“The failed implementation of Central Hudson’s new billing system compounded by unexpected and unprecedented bill surges has resulted in extensive damage to the confidence of our community…”
— Ulster County executive Pat Ryan
Brimming over with indignation at getting the raw end of a privately wielded stick, a hostile crowd of about 150 Ulster County residents gathered in the Kingston High School auditorium last Tuesday night to air their grievances. They felt that the billing practices of Central Hudson Gas & Electric Corporation were unfair.
Video cameras had been set up on tripods. Two live microphones waited just below stage-left and stage-right. With prepared speeches and handmade posters, the aggrieved audience gave witness, one after the other.
Three top Democratic politicians, freshman state senator Michelle Hinchey, longtime assemblymember Kevin Cahill and incumbent county executive Pat Ryan had provided the occasion. Ryan was the first up to speak.
“I think we all feel right now, frankly, that it’s absolutely ridiculous that we even have to be here doing this whatsoever,” said Ryan, “but it’s also important to recognize that if we don’t take the time as individuals, we know that this big company which is now owned by a global hedge fund is not going to listen.”
The sole player in the transmission and distribution of electricity and gas in a regional service territory, Central Hudson provides service to over 370,000 Hudson Valley residents in portions of the counties of Ulster, Greene, Sullivan, Montgomery, Orange, Putnam, Dutchess and Albany. Central Hudson was bought by the Canadian holding company Fortis in 2012 for $1.5 billion. Fortis reported revenues of $8.8 billion in 2019.
Something went wrong
In the summer of last year, irregularities were detected in the bills that Central Hudson had been sending out by mail through a process known as estimated usage. Rather than sending out an employee to read the meters to measure the kilowatt usage of electricity by the customer, Central Hudson instead estimated the price of the next bill based on past consumption. Billing based upon estimated readings is allowed under state law provided that the utility has made reasonable efforts to obtain an actual meter reading.
As a regulated utility, the company is subject to oversight by the Public Service Commission (PSC), which must approve the utility’s procedure for calculating estimated bills.
Something seems to have gone wrong.
Lake Katrine resident Jay Gorman spoke of his frustration in dealing with the company, saying he received multiple bills in some months, no bills in others. Trying to get a handle on the issue, he looked at the practice of estimated billing. He called the utility.
“I was told that they don’t even have to do need to do an actual reading,” said Gorman. “Only once a year, that per law once a year they have to do a reading. My question, why is every one of my bills estimated? Uh, we can give you an estimated bill eleven times a year. The twelfth month is when we get a real one.”
According to Lori Bullock, deputy director of the Public Utility Law Project, thousands of dollars were being deducted without notice from customer bank accounts. People were getting multiple bills in the mail every month for the same amount of time. and none of it was making sense.
It also came to light that Central Hudson had switched over to a new computer system.
Investigation is authorized
County human-rights commissioner Tyrone Wilson, who brought the situation to state senator Hinchey’s attention, had become all too familiar with the firsthand evidence of inaccurate usage estimates through constituent complaints. Hinchey attempted to address the issue by submitting a legislative bill to regulate the frequency with which the practice of estimated billing was used.
“There are widespread reports,” wrote Hinchey in December 2021,”that utility companies are relying heavily on estimated billing practices, causing excessively high swings in bills month to month, often to the difference of hundreds of dollars in additional unforeseen, and regularly inaccurate, costs.”
The Hinchey bill (S7579A) has languished in the state Energy and Telecommunications Committee.
Utilizing his authority under Public Service Law Section 71, county executive Ryan submitted a formal complaint to the Public Service Commission, triggering an investigation into Central Hudson’s service irregularities. Ryan pinned the problem squarely on the failed implementation of a new customer information system that Central Hudson had adopted. Central Hudson had swapped out its old system for a new SAP system on August 27.
The conversion from Central Hudson’s old mainframe went live on September 1, 2021.
Complaints have been rolling in ever since.
On December 16 of last year, the PSC began a search for an independent third-party consultant to conduct a comprehensive management and operations audit of Central Hudson. By March 3, at least 11,000 Central Hudson electricity customers had experienced billing problems, and Ryan concluded that it was high time to begin the independent investigation into the electricity and gas provider.
