million to $73 million annually, beginning in 2016. At the same time, the Long Island rate payers will continue to have a vulnerable electric power system with some of the highest rates in the Country which will rise higher due to the requested rate increases.
We recommend that the proposed rate increase request be denied and PSEG be requested to present a new budgetary plan that demonstrates a higher management capability.
The table below shows our analysis of the rate increase requests by PSEG