Maloney’s report, entitled The 2007 Steam Tunnel Explosion: Impact on Local Retail Businesses, showed that the 71 businesses surveyed had collectively lost nearly $1.3 million, and that the lion’s share of those losses stemmed from lost business.  While business losses are crippling area businesses, Con Edison is only reimbursing for physical damages, cleanup costs, and perishables.  Thus, businesses are left to cover the bulk of their losses.

Fewer than 10% of the businesses surveyed reported having received prompt and/or useful information from either the City or Con Edison.  In fact, many businesses had received no information at all until they were surveyed by the Congresswoman’s office.

Unfortunately, many of the most seriously affected businesses were closed at the time of the survey and either could not be reached or did not know the full scope of their losses.

“Local businesses should not have to bear the brunt of Con Edison’s inability to maintain its equipment properly.  Time after time – with this explosion and in the 2006 power outage in my district in Western Queens – we find that the utility is allowed to shirk responsibility for the damage it does,” said Congresswoman Maloney. 

Maloney added: “Con Edison leaves businesses with huge out-of-pocket losses, provides inadequate information and just generally refuses to take responsibility for the mess they create.  It’s not enough for them to pay for the clean up – they should also be required to make these businesses whole.

“We’re really talking about risk allocation here.  Who should bear the risk of loss from a disaster – the utility company or the individual businesses?  Clearly the utility company is in the best position to minimize damages and they should bear the risk.  Sticking individual businesses with the price tag is just plain wrong.”

"The only thing more disturbing than the explosion itself is the arrogance Con Ed has shown, by denying answers to the public and by failing to compensate local businesses," said Council Member Garodnick.  "The losses caused by this event cannot just be treated as a cost of doing business.  These mom and pop establishments did not assume any risk by locating on Lexington Avenue -- even with a hundred miles of steam pipes under the ground -- and they should not bear the burden of this catastrophe."

Report Findings:

The 71 surveyed businesses lost nearly $1.3 million, and most of those losses resulted from lost business.  The average loss per business was $17,838.  Most businesses (60, or 85%) reported some monetary loss.  One business, which is still closed, reports a whopping $400,000 in losses, 3/4 of which resulted from lost business.

The vast majority of businesses (60, or 85%) were required to close for some period of time.  More than 33 businesses (nearly 1/2 of the total) were closed for more than one day, and some remain closed to this day.  For those businesses that were required to close for more than one day, the average shutdown was 4.2 days and the loss of business was severe.

In last year’s blackout in Queens and this year’s steam pipe explosion, surveys revealed that only about 1/3 of businesses had insurance that covered lost business.  Extended power outages or forced business closures can devastate businesses.  Businesses have no ability to minimize their damages since the equipment and repair schedule are entirely in the control of the utility.  

Only 10% of the businesses reported that information provided to them by the City and/or Con Edison was prompt and/or useful.  Most businesses had not received any information or found the information they had received to be inadequate.  Many first learned that assistance was available to them through Congresswoman Maloney’s surveyors.

“Too little, too late is the hallmark of Con Edison’s response,” said Maloney.  “It is clear there should be better planning for massive disruptions such as July 18th’s steam main explosion and the 2006 power outage in Western Queens.  Aging infrastructure, increasing demand and extraordinary weather conditions create problems, and Con Edison should have staff who are trained and prepared to provide information and assistance.  Too often we found that Con Edison gave inaccurate advice and turned away companies that deserve compensation.  A simple flyer would solve the problem, allowing businesses to know what is reimbursable.”

Recommendations:

1. Con Edison should provide a clear flyer explaining what businesses need to do to be compensated, and what is covered, and that flyer should be made available immediately.

II. The City and Con Edison should expand their door to door and media outreach and encourage business to go to the business reimbursement center at Commerce Bank (317 Madison Avenue).   Business owners may find that they are entitled to compensation for some of their losses or they may find that one of the loan programs will help.

III.  Any business that experienced losses as a direct result of the explosion should be compensated.

IV. The City, perhaps through the Office of Emergency Management, should have an organized group of people ready to reach out to businesses affected by any future disaster immediately after the disaster occurs.  Businesses should not have to wait two weeks or longer to learn that help is available.

V.  The Public Service Commission should insist that Con Edison must take responsibility for reimbursing businesses for all losses resulting from an extraordinary event such as an extended power outage or an explosion – perhaps Con Edison should be the one that needs to have insurance, not the small businesses unfortunate enough to be located at the heart of a disaster.

Methodology:

To ascertain the severity of the impact of the power outage, Congresswoman  Maloney sent members of her staff to interview business owners and managers in the frozen zone.  The survey was done over a period of 5 days from July 26th through July 31st, with the majority of businesses being surveyed on July 30th and 31st.  Some business owners responded immediately; others took the survey and faxed it back to Congresswoman Maloney’s office at a later time.

Background:

Congresswoman Maloney represents the 14th Congressional District of New York, which includes east Midtown and all of the frozen zone. 

On July 20th, Congresswoman Maloney called on New York Governor Eliot Spitzer to make a formal request to the Administrator of the U.S. Small Business Administration (SBA) for disaster loan assistance to businesses affected by the steam pipe explosion in east Midtown.  On July 28th, Gov. Spitzer announced that the SBA had agreed to his request to offer affected businesses up to $1.5 million in low-interest federal loans. 

Rep. Maloney also represents much of the area affected by last summer’s blackout in Queens. For three days in 2006, members of Maloney’s staff visited and contacted western Queens businesses to evaluate the blackout’s impact.  Maloney issued a report based on the findings (click here for a copy of the report).  Most of the businesses surveyed suffered economic losses greater than $7,000, the maximum that Con Edison was required to reimburse them pursuant to the tariff governing electrical outages (a limit that is not applicable in this case, since it does not apply to disruptions of steam power such as the July 18th explosion).

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