New York State Assembly
2000 Annual Report
Committee on Corporations, Authorities
Albert Vann, Chairman
|December 15, 2000|
The Honorable Sheldon Silver
Dear Speaker Silver;
As Chairperson of the Assembly Standing Committee on Corporations, Authorities and Commissions, I am pleased to submit the Committee's 2000 Annual Report. Throughout the year the Committee has been involved in several important issues, including approval of the Metropolitan Transportation Authority's (MTA) 2000-2004 Capital Improvement Plan, investigation of the Consolidated Edison Company's increased rates during the summer months and the proposed acquisition of Niagara Mohawk by National Grid USA.
The Corporations Committee has worked with the Public Service Commission (PSC) and the industry to approve a number of bills over the past few years that will eliminate existing barriers to competition while ensuring that consumers are protected in the process. The energy industry is in a state of major transition in New York State. The competitive market must be nurtured and encouraged to benefit all New Yorkers. This session the Committee, in conjunction with the Assembly Standing Committee on Energy, held a number of hearings on the impact on consumers and the regulation by the PSC of the proposed merger of Niagara Mohawk with the National Grid Group and on electricity rate increases which involve deregulation and the Independent System Operator (ISO).
The Assembly advocated for and won a number of key points in the MTA's 2000-2004 Capital Program Plan, including a commitment to a full length Second Avenue subway. Additionally, the new plan has a strong investment in a clean bus initiative to reduce emissions by using CNG buses, hybrid buses, particulate traps and ultra low sulphur fuel. The Assembly Majority deserves much credit for being a proponent of a cleaner, more efficient system of public transit for the ridership communities. The voters rejected the proposed Transportation Infrastructure Bond Act which was to provide funding for some of the MTA's 2000-2004 Capital Program Plan, the Committee will continue to monitor the Metropolitan Transportation Authority and revisit the Plan if necessary.
The 2001 Legislative Session will continue to monitor the tumultuous change continuing in the area of telecommunications and energy. The Committee will continue to be vigilant in making sure that all utility customers receive quality service at affordable prices. In addition, customers should have access to advanced services, particularly in telecommunications at roughly the same time, no matter what region, or income group. Investment must be cognizant of maintaining a level playing field for all. We must also mitigate against sudden surges in electric costs because of limited competition in the generation of electricity. The Committee will monitor the expeditious and safe siting of new generating facilities in the State of New York.
In 2000, the Committee reviewed 376 bills, acting favorably on 87 of them. Ultimately, 31 of them became law. I am pleased with the success of the Committee's work in 2000 and look forward to the upcoming session. I wish to extend my sincere thanks to the members of the Committee, my staff, he staff of the Corporations Committee, and to you, Mr. Speaker, for your continued support and concern.
CORPORATIONS, AUTHORITIES AND COMMISSIONS
Albert Vann, Chairperson
Sabrina M. Ty, Principal Legislative Coordinator
Angela M. Neal, Legislative Associate
William Thornton, Associate Counsel
Rosaline Preudhomme, Chief of Staff
Vincent Thomas, Economic Development Specialist
Michael Johnson, Counsel to Assemblyman Vann
Adrienne Johnson, Committee Clerk
Laura Sawyer, Program and Counsel Executive Secretary
TABLE OF CONTENTS
Unlike the names of other Assembly Standing Committees, the name of the Committee on Corporations, Authorities and Commissions does not immediately identify its jurisdiction. It is often referred to simply as the Corporations Committee. Many people, both inside and outside of government, believe that its primary focus is on laws which govern New York State's businesses and not-for-profit corporations. While these laws are part of the Committee's jurisdiction, they represent only one area of its wide-ranging responsibilities.
The Committee investigates the organizational framework and activities of the State's myriad public authorities. These include everything from the Power Authority of the State of New York (PASNY) and the Port Authority of New York and New Jersey (PANYNJ) to local water authorities. While these entities often perform vital public functions more efficiently than other governmental agencies, it is imperative that they be held accountable through the oversight of public officials.
The Committee also oversees the Metropolitan Transportation Authority (MTA) and the State's other transportation authorities. The Assembly Majority and this Committee have fought for adequate financing for public transportation systems and have assured that money is spent wisely in improving and expanding these systems.
In addition, the
Committee monitors the operations and policies of the State Public Service
Commission (PSC). This is the five-person panel within the Department of
Public Service that has the broad mandate to ensure that customers of the
investor-owned electric, gas, telephone and water utilities in the State
are able to obtain adequate service at the lowest reasonable rates and in
a manner that has the least adverse effect on the environment. In the
Assembly, it is the Corporations Committee that is charged with making
sure that the interests of utility consumers receive a fair hearing before
the PSC when the investor-owned utilities plead their cases.
