Memo in Opposition A.9375

A.9375 (Camara)

MEMORANDUM IN OPPOSITION

           This memorandum is submitted by Energy Coalition New York in opposition to the subject bill which would make certain service contracts with utilities subject to prevailing wage requirements.

           Energy Coalition New York consists of New York State’s major gas and electric utility companies: Central Hudson Gas & Electric Corporation, Consolidated Edison Inc., National Fuel Gas Distribution Corporation, National Grid, New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation. Coalition companies collectively employ more than 32,000 people, service more than 8.5 million customers and pay more than $3 billion in state and local taxes, assessments and fees. The member companies annually invest billions of dollars to make capital improvements to the electric and natural gas infrastructure located in New York State.

           Article 9 of the Labor Law requires the payment of prevailing wages for certain building service workers. This bill would expand the definition of building service work to service work and expand the types and workers covered by prevailing wage requirements. It also expands the criminal penalties for Article 9 violations. Most significantly, this bill would define public utilities regulated by the Public Service Commission which provide electric light, power, gas or steam services at retail rates as public agencies for the purposes of subjecting such public utilities to prevailing wage requirements.

           There is no constitutional, statutory or in fact any rational basis for defining a public utility as a public agency. Public utilities are private investor-owned corporations which are highly regulated; however, they are not agencies or a civil division of New York State government.

           The New York State Constitution, Section 1, Article 17, provides that no worker employed by a contractor or subcontractor engaged in public work shall be paid less than the prevailing rate. The services workers performing contractual services including janitorial and security work as defined by this legislation are performing work for a public utility not “public work”. It defies logic to argue that such service work performed for a utility constitutes public work, particularly when this legislation does not even cover employees of public utilities.

           Under the Public Service Law, the increased labor costs added by the payment of prevailing wages to the service workers covered by this legislation would be passed on to utility consumers. This bill would increase the cost of electric and gas service to customers. The result would be that utility customers would be subsidizing the mandated wage rates which would only apply to one class of workers who are not public workers, or contractors or subcontractors of public agencies.

           The memorandum in support of this bill does not provide any data on the cost implications of this legislation. There is no data on the difference between current wages paid to covered service workers and the prevailing wage. This legislation is not clear on who bears the responsibility for acting as the chief fiscal officer responsible for determining the prevailing wage rate.

           This bill would set a dangerous precedent for the application of prevailing wages to other regulated and/or franchised businesses. If the premise is accepted that prevailing wages should be applicable to regulated and/or franchised businesses, there are numerous other private businesses that fit within those parameters. The costs of prevailing wage would have a substantial impact on such private businesses and their customers.

           This legislation not only impacts operational costs based on the payment of prevailing wages; it also results in significant compliance costs because of requirements for payroll verification. There is an administrative record-keeping cost which is currently nonexistent. Failure to comply with Article 9 would result in serious criminal penalties against utilities.

           This legislation negatively impacts both utility consumers and utility companies with no appreciable benefit to New Yorkers. A similar bill was vetoed by Governor Paterson in 2010 (veto memo # 6838), and the objections cited therein remain appropriate. Based on the foregoing, it is respectfully requested that this legislation not receive favorable consideration.