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'Prevailing Wage' Bills Will Increase Utility Costs Across New York State
'PREVAILING WAGE' BILLS WILL INCREASE UTILITY COSTS ACROSS NEW YORK STATE

May 25, 2010 – Concerned for likely increases to customer costs, National Grid is alerting its customers of, and urging state legislators to defeat two bills in the New York State Legislature that would force utilities and their contractors to pay “prevailing wage” for non-utility employees.

“Across New York State, close to one million utility customers are more than 60 days behind in their bills,” said William Flynn, vice president of National Grid New York Government Relations. “These pieces of legislation would significantly increase National Grid’s contracted labor costs and will likely place additional burdens on customers who have already been impacted by increased state assessments, taxes, fees and other charges reflected on their utility bills in recent years. Further, none of these state-added costs have, or will, result in improved service for our customers and could ultimately shift funds away from necessary investments in infrastructure upgrades.”

“Lawmakers need to recognize that these types of legislative measures will have a direct impact on utility bills for the people and businesses of New York,” he said. “For example, last year, new utility assessments in New York State resulted in the collection of more than $160 million dollars from our customers. Similar to these prevailing wage proposals, last year's assessment had no impact on reliability, safety or service. We have to ask, why approve additional legislation that would have the similar effect of increase utility costs with no associated benefit?”

In fact, according to The Business Council’s Public Policy Institute, it is estimated that nearly 27 percent of a New York State utility customer’s monthly energy bill is comprised of required taxes, fees and assessments. Flynn said the two bills would add more than $30 million a year to costs for National Grid, layered on top of the more than $160 million National Grid customers have been forced to pay in increased utility bill assessments thanks to 2009 legislation.

One proposal (A10257A/S7096A) would require that employees of contractors providing service work such as maintenance and janitorial, must be paid the prevailing wage. These individuals do not work for the utility or on utility facilities and have no impact on system operations or reliability.

This bill would define utilities as a public agency, similar to municipalities or state agencies such as the Department of Motor Vehicle, and apply associated requirements on privately-owned utilities such as National Grid. It is not appropriate to force the same requirements on a private business which are required of government bodies, especially when it will result in higher utility bills. By legislating costly standards, utilities will be forced to pay above market costs for services. We believe this approach is anti-competitive and could ultimately cause harm to small service providers including minority and women owned businesses.

The bill would require National Grid and other utilities in the state to ensure that restaurant workers, caterers, landscapers, building custodians and other contracted workers be paid the appropriate “prevailing wage.” These costs would increase operating expenses for the company while not related to providing safe, reliable, cost effective natural gas and electric service to customers.

A second bill (A404B/S7643) would require the use of so-called “competent” workers on specific jobs related to street digging. In addition, the phrase ”competent” is not defined, leaving the issue of who is competent subject to speculation and litigation.

Utility employees and contractors hired by utilities are already held to high standards and are the best trained and most skilled to work on and around utility facilities. National Grid requires specific training and testing requirements for those who work on natural gas and electric facilities. In addition, all utilities’ reliability is measured by the Public Service Commission, making it in the best interest of the utilities to ensure that the quality of work performed on utility facilities is beyond competent.

These requirements have allowed the company to maintain an excellent safety record.

National Grid also believes that this bill would place an unnecessary burden on local governments by creating the need for resources to verify that competent workers are being used for such projects, prior to issuing permits. In addition to the added cost for local municipalities, this will create new administrative hurdles that could further result in delaying projects needed to repair and improve infrastructure.

In addition, both of these bills would require a significant amount of administrative oversight by utilities, further increasing the cost placed on the shoulders of ratepayers.

“This legislation would wrongly place public utilities into the existing prevailing wage law along with the state municipalities, public benefit corporation and public authorities,” said Flynn. “Unlike organizations that are currently required to pay prevailing wage, privately owned utilities, such as National Grid, do not collect taxpayer dollars for operations. National Grid awards bids to the most qualified and cost effective bidders. As a regulated utility, part of our directive from our state regulators is that we provide cost effective service. By legislating costly standards, utilities would be forced to pass such costs on to their customers. We believe this approach is anti-competitive and will run counter to providing cost effective service.”

In a memo of opposition from Unshackle Upstate, a bi-partisan coalition of over 80 business and trade organizations representing 70,000 companies, the group stated: “This legislation demonstrates a fundamental lack of understanding about government and private enterprise. The sponsors of this legislation are willing to allow a powerful special interest that will benefit a few to dictate higher and more unreliable energy - due to poorly funded infrastructure - for the many. Government should not be used to settle labor disputes or to advantage one class of people over another class. Instead, state policymakers should start with a moratorium on energy tax and fee increases and new environmental regulations and wage mandates that make energy ever more expensive, and recognize that higher costs affect all consumers including businesses, the elderly, schools, daycares, local governments and hospitals and yes, janitors, food service workers, security guards. For these reasons, Unshackle Upstate opposes the enactment of this legislation.”

Both pieces of legislation are progressing through the legislative process, with strong support from New York City based unions and other special interests.

National Grid is an international energy delivery company. In the U.S., National Grid delivers electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority (LIPA). It is the largest distributor of natural gas in the northeastern U.S., serving approximately 3.4 million customers in Massachusetts, New Hampshire, New York and Rhode Island. National Grid also owns over 4,000 megawatts of contracted electricity generation that provides power to over one million LIPA customers.