The New York State Department of Public Service (DPS) is launching an investigation into National Grid’s downstate gas operations after five former managers of the utility were charged in a “bribery and kickback scheme involving contracts worth tens of millions of dollars,” according to a Monday statement from Gov. Andrew Cuomo.
The investigation follows a federal complaint, unsealed in Brooklyn last week, that charges employees who worked in National Grid’s facilities department with taking hundreds of thousands of dollars in bribes to award maintenance contracts to some Long Island-based contractors.
The investigation is one of a several actions regulators have taken recently to ensure safety across the New York’s energy systems.
The state’s Public Service Commission (PSC) on Thursday announced it was reducing the revenues of Consolidated Edison (Con Edison), Rochester Gas & Electric (RG&E) and New York State Electric & Gas (NYSEG) for failure to meet certain service and meter-reading metrics. In total, the failures will reduce utility revenues more than $15 million.
Alleged bribery scheme focused on maintenance contracts
There is likely no risk to public safety resulting from the bribes, but DPS officials say they will work to confirm that none of the National Grid contracts in question involved critical gas infrastructure.
“As a result of this alleged criminal activity by employees of a regulated utility, the department has launched an immediate investigation into this matter to determine if the utility’s customers were financially harmed by this scheme and, if so, to seek full restitution on behalf of the customers,” DPS CEO and PSC Chairman John Howard said in a statement.
A spokesperson for National Grid said the utility is aware of the investigation and has been fully cooperating.
“We are conducting a thorough internal investigation and will be working with our regulator, the NYS Public Service Commission, to enhance our existing controls and to implement additional controls and recommendations where appropriate to help prevent a similar situation in the future,” National Grid said in a statement.
According to Newsday reporting on the unsealed complaint, the bribes allegedly took place from 2013 to 2020. One contractor secured more than $50 million in facility maintenance contracts as a result of the scheme, according to Cuomo’s statement.
National Grid said the alleged misconduct is “unacceptable, we have zero tolerance for it.”
Revenues cut for performance, meter reading failures
Regulators have also handed down revenue cuts for utilities failing to meet certain performance metrics and meter-reading targets.
“While most utilities are doing a good job providing safe and reliable service, four utilities have fallen short of our expectations in certain areas and we will continue to act aggressively to ensure utilities improve performance,” Howard said in a statement.
The PSC hit Con Edison with a negative revenue adjustment of $5 million for exceeding its network outage frequency target, which excludes outages related to major storms. NYSEG will see a negative revenue adjustment of $7 million, also for exceeding its outage frequency target excluding major storms.
Con Edison, in a statement, said its service “remains industry leading in reliability,” but that its 2020 standing on one metric “was greatly affected by a single event, which was a 33-minute outage in parts of northern Manhattan early on the morning of Aug. 7.”
That outage was caused by a problem on Con Edison’s transmission system, a spokesperson said, and the utility continues to invest in its energy-delivery systems “to make them more reliable and resilient.”
Shareholders, not customers, will pay for the revenue adjustments, which will not impact utilities’ ability to make system improvements.
Despite the missed targets, the PSC said that outside of major storms, New York’s reliability metrics improved slightly in 2020. Including storms — like Tropical Storm Isaias last August, that left nearly 1.5 million in the state without power — tells a different tale.
“Including major storms, 2020 had the worst performance for frequency, duration, and customer hours of interruption over the past five years,” the PSC said in a statement.
The commission also called out PSEG Long Island, managed by Public Service Enterprise Group, for widespread outages in Isaias. That utility is regulated by the Long Island Power Authority Board of Trustees.
“It’s clear that utilities must be ready to address more frequent and powerful storms,” said Howard.
NYSEG officials say they are spending millions of dollars over the next three years to address outages. As part of a proposal the PSC approved approved in 2020, the utility is significantly boosting its vegetation management. Downed trees account for about 50% of outages on the system.
NYSEG’s annual tree trimming budget will rise from $32 million to $57.2 million, and the increased funding will go toward two programs: one focusing on at-risk circuits where the utility sees higher vegetation risks, and another to remove trees outside the utility right of way.
From 2020 to 2023, NYSEG says it will spend $550 million on an “asset condition replacement program” to modernize the system and replace aging infrastructure. Across that same period, the utility will be spending $107 million on resiliency and hardening against storms, with a goal to reduce the frequency and duration of outages.
The investments are already paying off, NYSEG said in a statement. “As a result, we have seen a positive 2021 year-over-year increase in NYSEG’s electric reliability,” the company said.
Waivers pending for meter reading failures
NYSEG and its sister utility, RG&E, each failed to meet meter reading targets, and as a result, the PSC also approved negative revenue adjustments totaling $1.4 million and $1.8 million, respectively. Avangrid owns both utilities.
Avangrid officials say there is some chance those revenue adjustments could be reversed. The utilities informed state regulators at the start of COVID-19 that they would be suspending in-home meter readings and as a result were likely to miss the target. They filed for a waiver and have been in contact with PSC staff, but the commission has yet to act on the waiver.
A spokesperson said the utilities have proposed foregoing other, positive revenue adjustments for metrics they did meet if regulators approve the waiver.
Avangrid officials say the meter reading issue will be moot within a few years, as the utilities will be installing smart meters from 2022 to 2025. The company’s utilities are the only power companies in New York state not yet using smart meters.
“NYSEG and RG&E suspended non-emergency work that required us to enter customer homes,” the company said in a statement. “This included indoor meter readings. … we filed a waiver to exempt the metric. We look forward to the commission acting on the request.”
The companies are also “eager to begin our smart meter installation program in 2022, which will automate the meter reading process,” the statement said.