Storm of opposition rising over Fortis’ Central Hudson bid

ktx rec power grab

Illustration by Joe P. Morgan.

The proposed $1.5 billion purchase of Central Hudson Energy Group by Fortis, Inc., a Canadian-based holding company, doesn’t have too many friends willing to speak on its behalf, if the April 18 public hearing held by the state Public Service Commission (PSC) in Kingston’s City Hall was any indicator. All 27 people who spoke at the session, attended by about 80 persons, were adamantly against the deal.

“How could it be good for our community to allow a foreign company, with no particular expertise in the area of energy transmission but rather expertise in the area of profits for stockholders, to buy our monopoly electric utility?” asked Carey Kittner. “Our community is at grave risk of having our only course of electricity being used as speculation by a foreign holding corporation.”

A newly formed group called Citizens for Local Power hosted a press conference prior to the Kingston hearing, the fourth held by the PSC on the proposed merger. Several union and labor spokespeople spoke. So did Kingston Alderwoman Elisa Ball, representing state Sen. Cecilia Tkaczyk, and Rosendale Town Supervisor Jeanne Walsh.

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A week after the Kingston hearing, which was conducted by PSC administrative law judge David Prestemon and commissioner Gregg Sayre, the PSC announced that the two administrative law judges charged with deciding whether the sale goes through will be issuing what is called a Recommended Decision (RD). The RD requires a detailed look at the evidence, pro and con, and also allows groups and individuals to write their own briefs. Assemblyman Kevin Cahill, who opposes the merger, called the decision for the RD “a victory” for opponents, even though it is non-binding.

Citizens for Local Power hopes to form a consortium of municipalities passing resolutions opposing the deal. Rosendale is the first to contribute $1,500 toward fighting the merger. (See sidebar.) The towns of Rosendale, Woodstock, New Paltz, Olive and Marbletown have all passed resolutions against the merger. So have the legislatures of Ulster and Dutchess counties. This week, Kingston Mayor Shayne Gallo said he would join the chorus of voices against the merger. “The city is opposed to any consolidation with Fortis,” Gallo said, adding that a letter would soon be sent to PSC codifying that sentiment. Further, New Paltz’s town board voted on April 25 to commit $1,500 to the legal fund to challenge Fortis’ bid.

Central Hudson and Fortis, which serves 2 million customers through its Canadian utilities, asked the PSC for approval of the merger in April of last year. A joint proposal for approval signed by the companies was filed late this January.

Under its terms, rates would be frozen through July 1, 2014. Central Hudson jobs would be guaranteed for two years. A $5 million community benefit fund would be established for local economic-development initiatives and to provide assistance to low-income customers. And $9.25 million would be credited to ratepayers over a period of five years.

A litany of objections

Speakers found none of these provisions adequate to protect the public interest. Loss of jobs was one concern. “Their intent is to outsource work,” declared John Kaiser, president and business manager of IBEW Local 320, at the press conference. Kaiser said Central Hudson had “moved aggressively toward outsourcing” since early 2012, when the acquisition was first announced.

Kelleigh Mckenzie, who said she valued Central Hudson’s service during the severe storms, said she feared the loss of Central Hudson’s knowledge base because “there’s only a two-year commitment to keep their employees.”

Opponents said the freezing of rates for a single year was meaningless, since Central Hudson hadn’t requested a rate increase and rates wouldn’t have gone up in any case. They also criticized the paucity of the $9.5 million in credits to be distributed in $1.85-million annual increments over the next five years.

The previous corporate takeovers of New York utilities approved by the PSC had been more advantageous to ratepayers, resulting in decreases of much larger amounts, noted attorney Daniel Duthie, representing advocacy group Citizens for Local Power. The settlement for the 2009 sale of New York State Electric & Gas and Rochester Gas & Electric to Iberdrola, a large Spanish-owned utility, “resulted in an average savings of $220 per customer, compared to less than $35 [per customer] in the current proposal,” according to a statement by assemblyman Cahill. Contrasted to the $275 million in ratepayer savings the PSC required in the Iberdrola deal, Cahill said, the proposed Fortis $10 million community benefit fund “should be renamed the shareholder protection plan.”

Under the Fortis-Central Hudson proposal, $5 million would be allocated to the five-county Central Hudson service area. According to the Public Utility Law Project of New York (PULP), a not-for-profit organization which advocates for low-income and rural energy consumers, only $500,000 of that money would be directed to low-income customers. Citizens for Local Power found that a pittance, considering that, it says, in 2011 one of every 10 Central Hudson customers either had their service cut off for non-payment or were more than 60 days in arrears.

“It’s very important to have a utility that cares about the community,” said Walsh. “I get called if someone’s power is cut. If rates go up, people won’t be able to live in their homes.”

Paltry ratepayer protections

Opponents also said that the $5 million in community benefits would be dwarfed by the nearly $25 million in payouts to five top Central Hudson executives. The biggest beneficiary, according to Citizens for Local Power, would be president and CEO Steven Lant, who would receive $8.74 million in cash plus $2.5 million in stock.

“They’re willing to pay $25 million to upper management and next to nothing to low-income ratepayers,” said Kittner. “They already have their priorities backwards.”

In a phone conversation, Central Hudson spokesman John Maserjian said the merger would benefit Central Hudson by giving it better access to capital. “We project more reasonable terms [on our debt] than what we are paying now,” he said. “That capital would help us with infrastructure projects, including upgrades to electric and natural-gas systems …. Fortis would support our equity investment, or they would make those investments themselves.”

Duthie, who has more than 30 years’ experience in utilities cases, disputed that argument. Fortis had a lower Standard & Poor credit rating than Central Hudson, he said, which meant the cost of borrowing would be higher. He noted that the merger announcement had raised Fortis’ credit rating and lowered Central Hudson’s.

Fortis’ apparent lack of commitment to investing in renewal was another concern. On its website Fortis states its preference for natural gas over alternative energy sources, thanks to the former’s low price and “an abundance of shale gas reserves.” The Iberdrola deal had brought an investment in wind through a subsidiary. That set a better precedent, according to Manna Jo Greene, environmental action director at Clearwater and a founding member of Citizens for Local Power.

There is one comment

  1. gberke

    Thank you Kingston Times and Lynn Woods… where else could a citizen get a clear view of the issues…
    Quite a skillful piece.

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