New York Targets Private Utilities as Fix for Energy Price Spike

New York Democrats are criticizing private, investor-owned utilities as they seek solutions to rising home energy prices that have discontented voters.

Gov. Kathy Hochul has proposed new compensation disclosure requirements for utility executives as she and other state Democrats question whether corporate earnings are factored into ratepayer costs. She also wants to require the state’s Public Service Commission to develop “performance-based targets” that tie utility CEO and managerial compensation to energy prices for ratepayers, and consider adjustments to the utility corporation’s return on equity based on that metric.

Progressive lawmakers also want stricter scrutiny of how utilities recover profits when they ask regulators to raise rates for residents.

Those measures are part of conversations about the state budget as lawmakers debate how to promote affordability while home energy prices surge in New York. The state’s spending plan due April 1 has stalled over Hochul’s other cost-of-living pitches, including weakening climate goals, but lawmakers appear more aligned on utility cost-cutting measures.

The framing has spread across other Democratic-led states. Gov. Josh Shapiro (D-Pa.), a prospective 2028 presidential candidate, said in a Feb. 3 state of the state speech he and lawmakers would have a “hard conversation about the amount of profit utilities and their investors can make on the backs of hardworking Pennsylvanians.”

And California regulators in December decreased profits the state’s three shareholder-owned utilities can recover from ratepayers when they invest in infrastructure,

New York State Sen. Pete Harckham (D), who chairs the environmental committee, acknowledged the focus on executive compensation among energy companies was “mostly symbolic” as lawmakers further push to lower the cost of energy and change how utility rates are set. It’s an opaque process that involves months of negotiation between state regulators and companies.

But the measure is broadly supported, Harckham said.

“When our constituents are suffering, the shareholders need to be sacrificing something,” Harckham said.

Regulators’ Role

While investor-owned utilities are governed by regulatory frameworks designed to guarantee returns on equity, those structures have faced increased political scrutiny as energy prices rise.

In New York, investors own the largest electricity and gas distributors, including Consolidated Edison Inc. and National Grid. Utilities seeking rate hikes must go through the New York Public Service Commission.

Utilities and industry groups argue that regulators control profits, and rate hikes are necessary to attract investment for grid modernization, especially as states pursue decarbonization goals. Energy infrastructure in New York is decades old, and utilities have cited the high cost of repairing and updating the system.

“It’s important to understand that executives don’t get paid whatever the heck that they want to get paid,” said Kimberly Harriman, deputy CEO of the energy company Avangrid Inc.. “We put in what we have for compensation at all levels of the company, and the regulator tells us what’s just and reasonable to recover.”

Harriman said utilities often get blamed by consumers for costs that are beyond their control, including state programs and taxes, and an unregulated electric generation market.

‘Gobs of Money’

In New York, Hochul wants utility corporations to disclose their CEO’s compensation when those companies present their case for rate increases to the state’s Public Service Commission. That disclosure would include a comparison with employees’ median salaries.

Hochul spokesperson Ken Lovett said in a statement the proposal Hochul is seeking to include in the final state budget would “incentivize utility executives to manage their companies with a greater focus on affordability.”

The state Senate earlier this year approved a package of bills intended to scrutinize further the amount of utility profits recoverable by shareholders, though they must still pass the state Assembly before June 4 and receive Hochul’s approval. The Senate’s proposals go beyond Hochul’s and face an uphill battle in the Assembly.

State Sen. Shelley Mayer (D), a frequent critic of the New York Public Service Commission for its role in approving rate boosts, carries a bill to entirely retool how the commission approves its hikes. She is also pushing to require utility companies to return any amount in excess of a profit cap set by the commission to consumers via a credit on their energy bills.

“Shareholders have done well while there’s been a real unwillingness to deal with the fact that people, so many people, are behind on their bills,” Mayer said.

Assembly Speaker Carl E. Heastie (D) has blamed the 1997 deregulation of the utility industry under former Gov. George Pataki, a Republican, who approved the separation of utility companies from power producers to boost competitive pricing. Heastie said energy producers are now making “record profits” and suggested lawmakers in that chamber would seek to contain earnings this year.

“Their CEOs are making gobs of money for their salary,” Heastie told reporters in February. “So I think we have to start to take a look at regulating this unregulated system in terms of utility rates.”