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The state Public Service Commission (PSC) is falling short in monitoring Charter Communications Inc. and other utilities across New York, according to an audit released today by State Comptroller Thomas P. DiNapoli. Auditors found regulators lacked the equipment to measure Internet speeds, used inaccurate data to track service reliability and imposed only four penalties in four years.

"When New Yorkers flip on the lights, log in or make a call, they should be confident that someone is making sure these service providers are living up to their promises," DiNapoli said. "My auditors found the state Public Service Commission was not doing enough to make sure utilities are holding up their end of the deal. PSC lacked critical equipment to do its job and rarely inflicted financial consequences when companies did not deliver. This has to change."

DiNapoli's office engaged the audit after lawmakers in the Hudson Valley raised concerns about poor Internet service. Assemblywoman Didi Barrett (D-Dutchess/Columbia) urged the Comptroller to look at Charter and growing problems with its service.

The audit examined how the PSC is overseeing utility compliance with commission agreements and orders, some stemming from mergers and acquisitions, from Jan. 1, 2015 to July 10, 2019, by four utility companies: Charter, Altice USA, FairPoint Communications Inc. and Rochester Gas & Electric Co. (RG&E).

The PSC, through the Department of Public Service (DPS), regulates 650 utilities responsible for electric, gas, steam, telecommunications, and water services for New York's residential and business customers. The five-member PSC reviews and approves utility companies' applications for mergers and acquisitions, rate cases, and other agreements.

Often, approval of these applications is based on conditions, such as pledges to replace or upgrade infrastructure, provide access to services to outlying areas, or enhance quality of service. These conditions are listed in commission orders, and any violation of an order's terms is grounds for the commission to seek reparations, terminate the approved acquisition or merger, or even revoke a utility's license.

Charter

In January 2016, the PSC approved the merger of Time Warner Cable and Charter, affecting approximately 2.6 million customers. The resulting order contained ten conditions. DiNapoli's auditors found four of these conditions were either not fulfilled by Charter or were not sufficiently verified by regulators.

Charter was to extend its network to an additional 145,000 unserved and underserved premises within four years, beginning January 8, 2016, with a goal of 25 percent expansion annually.

An earlier settlement agreement required Charter to submit a letter of credit in the amount of $12 million, propose a newly revised buildout plan requiring six semi-annual deadlines, and pay an additional fine of $1 million (drawn from the $12 million) for every missed goal under the new schedule. DiNapoli's auditors determined the DPS should have collected $5 million it was owed under that agreement, but has only been able to collect $1 million. PSC and DPS officials stated that the litigation leading to a new agreement prevented further collections.

Charter was also required to:

• Invest in system upgrades to permit the transition to all-digital technology, including an increase in broadband Internet speeds by the end of 2018. Although Charter submitted the required documentation stating compliance with this requirement, DPS did not verify that these system upgrades have actually been completed. In fact, DPS staff stated they lack the equipment required to perform such verification.
• Provide free broadband service to 50 community locations, such as schools, libraries, and public housing in low-income or underserved areas of the state. Charter submitted a list of institutions it believed would benefit from such service; however, as of the 2018 Annual Report provided to DPS, Charter had not provided any of the 50 institutions with the required services. The agreement also failed to establish a time frame for providing this service.
• Invest $50 million in service quality improvements over the two years following the approval of the merger. Charter reported it had met this requirement; however, DPS did not verify the service quality improvements had been made by May 2018.

Problems with Other Companies

DiNapoli's auditors found problems with DPS's oversight of the three other utility companies reviewed as part of the audit. For instance:

• When Altice merged with Cablevision Systems Corp., DPS did not have the equipment to verify broadband speeds, waited months before checking to see if libraries, schools and underserved areas had free broadband service, and did not verify that the required investments in service improvements were made.
• DPS never verified that FairPoint invested $4 million in network reliability, as required. Additionally, it did not verify that customer service staffing levels were maintained until after auditors brought the issue to the department's attention.
• DPS used inaccurate and self-reported data to calculate a financial penalty for RG&E.

DiNapoli recommended the PSC:

• Actively monitor all conditions listed in orders to ensure all utilities are in compliance;
• Develop and issue orders that include well-defined, measurable and enforceable conditions. The orders should also include the consequences for non-compliance, as appropriate; and
• Verify the accuracy of data submitted by utilities used by the commission or department to evaluate or make decisions concerning the utilities, including data submitted for performance metrics, safety standards and reports.
• PSC and DPS officials disagreed with many of the report's findings and conclusions, yet agreed with the report's recommendations. Their full response is included in the audit.

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