Although the Assembly Transportation Committee has jurisdiction over a large portion of legislation affecting New York's highway and bridge network, the Corporations Committee oversees public authorities which provide mass transit services throughout the State. This Committee has historically been the Assembly's advocate for mass transit and has fought to see that these systems are adequately funded, widely accessible, and affordable.
The following bills were signed into law:
The Corporations Committee reviews, monitors, and examines proposed revisions to the laws pertaining to business and not-for-profit corporations. The Committee's goal is to attract and retain these vital entities in the State. Specifically, the Committee maintains jurisdiction over issues of corporate governance and structure as they relate to business corporations, not-for-profit corporations, cooperatives corporations, limited liability companies ("LLCs") and other business entities.
The following bills were signed into law:
All New Yorkers are affected profoundly by New York's network of public authorities. While public authorities play a significant and often beneficial role in providing essential goods and services to New York State residents, the authorities' autonomy and lack of accountability in certain cases have fostered growing concern about some of their operations, practices and governance. The Corporations Committee has been examining issues affecting the accountability and governance of public authorities operating in New York State and will continue to do so.
The following bills were signed into law:
The Committee exercises responsibility for the development and evaluation of legislation concerning the management and regulation of the State's investor-owned utilities, publicly-owned utility systems, and telecommunications providers.
The Committee examines the extent to which the Power Authority of the State of New York (PASNY) is meeting its public power obligations in a rational, effective and efficient manner. It is the nation's largest state-owned power organization, providing more than a quarter of New York's electricity. Its primary mission is to provide economical power to New York's government agencies and electric consumers. Oversight of PASNY includes an ongoing evaluation of its policies concerning the allocation of power, the development of small power and alternate energy resources, the operation of its two nuclear plants, and what efforts it is taking to encourage conservation.
The Assembly Corporations Committee has worked with the Assembly Energy Committee, the lead committee in this area, to move the electric industry to adapt to today's competitive market. This includes oversight of the Long Island Power Authority. Electricity costs in New York State are significantly higher than the national average. This disparity hampers economic prosperity for all consumers, especially businesses. The high cost of electricity threatens to erode the utilities' customer base, resulting in further rate increases for residential and small business customers who will be forced to bear a higher proportion of the utilities' fixed costs.
Increasing competition in the electricity industry, with proper regulatory safeguards, can result in lower electricity costs. Competition must be implemented in a manner that does not jeopardize the safety or reliability of the electric system and provides benefits to all classes of customers.
The Assembly Majority's legislative package, known as Competition Plus/Energy 2000, would provide a blueprint for the implementation of competition in the electric industry. This package:
In addition, as a component of comprehensive legislation establishing a competitive electric industry and with the appropriate conditions and restrictions, it has been argued that securitization has the potential to reduce electricity costs, if combined with cost reductions by power producers. The legislative package passed the Assembly but failed to pass the Senate.
Telecommunications is one of the most dynamic industries in today's economy. The benefits that this industry can bring our citizens in the areas of health, education and economic development are almost limitless. However, there are potential downsides in this telecommunications revolution which include: the potential threat to privacy from the unregulated dissemination of information; the continuation and development of monopolistic practices that could force out competition and hurt consumers; potential layoffs of skilled communication workers in cost-cutting measures that eventually affect service; and ever-increasing costs endangering universal service. It is against this backdrop of benefits and dangers that the Chairman, this Committee and the Assembly have attempted to promote this industry while ensuring that adequate protections be maintained for all New Yorkers. The Assembly Majority has sought to achieve these goals through legislation, public hearings and advocacy, and maintaining a dialogue with the New York State Public Service Commission (PSC) and the Federal Communications Commission (FCC).
The following bills have passed the Assembly but failed to pass the Senate:
A. New York State Thruway Authority
The Committee, in conjunction with the Assembly Committee on Transportation, held hearings on February 11, 2000 in Rochester, February 16, 2000 in Albany and February 17, 2000 in Syracuse to solicit information from the Thruway Authority regarding their consideration of a toll increase. Additionally, the Committees wanted to hear reactions from the business community and the general public on the proposal to increase tolls.
