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Governor Cuomo and Mayor Bloomberg Propose Legislation to Protect New York City Ratepayers from Massive Rate Increas

Press Release

By:
Date:
Location: Albany, NY

Governor Andrew M. Cuomo and Mayor Michael R. Bloomberg today announced that they proposed a measure to prevent a massive rate hike on New York City energy customers.

The measure proposed by Governor Cuomo and Mayor Bloomberg will allow the City to guarantee property tax abatements to power plants. This would change property tax abatements for power plants from a discretionary program back to an "as-of-right" program and, in doing that, address the primary reason FERC cited for requiring the rate increase.

"This legislation is targeted to resolve the issues raised by FERC and should give them no choice but to reverse their decision," Governor Cuomo said. "This measure will protect already-strapped ratepayers in New York City from being charged hundreds of millions of dollars per year. Once our bill is enacted, we will immediately petition FERC and request that it reverse the January decision."

"When the Commission proposed a hike in New Yorkers' energy bills that was based on false assumptions, and which would provide no benefits to consumers, we immediately raised a red flag," said Mayor Bloomberg. "Now, by amending the existing tax benefits, we are removing any and all justification for this decision. I want to thank Governor Cuomo for working with us to propose this legislation, Senator Schumer for his continued leadership on this issue, and numerous other elected officials, like Senator Gillibrand and Congressman Crowley, for their advocacy on behalf of New York City consumers."

The Federal Energy Regulatory Commission (FERC) decided in January to allow power plants in the City to be paid energy capacity prices that factored in the cost of property taxes, even though many power plant operators in the City do not pay any property taxes at all. FERC's order concluded that since new power plants were not guaranteed property tax abatement, as they were in the past, those taxes should be built into the federally approved capacity prices that are passed on to ratepayers. This would have increased electricity bills for residents and businesses in New York City by as much as $1 billion over the next three years and provided a windfall to existing plants that do not pay property taxes.

The bill proposed by Governor Cuomo and Mayor Bloomberg:

* Adds peaking power plants, which are used by the FERC to determine capacity prices, to the City's as-of-right property tax abatement program, and will provide 100 percent property tax abatement for 15 years.
* Extends the City's existing Industrial and Commercial Abatement Program (ICAP), which is currently set to expire this year.
* Does not impact property tax revenue because the City already planned to provide tax abatement for these units in their discretionary program.

The rate hikes are set to take effect in June. The FERC's next meeting is May 19.

"In these tough budgetary times and with all of our efforts to improve our struggling economy, the last thing New Yorkers need is a massive increase in their electric utility rates. This legislation will protect consumers from a hypothetical assumption made by FERC when they interpreted the City of New York's tax law. It would have resulted in a windfall for power plant operators and devastated consumers. This bill will prevent the city's electric utility customers from paying twice and without causing any loss of revenue to the city," said Speaker Sheldon Silver.

"Without this bill, New York City consumers would be burdened with even higher utility rates than they're already paying. I'm very pleased that this legislation will make the changes necessary for FERC to have every reason to re-evaluate their earlier ruling and decide on an industrial and commercial tax abatement program that is more realistic and fair," said Assembly Ways and Means Committee Chair Herman D. Farrell.

Senator Andrew Lanza said, "Staten Islanders already pay too much for electricity and now the federal government is threatening to raise the cost even more. This legislation should stave off significant federal rate increases."

U.S. Senator Charles E. Schumer said, "I commend the Governor and Mayor for working to ensure this unfair rate hike never sees the light of day. We will continue to press FERC to ensure that ratepayers aren't forced to pay obscene rate hikes while power generators are collecting massive tax breaks. As summer approaches and electricity bills rise, we need to do everything we can to make sure New York families aren't getting squeezed by power generators."

New York Energy Consumers Council Executive Director David Bomke said, "The New York Energy Consumers Council members represent a broad spectrum of energy buyers, including hospitals, universities, financial institutions, residential and commercial property managers, public benefit corporations, energy service companies, and energy consultants. Collectively, our members spend more on electricity than any other single consumer class in Con Edison's service territory. NYECC strongly endorses the proposed legislation to ensure the right of property tax exemption for peak power generators. This legislation would eliminate the basis for an unprecedented hike in capacity charges as a result of tax exemption uncertainty."

AARP New York State Director Lois Wagh Aronstein said, "AARP commends Governor Cuomo and Mayor Bloomberg for introducing legislation that would close a loophole that could raise electricity prices for residents of New York City. New Yorkers pay some of the highest energy costs in the nation and older adults who are on limited or fixed incomes are even less able to bear such price increases."


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