March 25, 2023

Shaking Pennies and Fists Against Utility Rate Increases

The objections can take creative forms, like the jar of pennies meant to symbolize retiree finances that was sent to Lynn J. Good, chief executive of the Duke Energy Corporation, as a rate-increase protest on her first day of work in July. But she also received a bunch of sunflowers the same day from Greenpeace to encourage the utility to go green, said Tom Williams, a Duke spokesman.

“That shows how goals differ,” Mr. Williams said. “Some advocates want clean energy, and others want cost-effective, and no one wants their rates to go up.”

Many retirees are unswayed by such comments. They are moving away from lower-key activities like attending meetings, passing out fliers or making phone calls to more visible tactics to express displeasure over utility company requests for significant sums to cover everything from installation of smart thermostats to managing trees and vegetation.

At public rate hearings in South Carolina in June, opponents shook Mason jars full of pennies to show their displeasure with Duke’s rate proposals. Several rate protesters in North Carolina staged a skit recently, with one dressed like Rich Uncle Pennybags from the Monopoly board game, outside the state regulator’s office in Raleigh.

In other rate protests, AARP in Arizona gave away Christmas stockings stuffed with lumps of coal, and in Idaho the group awarded three utility companies “turkey” awards for attempts to raise water and electric bills.

AARP began stepping up its efforts against rate increases two years ago, prompted by survey results showing that those 50 and older spend the most, proportionally, of all age groups on electricity, and people over 65 list utility bills as their biggest annual expense. The AARP Public Policy Institute study was based on Bureau of Labor Statistics data.

AARP’s multistate campaign has spread, with mixed results, to 38 states, as the organization has begun to more assertively seek publicity, campaign and, in some cases, take legal action to protect retiree interests in rate requests. The stakes have risen as utility providers, especially those in areas hit by strong storms, seek revenue to shore up infrastructure and for tree-cutting and other maintenance that may have been deferred in earlier years.

“It’s unfair for utilities to ask for more money to upgrade their operations,” argued Janee Briesemeister, AARP’s senior legislative counsel and utilities expert.

“The company can’t just say, ‘We need money between rate cases, and we’ll tell you later what it’s for,’ ” she said, adding that such requests customarily are part of a rate-making process that differs somewhat state by state, but involves the utility’s providing detailed financial justification.

Mr. Williams of Duke conceded that “there is a need to take the lumpiness out of the rate process,” by spreading out increases over time. But utilities say costs for new plants or environmental upgrades can be recovered in rate increases after the improvements come online; such increases typically involve a settlement after regulators hear from all sides, including retiree protesters.

In South Carolina, AARP adopted the slogan “Raise Your Voice Before They Raise Your Rates,” with the image of the spilled Mason jar, to fight a proposed increase in electricity rates. Campaign materials were sent to 25,000 members by mail and appeared on the Internet and in local newspapers.

The campaign raised attendance at public hearings on a request by Duke Energy for a 16.3 percent increase in monthly residential bills, said Patrick Cobb, AARP state assistant director. The increase would have added nearly $214 to the average yearly bill, according to AARP. Instead, the eventual settlement, not yet completed, will raise rates about 10 percent over two years for the utility’s 540,000 customers.

Even in a state like Arizona, with some 800,000 AARP members, large numbers of retirees do not ensure complete victory. Dressed as Santa Claus, Steve Jennings, AARP’s state advocacy director, used holiday stockings with lumps of coal to urge state regulators to vote against a proposed rate rise. Regulators eventually approved a somewhat smaller increase.

“Getting out there doesn’t mean you are going to win,” Mr. Jennings said, “but it does make you a player.”

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High & Low Finance: Court Ruling Against Banks Lets MBIA Benefit From Splitting Up

Imagine, for a moment, what a court might say if state regulators allowed an insurance company, facing huge losses because of Hurricane Sandy, to separate itself into two companies. One, thinly capitalized and in clear danger of not being able to pay all claims, would insure the areas hit by the hurricane, like the beach towns of New Jersey and the Rockaway area of Queens. The other, with plenty of capital, would carry all the policies that were not likely to have large claims.

Of course, no regulator would do that. And any court confronted with such an act would search for reasons to overturn it.

Now imagine an insurance company split up with the clear purpose of discriminating against a set of policyholders who were the subject of overwhelming public scorn rather than public sympathy — perhaps the people who had caused the catastrophe that led to the losses.