On January 27, 2000, the New York State Thruway Authority Board approved a motion to authorize the Executive Director to prepare for toll rate adjustments and the reclassification of vehicles. As of June 1, 2000 and upon final Board approval, tolls would be indexed to rise at the same rate as the cost of construction. Specifically, toll increases would be set to the Construction Cost Index (CCI) for the previous year, but any toll increase would be capped at 3%. In the event the CCI decreases, tolls would remain the same. Hence, future toll increases of 3% or less would not be subject to further public comment or review.
This hearing was intended to examine the factors which contribute to the Authority's decisions regarding the establishment of toll levels on the Thruway. It was also intended to solicit information from the Thruway Authority on the proposed toll increase, the methodology for establishing future toll levels, the justification for the amount and the methodology, the proposed capital plan, and capital needs beyond the proposed capital plan. Below are a selection of questions asked at the hearing.
As a result of these hearings conducted by the Assembly Standing Committee on Corporations, in conjunction with the Assembly Standing Committee on Transportation, there was massive public outcry regarding the toll increase proposal. As a result of the Committees' action and attention to this issue, the Thruway Authority withdrew its proposal and did not raise tolls this year.
B. Indian Point 2 Nuclear Plant
A hearing was convened in conjunction with the Assembly Committee on Energy and the Assembly Committee on Environmental Conservation on March 3, 2000 in White Plains to examine the safety concerns regarding a recent radiation leak at the Indian Point 2 Nuclear Plant and the economics and consumer benefits of a potential sale of the plant.
Critics of nuclear generation warn of potential adverse impacts of the continued operation of these facilities on human health, safety, and the environment, especially in the vicinity of these plants. This concern is heightened in light of Consolidated Edison Company's (Con Edison's) expressed interest in selling Indian Point 2, conceivably to an operator who is new to New York State.
This hearing examined the circumstances involving a radiation leak at the Indian Point 2 Nuclear Plant that occurred on February 15, 2000 and examined the impact of a potential sale of this facility on ratepayers, plant workers, and the local community.
Radiation leak on February 15, 2000
On the evening of February 15, 2000, Con Edison's Indian Point 2 Nuclear Plant was forced to shut down, when a leak developed in one of the four plant steam generators. Con Edison declared an Alert because radioactive material was released from the plant. This most recent forced shutdown follows other safety-related closures in 1996, 1998, and 1999.
Plants, like Indian Point 2, have experienced significant problems with leaking steam generators. In many cases, such problems have led to the expensive replacement of steam generating equipment. The February 15 leak could be only the first of many such problems. If so, there could be major safety implications. If it becomes necessary to replace the steam generator piping at Indian Point 2, the market value of the plant could be significantly reduced, leaving more "stranded cost" after the plant sale. If so, there could be major implications related to costs to ratepayers.
Potential Sale of Indian Point 2
Con Edison has announced its intention to hold an auction to find a buyer for its Indian Point 2 Nuclear Plant (including the closed Indian Point 1 Nuclear Plant and gas turbines located at the same site).
Policy makers are grappling with the role of nuclear power plants in a competitive electricity market. Six New York nuclear plants supply over 13 percent of New York's electricity mix. All but one of them are currently proposed for sale.
Many question the extent to which ratepayers should continue to pay for costs after the plants are sold. Another concern is that the purchase price may be lower than desirable, if regulators allow costs not covered by the plant sale to be included in electric rates.
The Assembly Standing Committee on Corporations, Authorities and Commissions will continue to monitor the impact of the closed Indian Point 2 facility on energy rates and the regulation of by the Public Service Commission.
C. Central New York Regional Transportation Authority (CNYRTA)
This hearing was convened in conjunction with the Assembly Committee on Transportation on June 2, 2000 in Syracuse to examine current operations, board membership, management and oversight of CNYRTA, particularly in light of concerns raised about financial deficits, community representation and effective oversight by the current Board.
Recent events have brought into question the efficiency of the current CNYRTA Board and raised concerns regarding community representation. The ten member CNYRTA board is currently composed of two vacancies, four members serving under expired terms, and several members who have poor attendance records. As a 1996 staff study performed by the Comptroller of the State of New York noted, there is often a troubling correlation between ineffective and unaccountable overall operation of an authority and an authority board which has expired appointments and vacancies.
Correspondence from CNYRTA raised concerns regarding the level of sensitivity of the Board with respect to people with disabilities, the attendance records of current Board members, the Board's management of capital assets such as buses, the reliance of the Board on outside consultants, and financial deficits and delays on the Park Street Bridge Project.
