Hochul moves forward with new plan to measure energy affordability across New York

Albany, New York – New York is moving ahead with a new system designed to measure how much households are spending on electricity and natural gas, with state officials saying the goal is to put greater pressure on utilities to control costs.

Gov. Kathy Hochul announced that the Public Service Commission has opened a proceeding to begin putting several energy affordability measures into practice. The effort follows changes included in the state’s fiscal year 2027 enacted budget and centers on the creation of a new Energy Affordability Index.

The index is intended to give state regulators, consumers and policymakers a consistent way to examine the cost of utility service across New York. The state has set a target that household spending on electricity and gas should remain below 6 percent of household income, with 3 percent assigned to electricity and another 3 percent to gas.

The PSC’s action does not establish every detail of the new system immediately. Instead, the Commission’s initiating order provides interim instructions for utilities while a broader proceeding continues. That process will allow regulators and other stakeholders to work through additional policy details before the new framework is fully developed.

Under the new approach, utilities will have to provide information that allows their affordability levels to be measured. The first filings under the interim rules will eventually form the basis of a statewide report examining affordability among New York’s major utilities.

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The first annual affordability filings are due by February 1, 2027. Information from those filings is expected to be used in the Commission’s first annual affordability report, which is scheduled to be issued by July 1, 2027.

For the initial version of the index, the PSC will use a relatively straightforward calculation. A utility’s median annual residential electric or gas expenditure will be divided by the State Median Income. For Con Edison and National Grid customers in downstate areas, the calculation will instead use Area Median Income.

The measure is intended to make it easier to see how utility costs affect typical households rather than looking only at individual rate increases or utility financial statements.

The new index could also have consequences for utilities whose costs exceed the state’s affordability target. If a utility’s Affordability Index rises above the 6 percent threshold, the Commission may appoint an independent Affordability Monitor.

The monitor would provide another layer of review inside the utility. According to the state’s plan, the monitor would examine the factors driving costs and report to the Commission with recommendations for ways to reduce expenses and improve affordability.

The system is also intended to connect affordability with utility management. The index will be tied to performance incentives for executives and senior management, creating a link between compensation and the affordability goals established by regulators.

Hochul said the new PSC action is part of a broader effort by her administration to reduce pressure on household budgets while maintaining reliable utility service.

“I have made it a top priority to ensure we keep the lights on and costs down for all New Yorkers and the PSC’s action today builds on those efforts,” Governor Hochul said. “Just this week alone we announced that $1 billion in energy rebate checks will start going out to 8.2 New Yorkers beginning September 21 and we began an aggressive education and enrollment effort so the 2.5 million households eligible, but not enrolled, for utility bill credits of up to several hundred dollars a year can take advantage of the savings.”

The governor’s comments came as the state continues to expand direct assistance for energy customers. The administration has pointed to both immediate financial support and longer-term changes to the way utilities are regulated as parts of its affordability strategy.

PSC Chair Rory M. Christian said the Commission has been working on energy affordability for years and described the new index as an additional tool for measuring the issue across the state.

“Ten years ago this Commission established the nation-leading Energy Affordability Program to help lower New Yorkers’ energy burden by requiring utilities to provide discounts to income-eligible customers, and this year we expanded eligibility to households up to State Median Income. Just this week Governor Hochul directed the Department of Public Service to begin an aggressive education and outreach effort to sign up more people. This new Affordability Index will improve stakeholder understanding of energy affordability across the State’s major utilities with a consistent metric, incentivize executives to address affordability concerns, and inform the Commission’s rate case decisions going forward.”

The index is expected to become particularly relevant when utilities seek changes to their rates. Under the state’s new approach, proposed increases will have to be considered in relation to their effect on the affordability measure.

That means the index is not being designed simply as a yearly statistic. It is also intended to give regulators another piece of information when they review utility rate requests and determine whether proposed costs are putting additional pressure on customers.

The affordability initiative is part of a larger package of utility reforms Hochul has promoted this year. The administration has argued that utility companies should face greater scrutiny over spending and should be required to demonstrate that proposed costs are necessary before those expenses are passed on to customers.

One part of the plan calls for utilities seeking higher rates to provide more detailed information about capital projects. They would also be expected to examine zero-emission alternatives and present a budget-constrained option that keeps operating expenses below the rate of inflation.

The broader Ratepayer Protection Plan also calls for more time to review utility rate requests. Under the plan, regulators would have 14 months to examine rate proposals, while the PSC could establish multi-year rate cases when appropriate for consumers.

The state also plans to scrutinize expenses connected to the rate-setting process itself. The stated goal is to prevent customers from paying costs that are not legally required as part of utility rate proceedings.

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Another part of Hochul’s energy agenda focuses on expenses that utilities are allowed to pass on to customers. Under the plan, costs related to lobbying, public relations campaigns, political donations and luxury travel would not be passed along to New York ratepayers.

The administration has also said utility executive compensation will be connected to energy affordability goals established by the PSC. If a utility generates excess profits, the plan calls for those funds to be returned to customers.

The new affordability index builds on that broader approach by attempting to put a measurable figure on the burden utility bills place on households.

The state has been providing energy assistance through several programs. Since Hochul took office in 2021, her administration says more than $6.6 billion has been provided in direct utility bill relief to participating households, not counting the $1 billion in energy rebate checks scheduled for this fall.

The state has also committed another $1.4 billion to residential weatherization, energy efficiency and renewable energy projects. Those programs are intended to reduce energy use and, for participating households, lower utility costs over time.

Following the COVID-19 pandemic, the governor also announced $1.17 billion in one-time funding to help nearly 500,000 residential customers and about 56,000 small businesses eliminate unpaid utility balances that had become difficult to manage. The administration described that effort as the largest utility customer financial assistance program in state history.

The state is also trying to reach people who qualify for existing utility bill credits but have not enrolled. According to Hochul’s announcement, about 2.5 million households are eligible but are not currently receiving those benefits.

The PSC’s new proceeding therefore comes at a time when New York is using several different methods to address energy costs. Some programs provide direct financial assistance, while others focus on reducing consumption. The affordability index adds another layer by measuring utility expenses against household income.

The first numbers produced under the new system will be based on the interim calculation adopted by the Commission. As the proceeding continues, regulators and stakeholders will have an opportunity to consider how the index should work in greater detail.

The eventual annual reports are expected to provide a statewide picture of affordability by utility. Over time, that could allow policymakers and consumers to compare changes in energy costs from year to year and examine whether utility affordability is improving or becoming more difficult.

The system will also give the PSC another source of information during rate cases. Rather than considering utility spending and proposed rates separately from household income, the affordability index is intended to connect those issues.

For now, the Commission’s action marks the beginning of the process rather than the completion of the new affordability framework. Utilities must prepare for the first required filings, while the PSC continues developing the policies that will govern the index in the longer term.

The February 2027 filing deadline will be the first major test of the new reporting system. The information collected from utilities will then feed into the first annual affordability report planned for July 2027.

The broader objective is to make energy affordability a more visible part of utility regulation in New York. By establishing a common measure, linking it to management incentives and giving regulators the ability to bring in an independent monitor when affordability targets are exceeded, the state is creating a framework that puts household energy costs directly into the regulatory process.