Just such a case was decided this week. And the state regulator’s decision was upheld by a judge who concluded that the regulator was entitled to the widest possible latitude in making its decisions. If the regulator had not bothered to verify calculations in the insurance company’s financial projections, and those calculations turned out to be wildly inaccurate, that was fine with the judge.

That case did not concern a hurricane, of course. It instead concerned the financial storm that sent the world into recession and led countries to bail out the banks that had made bad loans that led to the disaster.

The insurance company was MBIA, a company that prospered insuring municipal bonds, almost all of which were safe anyway. It then made the huge mistake of deciding to also insure structured financial products, like collateralized debt obligations and commercial mortgage-backed securities. It did little investigation of what actually backed those securities, explaining later that its low fees made such investigations too expensive. Instead it relied on the ratings agencies and on the banks that had put the securities together.

That reliance was misplaced, and MBIA is now in danger of being unable to pay claims on those securities.

In 2009, with the blessing of its regulator, the New York State Insurance Department, MBIA decided to split in two. On one side, fully protected, were the insurance policies issued to muni bond investors in the United States. On the other side were the structured finance policies, which would mostly benefit the banks that had bought such products. A group of banks sued to overturn the breakup.

Justice Barbara R. Kapnick of the New York State Supreme Court — a trial court despite the lofty title — listened to lawyers argue for 13 days over whether the case should proceed to trial. She decided there was no reason for a trial. The insurance department had wide latitude to approve the split with or without much investigation, and she would not second-guess it.

Anyone from the Securities and Exchange Commission who might read Justice Kapnick’s opinion will be envious. The S.E.C. has to contend with a court — the United States Court of Appeals for the District of Columbia Circuit — that instinctively throws up roadblocks to any rule the commission passes. The S.E.C. jumps through whatever hoops the court established in its last decision but, somehow, it never quite manages to live up to what the D.C. circuit requires in its next ruling.

Justice Kapnick, on the other hand, is not bothered by the fact that the state insurance department relied on MBIA financial filings that turned out to be very inaccurate — not just later but at the time that the filings were made.

The banks, she said, “fail to provide any legal authority to support their argument that this court can annul the department’s decision based on claims that MBIA concealed or withheld potentially damaging information” from the department.

She quotes from a deposition by Michael Moriarty, the deputy superintendent of the department and the man who signed the letter approving the split. When considering MBIA’s request, he said, “the department did not, nor do they usually, verify the financial condition of a company.” Since that was the policy, the judge concluded she had no authority to question it.

The New York Insurance Department has since been combined with the state banking regulator in a new body, called the Department of Financial Services, and that body seems to be very worried about MBIA’s ability to meet its obligations in the structured finance unit.

An interest payment that MBIA owed on a junior security it had sold to investors was not paid in January, because the department would not allow it.

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DealBook: Standard Chartered Set to Sign Pact With New York Regulator

Benjamin M. Lawsky, head of the New York Department of Financial Services, at his office in Lower Manhattan in January.Michael Appleton for The New York TimesBenjamin M. Lawsky, head of the New York Department of Financial Services, at his office in Lower Manhattan in January.

Standard Chartered, the British bank at the center of accusations that it illegally funneled money for Iranian banks and corporations, is expected to sign a settlement on Friday with New York’s top banking regulator.

While bank executives agreed last month to pay $340 million to settle claims that it moved hundreds of billions of dollars in tainted money and lied to regulators, the final details were not hashed out until Friday, according to several people with knowledge of the discussions.

The finalized agreement will allow the 150-year-old bank to move beyond its clash with Benjamin M. Lawsky and his 10-month old agency, the New York Department of Financial Services. The state regulator in August accused Standard Chartered of scheming for nearly a decade with Iran to hide from regulators 60,000 transactions worth $250 billion.

Federal authorities, including the Manhattan district attorney and the Justice Department, have their own investigations into Standard Chartered. The bank is expected to resolve any criminal allegations with the Manhattan district attorney’s office by next week, according to law enforcement officials.

Standard Chartered has maintained that only $14 million of the $250 billion in transactions violated federal regulations. In a regulatory filing shortly after the settlement was announced, the bank said that “a formal agreement containing the detailed terms of the settlement is expected to be concluded shortly.”

A bank spokeswoman declined to comment.

The concluded settlement on Friday will be the final act in an international drama that pitted Mr. Lawsky against federal authorities who believed he was overreaching and British authorities who accused the regulator of hurting the reputation of their banks.

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