This public hearing afforded members of the Assembly the opportunity to ask questions directly to CNYRTA Board members, CNYRTA Board members the ability to provide testimony on those questions, as well as allow the input of any interested parties to be provided in a public forum. Below are some of the questions asked during the course of the hearing:
The Committees received testimony from a number of constituents including advocates, consumers, board members and businesses. The Corporations Committee will continue to monitor the management and operations of the Central New York Regional Transportation Authority to ensure that it performs its duties and continues to benefit the New Yorkers of this region.
D. Consolidated Edison Company (Con Ed)
This hearing was convened in conjunction with Assembly Speaker Sheldon Silver, the Assembly Committee on Energy, the Assembly Committee on Ways and Means, the Assembly Committee on Environmental Conservation and the Assembly Committee on Consumer Affairs and Protection on August 2, 2000 in New York City to identify the causes of price increases and power supply and distribution problems and to discuss methods of preventing such problems in the future.
Summer is the season of highest electricity use in the Consolidated Edison Company (Con Edison) service territory. This past summer Con Edison consumers were faced with warnings of potential power failures as well as price increases in the range of 40 percent. Despite an unusually cool season, power disruptions and sharp price increases occurred.
A number of circumstances may be responsible for the present situation. The State Public Service Commission (PSC) no longer requires Con Edison to produce its own power at regulated rates; rather, the Company buys electricity on the market from other power producers. If this process results in very high prices, Con Edison is allowed by the PSC to pass these prices on to its customers. While customers are facing higher bills, the Company has reduced the number of its customer service centers and has not demonstrated a method for maintaining customer service for its cash-paying customers.
In addition, electricity use has grown faster than had been anticipated, and energy efficiency programs have not been pursued aggressively, with the result that demand may outstrip supply and result in high prices. To exacerbate this situation, the Indian Point 2 Nuclear Plant (IP2) has been inoperative since February due to leaking pipes. Con Edison has been passing along to customers the cost of replacing the power from IP2. Moreover, as the blackouts of 1999 revealed, Con Edison has not maintained its entire distribution system at levels that can withstand predictable hot weather. Finally, as the federal Department of Energy warned in March, many wholesale power markets may operate inefficiently, with market power concentrated in the hands of a few companies that may be able to charge prices well in excess of genuinely competitive levels.
The statutory responsibility for ensuring that utilities provide reliable power at fair prices rests with the PSC. Most other utilities in this state are prevented from passing high power costs through to consumers, but Con Edison is not.
Testimony was received by a number of consumers and advocates, as well as by the Public Service Commission, the Independent System Operator and Con Edison. As a result of this hearing held by the Assembly, Con Edison has recently reached a deal with the Public Service Commission to reduce rates as a part of its merger with Northeast Utilities. However, this merger is not yet complete. The Assembly Standing Committee on Corporations, Authorities and Commissions will continue to monitor Con Edison's rates and their regulation by the Public Service Commission to ensure that customers are protected from unnecessarily high energy rates.
E. The Acquisition of Niagara Mohawk Holdings, Inc. by National Grid Group, plc
A hearing was held in conjunction with Assembly Speaker Sheldon Silver and the Assembly Committee on Energy on September 27, 2000 in Buffalo to evaluate the effects of the proposed merger on ratepayers and Niagara Mohawk's workers.
On September 5, 2000, Niagara Mohawk Holdings Inc. and National Grid Group plc announced a merger agreement. National will acquire Niagara Mohawk and form a new holding company called New National Grid. Niagara Mohawk intends to retain its name and headquarters in Syracuse. National Grid builds, owns and operates electric networks and telecommunication ventures around the world; its headquarters are in London, England.
The transaction involves the exchange of Niagara Mohawk shares for a combination of American Depository Shares (ADSs) and cash. The terms of the agreement value the equity of Niagara Mohawk at approximately $3.0 billion and the enterprise value at about $8.9 billion, including debt at $5.9 billion as of June 30, 2000. The transaction is expected to be completed by late 2001, subject to regulatory and other governmental approvals, the sale of Niagara Mohawks's nuclear facilities or other satisfactory arrangements, and approval of company shareholders.
The merger is expected to result in savings from merger-related cost synergies and sharing of best practices. National Grid estimates that it will achieve an annual cost savings of $90 million across New England and New York operations. These savings are expected to be achieved within four years of merger completion, with about half the savings occurring in first year.
National Grid has stated that it intends to honor union agreements and that it's goal is to achieve workforce reductions across the entire National Grid USA organization by 500 to 700 positions over a four year period through natural attrition and voluntary programs.
Below are a few of the questions explored during the hearing.
