Objective

To assess the extent of implementation of the four recommendations included in our initial audit report, Enforcement of Commission Orders and Other Agreements (Report 2018-S-27).

About the Program

The Public Service Commission (Commission) regulates 650 utilities operating in New York State. Through its Department of Public Service (Department), the Commission seeks to ensure affordable, safe, secure, and reliable access to electric, gas, steam, telecommunications, and water services for New York’s residential and business customers, while also protecting the environment.

The Commission reviews and approves applications for potential mergers and acquisitions, rate cases, and other agreements with utility companies. Approval of these applications is often based on conditions such as replacing or upgrading infrastructure, providing access to services to outlying areas, or improving the quality of service. These conditions are listed in Commission Orders (Orders), and any violation of an Order’s terms is grounds for the Commission to seek reparations, terminate the approved acquisition/merger, or even revoke a utility’s license. The Commission also has the statutory authority to pursue penalties against utilities pursuant to Public Service Law. Between January 1, 2019 and February 28, 2021, the Department reported six settlements under provisions of the Public Service Law, totaling $76.75 million, including a $38 million settlement with National Grid to lift the natural gas moratorium in Long Island, Queens, and Brooklyn.

For electric and gas utilities, the Department employs individualized measures of utility service quality, reliability, and safety, which include performance improvement goals that utilities agree are appropriate and achievable. The Department monitors the major electric and gas utilities’ performance in relation to benchmarks in each utility’s performance plan. These performance plans state the utilities have sufficient resources to meet agreed-upon performance standards. Failure to meet the goals in these plans may result in fines based on fixed-dollar amounts or a percentage of equity.

The objective of our initial audit report, issued on March 3, 2020, was to determine whether the Commission monitors utilities’ compliance with merger/acquisition Commission Orders and other agreements (including performance plans) and uses its enforcement power to hold utilities accountable when the terms and conditions of those agreements are not met, including applying monetary penalties and other sanctions. Our initial audit covered the period from January 1, 2015 through July 10, 2019. The audit found the Department does not always adequately monitor compliance with Order conditions – and in some cases even lacks the equipment necessary to do so. Orders are, at times, ambiguous and lack time frames for completion, interim performance measures, and consequences for non-compliance, making enforcement difficult and inconsistent. In the absence of policies and procedures, Department staff use their own discretion for identifying non-compliance and the Commission imposes fines and/or sanctions. Additionally, the audit found that utilities submitted required documents per the Orders and performance plans. However, the Department does not always verify the information it receives from utilities and shares with the Commission – information the Department and Commission then may use for decision-making purposes.

Key Finding

Department officials made significant progress in addressing the issues identified in the initial audit report. Of the initial report’s four audit recommendations, two were implemented and two were partially implemented.

Key Recommendation

Officials are given 30 days after the issuance of the follow-up review to provide information on any actions that are planned to address the unresolved issues discussed in this review.