Testimony of Zilvinas Silenas
President, Empire Center for Public Policy
 

Before the Joint Legislative Committee on Environmental Conservation and Energy for the 2027 Joint Legislative Budget Hearing 

January 28, 2026 

TESTIMONY ON FY 2027 NEW YORK STATE EXECUTIVE BUDGET TRANSPORTATION, ECONOMIC DEVELOPMENT AND ENVIRONMENTAL CONSERVATION ARTICLE VII LEGISLATION, PARTS N, O, P 

General remarks 

In October 2026, New York had the 8th highest average residential electricity prices in the U.S., exceeding the National average by 50%. Moreover, the gap between New York prices and the national average has been increasing for the past five years (see our Energy Data Bulletin for details). High energy prices—and especially prices rising faster than in the rest of the country—are a legitimate concern. We are happy to provide assistance and our monthly Energy Data Bulletin in researching this issue.  

However, this budget does not address the fundamental reasons why prices in New York are high and rising faster than in most other states. The entire country faces similar challenges, yet most states deliver cheaper energy and slower price increases. Rather than researching whether energy prices are high (as in the proposed Affordability Index), we should investigate market forces and government policies unique to New York, driving prices higher and faster than in the rest of the country.  

Better, smarter, and more transparent regulation of utilities is an excellent direction for improving energy policy. However, the executive budget does not introduce smarter or better regulations. Instead, it offers unproven and untested interventions into price regulation and utility operations, which could cause significant harm and provide little benefit. Moreover, they will cost money and create potential security risks and opportunities for corruption. 

Detailed remarks on sections N, O, P 

Part N, Section 1 (n), Regulating rate of return by ratio of median earnings of employees to management 

Part (n) proposes adjusting the regulated return on equity for gas and electric utilities by introducing a ratio comparing median employee earnings to the compensation of the CEO and other management personnel. 

Unclear definition of the ratio. The proposal does not provide guidance on how the ratio of worker pay to CEO and management pay should be calculated, e.g., what constitutes “management position,” should it include compensation in stock or similar financial instruments, overtime pay, benefits, and many other types of compensation. Without clear definitions, the Ratio will be inconsistent, difficult to audit, and vulnerable to manipulation. 

No guidance on how the ratio should be used. More importantly, the proposal does not provide guidance on how the Public Service Commission should interpret the ratio, e.g., should it reward higher values (higher workers’ wages and lower CEO pay) or lower values (e.g., lower workers’ wages and higher CEO pay). 

Potential for higher, not lower, rates. Most importantly, if the goal of this proposal is to lower the utility rates (or slow down their growth), the proposal should aim to reduce the overall expenses associated with the provision of gas and electricity, including personnel costs, rather than reward or penalize companies for their personnel strategy.  

Furthermore, the proposal could result in situations where some companies are rewarded for inflating personnel costs (directly or through overtime payments), as long as the Ratio remains low (or lower than that of competitors). Empire Center has documented numerous cases of unreasonably inflated pay among New York’s public sector entities.1  

Artificially lowered returns discourage investment in New York’s energy sector. Investment in energy production and competition among energy companies are essential for maintaining a reliable supply of energy at competitive prices. If this proposal leads to artificially lowering the regulated return on equity below what utilities earn in other states—or even other industries—it could discourage investment and create serious risks of underinvestment across New York’s entire energy sector.  

Part N, Section 1 (o), Budget constrained proposal 

Legislation introduces a “budget constrained proposal” which, in essence, means utilities would not be able to increase prices above inflation, even if their actual costs rose faster than inflation (Consumer Price Index – CPI). 

Costs might rise faster than inflation. If prices of fuel or energy on wholesale markets rose faster than CPI inflation, this could lead to situations where the revenues utilities receive do not cover the costs of operation, or the costs of energy. As the U.S. Energy Information Administration notes, electricity prices rising faster than CPI inflation is likely: 

Retail electricity prices have increased faster than the rate of inflation since 2022, and we expect them to continue increasing through 2026, based on forecasts in our Short-Term Energy Outlook.  