1. How will benefits to Niagara Mohawk's ratepayers compare with the benefits for shareholders of each company?
2. Will the new company continue to operate under Niagara Mohawk's PowerChoice settlement with the Public Service Commission (PSC)? How much further will rates be reduced beyond the current requirements of PowerChoice? Will the PSC require any additional ratepayer benefits as part of deciding if the merger is in the public interest?
3. What exactly will happen to Niagara Mohawk's debt?
4. What will happen to Niagara Mohawk's nuclear facilities, if they are not sold to another company?
5. Where are the merger savings coming from exactly? When does the current collective bargaining agreement expire?
A number of these questions were addressed by representatives of Niagara Mohawk and National Grid Group. However, additional questions and concerns were raised by Members of the Assembly and the Public Utility Law Project. The Corporations Committee will continue to seek answers to these questions and will follow this merger proposal as approval is sought by the Public Service Commission and other regulatory agencies. The Assembly is committed to ensuring that any acquisition of Niagara Mohawk includes protections for consumers and employees.
The New York City Transit Authority has experienced steadily increasing ridership over the last few years. Ridership has risen due to a variety of factors, including: the improved economy, the elimination of two-fare zones, a decrease in crime on the transit system, the introduction of discounts for daily, weekly and monthly MetroCards (championed by the Assembly Majority) and the improved infrastructure that has occurred as a result of 19 years of extensive capital investment through the MTA Capital Plan. The Assembly and the Committee have fought to increase funds for the capital plans.
The Committee is determined that any surplus not be used as an excuse to further cut subsidies to the Transit Authority. Toward this end, the Committee will continue to insist that money be reinvested in improvements in safety, service and cleanliness.
Despite increased ridership and improved infrastructure, the Metropolitan Transportation Authority (MTA) is functioning under an operating deficit. This past year the Assembly assisted the MTA with additional funds to prevent fare increases. The Committee will continue to monitor this situation and will ensure that MTA riders are not hit with unjust fare increases. This is particularly important in light of the recent failure to pass the Transportation Infrastructure Bond Act. Additionally, the Committee will advocate for continued improvement in services, system expansion, and a promise to maintain the current fare structure for riders.
The Committee will examine a variety of business law issues in the coming session in continuance of its efforts to modernize these statutes. Further, with thousands of limited liability companies now in existence, further fine-tuning of the LLC law may also be expected next session. The LLC is a relatively new business entity in New York and elsewhere, and states are continuing to learn from each other's experiences and refining their statutes accordingly.
With respect to the Not-for-Profit Corporation (NFP) Law, the New York State Bar Association Corporate Law Committee formed a subcommittee to examine the NFP Law with an eye towards modernizing and improving the statute where necessary. The Assembly Corporations Committee will closely examine any proposals which may result from these efforts.
The Committee will continue to examine methods to improve the accountability and governance of public authorities operating in New York State. While the creation of these entities has proven to be a valuable tool in delivering services to citizens, effective oversight by the Legislature is critical. The Committee has developed a model public authority statute which has been used to standardize and make more accountable newly created public authorities. The Committee will continue to monitor the management and expenditures of New York's public authorities in order to ensure that these authorities are fulfilling their statutory mission.
The Federal Telecommunications Act of 1996 continues to bring major changes to the field of telecommunications. The New York State Public Service Commission (PSC) has instituted major changes in the telecommunications field through its negotiated agreements with the former Rochester Telephone Corporation (now Frontier Telephone), New York Telephone (now Bell Atlantic) and Taconic Telephone. Ensuring that New York State is at the forefront of telecommunications is a priority for the Committee and the Assembly Majority. It is imperative that telecommunication services be universally available to all residents of New York State in a manner which is accessible and affordable.
The Committee will continue its efforts to monitor the business activities of the major telecommunications companies as they continue to merge and change with the enactment of the Telecommunications Act.
In the coming year, the Committee will continue to closely watch as energy utilities begin operating in a deregulated market. The Committee will work to ensure that customers are afforded the promised choices of energy service companies. Additionally, the Committee will monitor the functioning of the Independent System Operator (ISO) and its relationship with the Public Service Commission and energy rates in New York State.
2000 SUMMARY SHEET
Summary of Action on All Bills Referred to the Committee on
CORPORATIONS, AUTHORITIES, AND COMMISSIONS
BILLS THAT BECAME LAW
BILLS THAT WERE VETOED BY THE GOVERNOR
BILLS THAT WERE PASSED BY THE ASSEMBLY