Requires that any proposed capital expenditure to be considered in any matter affecting a major change in rates must be described by the utility and shall include the purpose, cost, and benefits to the ratepayers and shall be posted on the PSC website.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2736A
SPONSOR: Jacobson TITLE OF BILL:
An act to amend the public service law, in relation to consideration of
capital expenditures in utility rate proceedings
PURPOSE OR GENERAL IDEA OF BILL:
To ensure that all proposed capital expenditures by utilities as a part
of a rate proceeding are just and reasonable and are beneficial to rate-
payers.
SUMMARY OF PROVISIONS:
Section 1 requires utilities to fully describe their capital expendi-
tures in rate cases and requires the burden of proof to show that a
capital expenditure is just and reasonable be on the utility.
Section 2 is the effective date which is immediately.
JUSTIFICATION:
The calculation of utility rates is complicated. Rates are determined by
the Public Service Commission (PSC) after a utility makes a request to
increase the rate which it is allowed to charge. The utility must prove
why the rate increase is necessary.
One of the considerations is how maintenance or repairs are calculated
in the utility's rate as opposed to capital expenditures. Generally,
repairs or maintenance are reimbursed dollar-for-dollar. A capital
expenditure receives reimbursement plus a guaranteed rate of return
approximately 9W depending on current interest rates. The utility
profits more from capital expenditure so before granting an increase in
rates, the PSC should determine whether the proposed expenditure makes
sense on both a financial and non-financial basis.
For example, the decision on whether to repair a garage roof or put on a
new roof or tear the garage down and build a new one would depend on
many factors beyond the amount of money to be spent. While it might be
cheaper to repair the roof or put on an entirely new roof, it should be
considered how long the repaired roof would last and the overall condi-
tion of the building. Would the building last as long as the repaired
roof or a new roof? Would it be cheaper in the long run to tear down the
garage and build a new one? In order for the public to understand the
process and for the PSC to make the proper decision, there must be tran-
sparency as to what is being proposed and what benefit there is of the
expenditures for the rate paying customers.
It is often unclear what projects are being proposed and their benefits,
so this bill requires that there be a full description of each project
including the purpose, cost and life expectancy, location of the
project, and the anticipated benefits to ratepayers, both financial and
non-financial when the rate increase is proposed. Further, this bill
requires at any rate hearing involving consideration of a proposed capi-
tal expenditure for purposes of a rate proceeding, a capital expenditure
shall not be considered, in whole or in part, if the utility does not
show by the preponderance of the evidence that the desired outcome
through such capital expenditures is just and reasonable and beneficial
to ratepayers, with consideration given to both immediate and long-term
impacts. The PSC may give preference to the hearing and decision of such
questions over all other questions pending before it.
This bill would give more transparency to the rate setting process and
will make it easier for the PSC to come to the proper outcome.
PRIOR LEGISLATIVE HISTORY:
None. New bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect immediate
STATE OF NEW YORK
________________________________________________________________________
2736--A
2025-2026 Regular Sessions
IN ASSEMBLY
January 22, 2025
___________
Introduced by M. of A. JACOBSON -- read once and referred to the Commit-
tee on Energy -- committee discharged, bill amended, ordered reprinted
as amended and recommitted to said committee
AN ACT to amend the public service law, in relation to consideration of
capital expenditures in utility rate proceedings
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 12 of section 66 of the public service law is
2 amended by adding a new paragraph (m) to read as follows:
3 (m) Any proposed capital expenditure to be considered in any matter
4 affecting a major change in rates must be described, which shall include
5 but not be limited to, the: (i) purpose of the proposed project, (ii)
6 total cost, (iii) expected period of usefulness, (iv) location in the
7 service territory, (v) rationale for inclusion in the proceeding, and
8 (vi) anticipated benefits to ratepayers, measured by lower costs to
9 ratepayers and/or other benefits as determined by the commission. Such
10 descriptions of projects shall be posted on the commission's website.
11 Pursuant to paragraph (i) of this subdivision, the burden of proof to
12 show that a change in rates related to each capital expenditure is just
13 and reasonable shall be on the utility.
14 § 2. This act shall take effect immediately; provided however, this
15 act shall not apply to any matters involving a change in rates before
16 the Public Service Commission which were initiated prior to such effec-
17 tive date.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05485-02-5
