Opposition to Central-Hudson takeover

(Joe Morgan)

(Joe Morgan)

On the same day that U.S. Sen. Chuck Schumer joined with Ulster County Executive Mike Hein to recommend the Public Service Commission (PSC) give the proposed $1.5-billion takeover of Central Hudson by Canadian power company Fortis more scrutiny, two PSC administrative law judges assigned to evaluate the deal wrote that the proposed merger’s minuses outweighed the pluses.

Last Friday, May 3, just hours before Schumer and Hein held a press conference at the county office building in Kingston, administrative law judges Rafael A. Epstein and David L. Prestemon issued their recommended decision (RD) in the case — a 66-page legal document detailing and analyzing the arguments for and against the Fortis takeover. The major argument against? The public opposition to it, expressed through comments and at four public hearings.

“We find it relatively easy to conclude that the benefits of the merger transaction pursuant to the Joint Proposal [the technical term for the merger bid] are outweighed by the detriments remaining after mitigation,” Epstein and Prestemon wrote in the conclusion. The last sentence of the document implies the merger may not be easily modified to pass muster. “The Commission might conclude that this could be accomplished by requiring PBAs (Positive Benefit Adjustments) additional to those offered in the Joint Proposal, should Petitioners come forward with such a proposed modification. Since any such possibility is speculative, we will not address it except to state our opinion that the proposed transaction’s flaws may be inherently unsusceptible to effective remediation by means of supplemental PBAs.” The PSC is not bound by the Recommended Decision.


The judges looked at many different aspects of the transaction and weighed the various arguments by several parties both for and against. The aspects of whether the merged Fortis-Central Hudson entity would bring sufficient economic benefit, protect local jobs, provide sufficiently for low-income customers and pose any special problems due to foreign ownership.

As far as economic benefit goes, the judges found “that the $49.25 million in payments and guaranteed savings provided for in the Joint Proposal are real, will inure to the benefit of ratepayers in the short term, and may generate some additional small, continuing savings.” Later, they concluded that the best the proposal could do in hedging against the economic risks and detriments of the transaction “amount to a net zero impact.”

On the issue of foreign ownership, the judges wrote they do not consider that Fortis would ignore local concerns or sell Central Hudson to a “country less friendly to the United States” to be justified. They also dismissed concerns that the North American Free Trade Agreement could be used by Fortis to dodge local rules as unsupported by precedent, noting that NAFTA has never been used in such a fashion anywhere.

But what got the judges to recommend against the deal was, after all, the massive outpouring of public opposition to it, to an extent that they believe the public would rather keep Central Hudson as is than accept any possible financial benefits of a merger. Epstein and Prestemon acknowledged the “extraordinarily intense degree of public opposition to a change of Central Hudson’s ownership among customers, their elected officials, and labor representatives and other public organizations in the service territory.” Indeed, the document states that “all of the speakers at all of the public statement hearings [two each in Kingston and Poughkeepsie] opposed the merger.”

Through May 1, the judges report, another 316 comments were received by the PSC via e-mail, snail mail, phone and posting to the commission website. The judges also noted that 896 individuals signed a petition on SignOn.org expressing opposition to merger. No comments in support of the merger were received at all until April 24 — Dutchess County Chamber of Commerce President Charlie North was the first to support it, followed by 274 more pro-merger — “about 133 of those…from Central Hudson employees.”

The decision goes on to quote former congressman Maurice Hinchey: “Surely, in a democratic society such as ours, the decision as to what constitutes ‘public benefit’ is not unrelated to the will of an informed public and its elected representatives.” The judges wrote, “We think it is, and we find the lack of public confidence in the putative future benefits [of the Fortis takeover] to be a significant detriment of the transaction.”