And 

Between 2013 and 2023, electricity prices closely tracked inflation, but we expect increases in electricity prices to outpace inflation through 2026.2 

Rates not covering costs could lead to financial problems and even higher rates in the future. When approved rates fail to meet a utility’s actual costs, the result can be financial instability and, ultimately, higher rates for customers. During periods in which utilities are required to operate under the constraints of the “budget constrained proposal” and their revenues do not fully cover operating expenses, they may be unable to meet financial obligations to energy suppliers and personnel. They may also be compelled to reduce funding for maintenance or capital investment, which can degrade service quality and lead to increased costs for ratepayers in the future. 

Part P, Section 1, Affordability Index 

While we welcome research into the affordability of energy in New York and comparisons with other U.S. states, we would like to point out that such research already exists, provided by the U.S. Energy Information Administration Electricity and Natural Gas reports, or private actors, e.g., Empire Center for Public Policy (see our monthly Energy Data Bulletin in Appendix)3. We are happy to assist in further research and provide information on the matter.  

If the proposed Affordability index involves not just comparisons of average electricity and natural gas prices, but also how they compare to the purchasing power of New Yorkers vis-à-vis residents of other states, note that utilities do not have detailed information on household incomes beyond publicly available data. Such an index would require cooperation and sharing of information between utilities, tax authorities, and multiple other institutions.  

Basing important rate decisions on yet-to-be-created Affordability index is not sound. Sections 2 and 3 propose important decisions (e.g., Affordability Monitor – see below) to be triggered by the Affordability index growing faster than 3 percent. However, the methodology and data sources for the Affordability index are not yet determined, the index does not exist, and its shortcomings, biases, robustness, and other statistical parameters have not been tested or reviewed. It is unsound, risky, and premature to legislate changes to rate regulations based on a non-existent, untested product.  

Affordability Monitors 

Section 3 establishes the position of “Affordability Monitor”, who would work under the Public Service Commission in the utility companies, have access to all documents, meetings, and bank accounts. The monitor would also report his findings on the costs of drivers and opportunities for savings.  

Affordability Monitors are redundant and unnecessary. If the Public Service Commission (PSC) acts as an independent regulator of utilities, all information relevant to setting of rates should be available to it without establishing the position of the Affordability Monitor. If the current legislation does not give PSC enough access to information, increasing the amount of information necessary for rate decisions would be the appropriate proposal, and does not require Affordability Monitors. 

Finally, and most importantly, the idea that an outside person (or body) would be able to identify savings better than the company or the Public Service Commission is unrealistic and places unfounded expectations on the Affordability Monitors.  

Expenses for Affordability Monitors will increase the rates. Legislation explicitly states that the costs of maintaining the Affordability Monitors (e.g., compensation, expenses, etc.) will be covered by the companies, and therefore the ratepayers.  

Therefore, while it is far from certain whether the Affordability Monitors will provide any value, it is guaranteed that they will be an expense covered by the ratepayers.  

Lack of clarity on the composition of the Affordability Monitor. It is unclear whether the Affordability Monitor is a person, a body of persons, or an institution. It is also unclear whether it will be the same person (or body) for all utilities, or whether each utility will have its own dedicated Affordability Monitor. Given the potential impact of the Affordability Monitor legislation, it is important to provide these details (or at least guiding principles) in the legislation.  

Confidentiality requirements of Affordability Monitors need to be addressed. As mentioned, Affordability Monitors will have access to confidential information of companies, including meetings, documents, and bank accounts. The Affordability Monitors will gain access to information that might have nothing to do with rates, rate decisions, or operations in New York, creating security risks for energy companies. If proper confidentiality requirements are not imposed, it creates risks of leaks of confidential information to rival companies, fraudsters, criminals, foreign adversaries, etc.