STATE OF NEW YORK PUBLIC SERVICE COMMISSION CASE 99-E-0930 – Proceeding on Motion of the Commission to Investigate the July 6, 1999 Power Outage of Consolidated Edison Company of New York Inc.’s Washington Heights Network. NOTICE SOLICITING COMMENTS (Issued September 22, 2000) By letter-filing dated August 18, 2000 (see attached), Consolidated Edison Company of New York, Inc. filed proposed tariff revisions concerning its liability limitations for the spoilage of food and loss of perishable merchandise during certain distribution system outages. Con Edison’s proposal was submitted in response to the Commission’s June 22, 2000 Order Approving Tariff Amendments in this proceeding. TAKE NOTICE that persons wishing to comment on Con Edison’s proposal should file six copies of their comments with the Honorable Janet Hand Deixler, Secretary, Public Service Commission, Three Empire State Plaza, Albany, New York, 12223- 1350 and serve a copy on the persons on the attached service list not later than October 9, 2000. Reply comments may be filed and served in the same manner no later than October 19, 2000. JANET HAND DEIXLER Secretary Attachments (2) . Law Depart men t con Consolidated Edison Company of New York. Inc mson 4 lrvlng Place. New York. N.Y. 10003 August 18. 2000 Hon. Janet Hand Deixler Secretary New York State Department of Public Service Three Empire State Plaza Albany, New York 12223 Re: Case 99-E-0930 - Proceeding on Motion of the Commission to Investigate the July 6, 1999 Power Outage of Con Edison’s Washington Heights Network Dear Secretary Deixler: The Commission’s June 22, 2000 Order Approvina Tariff Amendments in the referenced proceeding directed Consolidated Edison Company of New York, Inc. (“Con Edison” or “the Company”) to file a proposal designed to address the administrative and practical difficulties involved in compensating consumers for spoilage of food and perishable merchandise resulting from a power outage as defined in the Company’s tariff. The purpose of the proposal is to suggest an alternative to the temporary plan, established by tariff leaves filed on June 14. 2000, which sets the maximum compensation available to residential customers at $350 and to commercial customers at $7,000. After exhaustive analysis and research, Con Edison has determined that the following proposal will best achieve the goal of compensating customers for actual losses, while alleviating some of the practical difficulties in administering the claims process: Con Edison proposes to increase the compensation to residential users for actual losses up to $350 and to commercial users for actual losses up to $7,000 on a permanent basis. In addition, Con Edison will increase the ceiling on total payments to $10 million per occurrence, as directed by the Commission.’ A major issue has been verification of customer claims, since ’ If an outage occurs that will invoke the tariff spoilage provisions. the Company will immediatei!, endeavor to estimate the potential total maxlmum payment responsibilit?.. When there IS reasonable assurance that the SIO million total occurrence cap will not be reached. claims will be processed for payment on an as received basis. When the SIO million cap is likely to be exceeded. the Company will want until after the 30 day period for submmm g claims to determme if prorating IS required. verification can be a time-consuming and burdensome process, but a necessary one. Under the new framework, the Company will pay residential claims up to $125 upon receipt of an itemization of actual losses, and the Company will pay residential claims over $125, up to $350, upon receipt of an itemization and proof of actual losses. The Company will pay non-residential claims up to $7,000 upon receipt of an itemization and proof of actual losses. All claims will be subject to reasonable verification. Backsround The Commission’s March 15, 2000 Order in this proceeding directed Con Edison to show cause why the compensation levels for perishable merchandise set forth in its electric tariff should not be increased from $100 to $350 for residential users and from $2,000 to $7,000 for non-residential users. Con Edison filed a response on April 17, 2000, which urged the Commission to adopt lower compensation levels. The Company asked the Commission to reconsider the $350 cap for food spoilage claims because it far exceeds the actual potential spoilage loss that would be experienced by residential customers as a result of a power outage. Moreover, the Company expressed a concern that, based on its experience, many claimants view the maximum reimbursement cap as an entitlement for the general inconvenience occasioned by the outage, rather than reimbursement for actual food spoilage incurred. As a result, many claimants file claims for the maximum amount available, whether or not they have experienced food spoilage losses in that amount. At the same time, it is difficult to require rigorous proof for actual losses. On further consideration, the