Central Hudson is proposing to increase its rates, and on Oct. 10 at Kingston City Hall, ratepayers had a chance to speak up about the proposal, which would, if approved by regulators, go into effect next July.
The state Public Service Commission (PSC), which regulates the state’s utilities, held two public hearings one in the afternoon and the other in the evening. At the evening hearing, administrative law judges Erika Bergen and Michelle Phillips listened as 20 testifiers — comprising approximately half of the 40 people in attendance — slammed the proposal.
Central Hudson Gas & Electric Corp., owned by Canadian holding company Fortis Inc., is requesting a 21.2 percent increase in delivery revenues — a total of $63.4 million — which would be effective from July 1, 2018 through June 30, 2019. The company said it would offset the increase by using $22 million in bill credits, resulting in an average monthly bill increase of $8.39, or a 7.5 percent increase (the PSC must approve the use of those credits, which are the net amounts of higher than anticipated costs and lower than anticipated costs, according to Central Hudson spokesman John Maserjian).
Rosendale resident and Democratic county legislature candidate Pam Krimsky said the proposed rate increase “is incredibly appalling. You’re supposed to be a service, not operating independently.” Darrett Roberts said Central Hudson should decrease its rates and “big business should be made to pay higher rates and middle and lower class people should be paying lower ones.” Susan Gillespie, president of the board of local activist group Citizens for Local Power (CLP), accused the utility of raising rates as a way to maintain corporate profits as electric usage flattens. She said that Central Hudson’s basic service charge, which the utility wants to increase by $1, is already the highest in the state.
Central Hudson last submitted a rate increase proposal in 2014, which was approved and spread out over three years. Last July, ratepayers began paying 9.1 percent more than the year before, which followed smaller increases the two prior years. The increases in electric rates totaled $43.3 million and increases in gas rates reached nearly $10.7 million. This time around, the proposed rate increase is for one year only.
Bergen opened the meeting by explaining the complicated process by which the state approves or denies a rate increase proposal. Basically, the proposal is reviewed by two administrative law judges who, after hearing testimony from the public and other evidence, make a recommendation to the PSC. The PSC then makes a determination. Usually the utility negotiates a settlement with the interveners, who mainly consist of large industrial customers; the resulting “joint proposal,” as it is called, is reviewed by the PSC after more hearings before it makes a decision.
The utility’s case
Anthony Campagiorni, CH’s vice president of regulatory & governmental affairs, listed the various costs the company contends necessitate the rate increases. They include modernizing the infrastructure of poles and wires and upgrading aging natural gas pipes, along with tree-clearing for more reliable service; investments to enhance cybersecurity, increase the efficiency of the grid and improve customer service, including more control over their energy usage; expanding digital services, including no-fee credit card payments by customers and mobile applications; continuing cleanup of hazardous former coal-burning manufactured gas sites; and upgrading of transmission lines to better deliver green power to New York City. (Maserjian later explained that Central Hudson customers would pay only 5 percent of these costs through supply charges, since the prime beneficiaries are people downstate.)
Campagiorni said the company also planned to offer a $1,250 credit for the purchase of an electric vehicle.
Speakers at the public hearing pushed back hard on two initiatives Campagiorni failed to mention: Central Hudson’s proposal to raise its return on equity from the current 9 percent to 9.5 percent and plans to build a new $36 million employee training center.
How about a decrease?
Assemblyman Kevin Cahill, past chair of the Assembly’s Energy Committee, led off the public hearing portion of the meeting lambasting the proposal and instead insisting on a rate decrease.
Cahill noted that the takeover of Central Hudson by Fortis in 2013 was accompanied by the promise that the new ownership “would lead to stabilization and be in the benefit of ratepayers. The opposite is true.” The company, said Cahill, proposes to increase ratepayers’ bills “by $10 a month … with no improvement in service and no means by which the average customer can save.”
