ILSR Asks Regulators to Protect Customers From Unjust Utility Spending

Date: 28 Feb 2022 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

No American electricity customer can choose which utility owns the meter on their house. So when utility companies and their trade associations engage in political lobbying against clean air and water, or against rooftop solar, ordinary Americans pay to have their interests undercut.

For some background, many electric utilities are members of trade associations. These are companies that develop standards for reliability and engineering, provide training, and host conferences. Trade associations also engage in more subjective activities, including setting policy positions for utilities, lobbing for these policies, and public outreach campaigns. Utilities pay dues to trade associations to maintain their membership — often from funds collected from their captive customers.

Unfortunately, how much utilities spend to lobby through their trade associations isn’t known. The rules of the Federal Energy Regulatory Commission presume that all of that money, even when spent in anti-consumer lobbying, can be recovered by the utilities from their customers. The Center for Biological Diversity filed a petition with the Federal Energy Regulatory Commission (FERC) arguing that trade association dues are an objectionable use of ratepayer dollars. In response, FERC issued a notice of inquiry and subsequent comment period.

The Institute for Local Self-Reliance has signed on to a petition (along with the Center for Biological Diversity and 311 other organizations) that would undo the automatic flow of dollars from captive utility customers into the lobbying funds for utility trade groups. The groups ask that trade association dues be treated as non-recoverable by default — unless the utilities can provide sufficient evidence that their benefits to consumers ought to allow them to be recovered.

ILSR also submitted its own comments to FERC in February 2022. Read the comments in full below.


RE: Docket No. RM22–5–000. Rate Recovery, Reporting, and Accounting Treatment of Industry Association Dues and Certain Civic, Political, and Related Expenses

The Institute for Local Self-Reliance (ILSR) respectfully submits the following comments on utility rate recovery and industry association dues.

Summary: Because utilities have a captive customer base due to a publicly provided franchise, their spending requires strict scrutiny. Ratepayers should not be obligated to fund advocacy for policies that are anti-competitive, anti-consumer, or otherwise counter to their interests. Utilities with a publicly-granted monopoly franchise have an obligation to disclose their expenses and prove they are spending ratepayer dollars in a worthwhile manner.

  • Utility Payment of Industry Association Dues

It is well understood that allowing utilities to use ratepayer dollars to fund lobbying activities is unjust and unreasonable. 

As Commissioner Christie has written, monopoly utilities cannot be treated in the same way as other companies. Their earnings come from captive customers who are paying for an essential service. Therefore, the state and ratepayers have the right to scrutinize their spending.

As it stands, industry association dues can mask anti-customer lobbying activities. Trade associations like the Edison Electric Institute develop research, policy, and political and regulatory advocacy positions in opposition to customer-owned solar energy. Customers ought not to pay for these activities, but they likely do. The current expectation is that utilities properly designate their expenses between operating and non-operating costs, including the ultimate use of their industry association dues. However, as pointed out by the Center for Biological Diversity and others, there are discrepancies between how utilities report the ultimate use of their industry association dues and invoices done by industry associations. These inconsistencies show that the status quo (of utility self-reporting) is failing.

ILSR believes that, in order to recover their costs, utilities must bear the burden of proving that their industry association membership dues provide value to customers. So-called ‘public service’ companies have sometimes conflicting legal obligations to serve shareholders and the public interest. Like any public servant, they should justify the public interest purpose of their spending in order to have costs recovered.

  • Rate Recovery of Utility Regulatory Intervention and Advocacy

In response to FERC question 19, there are many cases when spending ratepayer dollars on regulatory intervention or political advocacy is unjust. For example, Xcel Energy successfully  lobbied the Minnesota legislature to circumvent regulatory approval of a desired gas power plant. In a subsequent resource plan, the plant was found to be uneconomical. In Nevada, utilities successfully lobbied regulators to end net metering, a policy ultimately overturned in the public interest. 

The use of customer funds for anti-customer advocacy is exacerbated by the unequal access to decision makers. Some proceedings, such as rate cases, limit the number and type of intervenors. Legislative hearings often take place during working hours, with uncertain times for testimony, allowing professional utility lobbyists to participate when their customers cannot.

  • Transparent Accounting of Industry Association Dues

As the Commission has acknowledged, trade association invoices do not provide a significant level of detail. This makes it more difficult for the Commission to conduct audits and determine whether utilities have appropriately accounted for their expenses. If these expenses are passed down to captive customers, they are entitled to know what they are paying for. 

Such accounting is already required of many other parties to energy advocacy, such as nonprofit organizations. In order to maintain nonprofit status, these organizations have to clearly limit and account for lobbying time, including development of lobbying materials or research that is for the sole purpose of advocacy. Utilities and trade associations should be held to a higher standard given their privileged role.

Thank you for the opportunity to comment and for taking up this important conversation.

 

Sincerely,

John Farrell and Maria McCoy

Institute for Local Self-Reliance


This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update

Featured Photo Credit: FERC.gov via Flickr (CC BY 2.0)

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Follow Maria McCoy:
Maria McCoy

Maria McCoy is a research associate with the Energy Democracy Initiative. In this role, she contributes to blog posts, podcasts, video content, and interactive features.

Follow John Farrell:
John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.