Relates to phasing out transition fees

1 Co-sponsor

• Michael F. Nozzolio

BILL NUMBER:S3467

Title of bill

An act to amend the public service law, in relation to phasing out transition fees

Purpose

This bill would phase out transition fees, initially providing a budget plan to consumers who face high rate variability and eventually discontinuing the assessment of transition fees.

Summary of provisions

§ 1- Amends section 65 of the public service law by adding a new subdi- vision 6-a which phases out transition fees

§ 2- Effective date.

Justification

Allowing electric utilities to collect transition costs harms a competitive market. If utilities can simply pass the expenses on to customers, they will not have as much incentive to mitigate actual transition costs. It would be impossible for a regulator to know whether the utility is doing all it can to reduce costs; the market is better suited for such a task. Allowing transition costs incentivizes electric utilities to recover costs rather than lower costs to become compet- itive. This institutionalizes existing uneconomic costs and rates, stunting a natural phasing out of these uneconomic and inefficient costs.

Transition costs suppress investment in new technology by protecting an electric utility's existing assets. Similar to many other industries, expensive technological infrastructure becomes obsolete before it wears out. Market pressures demand investments in new technology, even before the preexisting infrastructure's lifespan expires. For example, cell phone providers must invest in new infrastructure to remain competitive, even though, on a mechanical level, the old infrastructure is perfectly functional. Allowing electric utilities to charge a transition fee prolongs the use of obsolete and inefficient technology. Technological progress will always threaten the value of capital assets; without tech- nological progress, assets would be more valuable for longer periods of time. But this is not a persuasive argument to slow technological progress. Originally designed to ease the transition to a deregulated market, transition costs have outstayed their usefulness and suppress investment in new technology.

If transition charges exist at all, the charge should not vary from month-to-month. While a complete phase out of transition charges is necessary, electric utilities should be given a reasonable period to prepare for this change. However, the turbulent rise and fall in prices is detrimental to New York State businesses and must end immediately. Unstable energy prices cripple business models and deter New York State economic growth and development.

Legislative history

None.

Fiscal implications

None.

Effective date

This act shall take effect immediately.