Cahill said the upgrade of aging poles and equipment is already being paid for by the previously approved rate increases. (In a subsequent email, Maserjian countered that “we are seeking approval to continue our work in replacing aging infrastructure.”) There is “already a tariff in the law for the interconnection of distributed energy resources” — the community solar systems that are coming online and that are part of the state’s Reforming the Energy Vision (REV) initiative.
Furthermore, “upgrading systems should carry their own savings, not costs.” He claimed the utility is “getting significant new revenue” from carbon reduction programs, such as converting oil or coal furnaces to natural gas and utilizing heat pumps. And he said Central Hudson’s “bold assertion … to make higher profits” is excessive considering its current 9 percent rate of return on equity is “three to 15 times higher than a certificate of deposit can earn, higher than Samsung, AT&T nearly three times what Wal-Mart makes” — while “meanwhile the paychecks of working people continue to shrink.”
Cahill also said that the utility’s plan to offer employees an enhanced stock option is actually “a way to increase executive compensation … the compensation of the rank-and-file worker is relegated to the contract. It is beyond belief that Central Hudson would expect rate payers to help shareholders pay for stock.”
In his emailed response, Maserjian wrote Central Hudson is not proposing a stock option program, but rather including the company’s 10 percent contribution of the employee’s purchase of the company stock in the proposed rate increase, meaning this cost would be funded by ratepayers- — “consistent with that of other utilities,” he wrote.
It ain’t cheap
Also speaking was Richard Berkley, executive director of the Public Utility Law Project of New York (PULP), a nonprofit public interest law firm that advocates on behalf of low and fixed-income utility consumers. Berkley said according to the U.S. Energy Information Administration, “in 2015, Central Hudson was the fifth most expensive electric company in the 48 contiguous states.”
The proposed rate increase would hit Central Hudson’s customers particularly hard, given the high levels of poverty in the area. He said that in Kingston, 28.8 percent of children under age 18 and 8.7 percent of seniors live in poverty. In short, “45 percent of Ulster County residents … have significant difficulties paying their vital bills,” Berkley said.
Speakers noted that the company terminated the power of more than 11,000 customers in 2016, which Berkley said was the highest termination rate in the state. The utility also starts the termination process at a lower level of arrears than other utilities — at an average of $800 owed, whereas for other utilities it’s $1,100, according to Berkley.
(Maserjian responded that due to a new program that will be implemented in November, low-income customers participating in the state’s Home Energy Assistance program will receive larger discounts. In addition, “eligibility [for HEAP] has been expanded so that twice as many households are estimated to qualify. These regulated enhancements increase the cost of this program and is one of the factors in the proposed plan.”)
According to a Citizens for Local Power flyer passed out at the hearing, the electricity rates under the proposal would increase by 7.5 to 11.6 percent. The fixed charge would increase from $24 to $25: In comparison, CLP noted that a utility in neighboring Connecticut recently reduced its fixed charge from over $17 a month to under $10.
CLP’s Jen Metzger said there’s “some good stuff” the utility is funding, such as the “continued investments in the distribution system to do distributions automation, which better supports a two-way grid” in which power is provided by small localized sources, such as community-based solar systems.
But she said the company’s attempt to increase its profits off customers in the proposed rate increase is excessive. Part of Central Hudson’s proposed IT investment of $30 million (which Metzger termed “ridiculously huge”) is to enhance CenHub, a portal on its website selling third-party products and services, such as smart thermostats and community solar projects, as a kind of one-stop shop for consumers. “They’ll make money off every transaction,” said Metzger. She said that expecting ratepayers to pay 100 percent of the investment when they will receive only 50 percent of the profits is outrageous.
(Maserjian responded in writing that “this platform may provide some small level of revenues, most of which will be returned to customers.”)
To ensure utilities still can make money in the green energy system, the PSC has approved the use of performance-based incentives, Metzger noted. But Central Hudson also plans to reward itself: the company is proposing “earnings adjustment mechanisms” for energy efficiency, interconnecting solar to the grid and other green energy goals that would add $8 million in additional profits this year alone, she said. “They’re getting paid three different ways: making the investment, getting extra profit from using the website, and getting more money when they offer these other things,” Metzger said.
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