Commission directed the Company to file tariff revisions increasing the levels as initially directed or, alternatively, to request a hearing. By letters dated June 2 and June 5,2000, Con Edison indicated it would file conforming tariff leaves, but expressed a desire to explore ways to address the practical and important issue of administering a claims program in a way that made sense for customers, regulators, and the Company. The tariff leaves were filed on June 14, 2000 with an effective period of June 23, 2000 through December 1,200O. The Commission’s June 22, 2000 Order Approvinq Tariff Amendments accepted the Company’s recommendation that the compensation system be further examined and directed the Company to file by August l&2000, a proposal addressing its concerns. The Commission also accepted that the tariff revisions be effective only through December 1, 2000 and stated that, following its review of Con Edison’s proposal, it would consider adoption of suitable tariff revisions or continuation of the increased compensation levels. Con Edison’s Proposal Con Edison continues in its view that a $350 cap on residential claims is excessive 2 and creates the erroneous expectation that the “cap” amount is something customers may be entitled to irrespective of actual losses experienced. The cost of excessive payments is one that is not only unfair to the general body of ratepayers, but especially unfair to the claimants who adhere to the Commission’s intent of providing compensation for actual losses experienced. For example, while a large percentage of claims made last summer were on forms requesting a pre-printed $100 payment, many claims listed specific items of damage on hand-written notes and sought compensation for much lower amounts. Con Edison has thus developed a proposal for providing compensation for spoilage that would address these concerns to at least a limited extent. Con Edison also considered other factors in developing the plan. The compensation system should continue to provide claimants with compensation for actual spoilage losses. The claims process should be simple for claimants to follow and easy for the Company to administer. In addition, to promote the integrity of the claims process, claims should be subject to reasonable verification. The concept of verification, which is necessarily a key concern in developing any claims process, is certainly not a new one; the Commission’s discussion of the claims process made clear that the intent of the tariff is that claims should be subject to reasonable verification requirements. The real task is to develop a reasonable way to balance the significant practical problem of verifying large numbers of claims and the need to insure the integrity of the claims procedure; we believe the framework we have developed balances these interests in an acceptable fashion. Con Edison is proposing a compensation program that will provide reimbursement to residential users for actual spoilage up to $350. Claimants 2 Staff tived at its proposed $350 cap by escalating the $100 cap established in 1973. Food-industry experts are in agreement that the application of inflation to the expected value of the perishable contents of a 1973 refrigerator or to the $100 cap is a severely flawed methodology. The consumers approach to meals - shopping, eating and preparing - has changed so dramatically that to simply look at the value of the perishable food in the 1970s and increase it by the appropriate CPI is meaningless and inappropriate for reflecting the value of perishable food in 2000 and beyond. These experts also question the validity of the $100 value assigned in 1973. In connection with this, it is noteworthy that in 1973 the Commission originally proposed the $100 cap to reimburse claims for both food spoilage and appliance damage. The Commission later eliminated reimbursement for appliance damages but maintained the $100 limit without adjustment. (See Op. No. 73-20, Opinion and Order Directing the Filing of Tariff Provisions bv Consolidated Edison Comoanv of New York. Inc. to Provide Comoensation for Losses Due to Distribution Svstem Interruutions, issued July 10, 1973, p. 9.). Even assuming that the Commission intended to set an amount that would cover anticipated inflation, it is patently erroneous to use that amount ($100) as the appropriate 1973 value for escalation to the year 2000. 3 itemizing losses will receive up to $125 without providing proof of 10~s.~ Claimants who provide proof of loss will receive reimbursement for their actual losses up to $350, after reasonable verification. In the event a claim in an amount in excess of $125 does not have supporting documentation, or if the documentation provided is deemed insufficient, the Company will advise the claimant of the additionalinformation required. Reasonableness Over the last two months, Con Edison conducted an intensive study of the compensation level needed to reimburse residential users for actual food losses.