Requires that any proposed capital expenditure to be considered in a rate proceeding must be stated in full detail with each project described in full detail by the utility, and that at any hearing involving consideration of a proposed capital expenditure for purposes of a rate proceeding, a capital expenditure to be used in determining a rate increase, shall not be considered in whole or part, if the utility does not show by the preponderance of the evidence that the desired outcome through such capital expenditure is just and reasonable and beneficial to ratepayers, with consideration given to both immediate and long-term impacts.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2736 Revised 1/34/2025
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 amends subdivision 12 of section 66 of the Public Service Law
by adding a new paragraph (m) to read as follows:
Paragraph (m): Any proposed capital expenditure to be considered in a
rate proceeding at the time of authorization to make such investments is
initially requested, must be stated by the utility in full detail
including: the purpose, cost life expectancy, location in the service
territory, and anticipated financial and non-financial of each project
included in the capital expenditure.
At any hearing involving consideration of a proposed capital expenditure
for purposes of a rate proceeding, a capital expenditure to be used in
determining a rate increase, shall not be considered in whole or part,
if the utility does not show be a preponderance of the evidence that the
desired outcome through the capital expenditure is just and reasonable
and beneficial to ratepayers with consideration given to both immediate
and long-term impacts.
The Public Service Commission may give to the hearing and decision of
such questions preference over all other questions pending before it.
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 9% 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
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
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 a rate
4 proceeding at the time authorization to make such investments is
5 initially requested, must be stated in full detail with each project
6 described in full detail by the utility, including the purpose, cost,
7 life expectancy, location in the service territory, and anticipated
8 benefits to ratepayers, both financial and non-financial, of each such
9 project included in the proposed capital expenditure. At any hearing
10 involving consideration of a proposed capital expenditure for purposes
11 of a rate proceeding, a capital expenditure to be used in determining a
12 rate increase, shall not be considered in whole or part, if the utility
13 does not show by the preponderance of the evidence that the desired
14 outcome through such capital expenditure is just and reasonable and
15 beneficial to ratepayers, with consideration given to both immediate and
16 long-term impacts. The commission may give to the hearing and decision
17 of such questions preference over all other questions pending before it.
18 § 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05485-01-5