“Residents have detailed a multitude of negative experiences,” Ryan wrote to PSC chair Rory M. Christian, “including not being billed for multiple months, erroneous and/or extremely overestimated bills, automatic withdrawals of large sums without notice, unsubstantiated charges, and more.”
On March 16, Christian acknowledged that PSC staff was aware of recent billing and customer service issues faced by customers of Central Hudson. An independent investigation was under way, he said, which would specifically include a review of customer information system changes made since the last audit and the impact that such changes had on customers.
Central Hudson was compelled to pay an amount not exceeding $714,350 for the audit by the independent consultant Overland, chosen by the PSC through an open Request For Proposals.
Billing system was changed
“The primary explanations provided by Central Hudson have been rising global energy costs, and an inept implementation of their new billing and customer service system,” said Ryan. He said the utility had been “disregarding the precarious and stressful situations they have plunged their customers into.”
The current Central Hudson website contains a statement striking a repentant tone:
“We apologize to our customers who have not been billed properly over the last several months,” it says. “We apologize for the frustration and inconvenience this has caused. Central Hudson is not charging late fees and offers no-cost payment plans if you are unable to pay your bills in full.”
The utility notes the higher price of energy. “The market costs of electricity and natural gas had risen sharply due to colder weather and higher usage,” it states. “Higher energy costs this winter are a global issue, affecting North America, Europe and Asia.”
While Fortis allows the Central Hudson Energy Group headquarters to keep its name and fly the flag of the City of Poughkeepsie, Central Hudson president and CEO Charlie Freni must report to Fortis headquarters in the Canadian province of Newfoundland and Labrador. Behind the company executives are the shareholders.
As noted by speaker Jess Mullen, the executive director of communities for local power (CLP), Fortis dividends have been increasing during a period of rising energy costs, a global pandemic and the uneven response of Central Hudson during the February 4 ice storm, which left more than 47,000 residents of Ulster County without power for days,
The dividend paid out to Fortis shareholders rose an average of six percent per year for the past three years. The latest information available shows a cash dividend payment of $0.424 per share on December 1, 2021.
The institutional investor Vanguard owns 16,219,764 shares of Fortis stock. At a dividend payout of 42 cents on the dollar, Vanguard, the second largest mutual fund investment management firm in the world, received a dividend of $6,812,300 at the end of 2021. Fortis estimates its own total assets at $26 billion at September 30, 2020.
Deregulation and the PSC
Historically, providing electricity and gas in the State of New York was a brisk business, with captive customers who had no choice but to consume the product, whatever the quality, however it was made, no matter who delivered it, and compelled by law to pay for it no matter the cost or face disconnection.
In 1996, Central Hudson, which at that time provided its own electric and gas, was compelled to sell its power-generating plants to other companies in the interest of creating a deregulated public market where companies would compete with each other to buy and sell energy on the open market.
“Canada, oh Canada. I’m not moving up there anytime soon,” testified Jen Muse of Woodstock, speaking into the microphone. “But seriously, I do agree we have to go public. Between Spectrum and Central Hudson, I may have to go to therapy soon. I just went from a normal $200 monthly bill during the winter months for additional electric heaters to a $1000 bill this last month. The every-other-month meter reading is ludicrous, so I take photographs of my meters. I have two, unfortunately, so I get double delivery charges. I can’t believe how high the delivery charges are. Because I’m on a fixed income, I can’t afford to get my meters combined into one, so I suffer with that. The only advantage to being disabled is they can’t shut me off legally, um, because I’m protected that way.”
For the delivery of electricity, a Central Hudson rate increase of 1.3 percent, or $1.72 per month, is set to begin in July. The gas bill is set to rise 1.2 percent, or about $1.64 per month, in the same period.
Central Hudson notes that actual bill impacts may vary, as energy-supply prices are subject to market conditions.
Public comment for the investigation into Central Hudson’s Customer Information System Implementation and Resulting Billing Errors may be given by calling 800-342-3377 or submitted online at the New York State Department of Public Service webpage, matter number 22-00666.
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