Two quick punches at the same target, Central Hudson Gas & Electric Corp., were delivered so closely together on December 15 that it was hard to know which came first.
One jab was a letter made public, sent to the chair of the state Public Service Commission, Rory M. Christian, from acting Ulster County executive Johanna Contreras and state senator Michelle Hinchey.
Instead of having customers of the utility pay a 0.5 percent surcharge to help fund a program to assist low-income households, the Contreras-Hinchey letter calls for the shareholders of Fortis, the parent company of Central Hudson. to pay the surcharge. “[The] relief is much-needed,” said Contreras, “but cannot continue in this same inequitable cost structure — our constituents and ratepayers deserve better.”
The other punch was a devastating PSC report released to the public by Christian of the findings of a nine-month investigation into the troubled debut of the utility’s new customer information system. The findings revealed are not kind.
Overcharges, delayed bills, and incorrect or illegal withdrawals of funds from customer bank accounts were some of the violations of the law alleged in the report conducted by the sub-department of the PSC charged with looking into the matter. That investigative sub-department recommended refunds to the thousands of affected customers. It alleged that a number of public laws had been violated.
“After months of investigation,” said Hinchey in the joint press release with Contreras, “today, the PSC rightfully found Central Hudson guilty of numerous violations that have directly caused economic harm to its customers.” She called on the utility to take financial responsibility for its damaging business practices.
The clock is now ticking on Central Hudson to respond. The utility has 30 days to demonstrate why the PSC should not commence a civil penalty action and/or an administrative penalty proceeding for violations of the Public Service Law, regulations and PSC orders. The power provider must similarly demonstrate why the commission should not initiate a prudence proceeding to investigate the propriety of the costs incurred by Central Hudson related to implementation of that system.
Central Hudson’s president and CEO Charles A. Freni, Jr. put out a brief letter on Facebook acknowledging the release of the report, explaining that the utility had fully cooperated with the Public Service Commission as it audited the new system and its attendant operations. “Technical challenges associated with the implementation of this system have caused undue stress and confusion to some of you,” said Freni. “For that, I am deeply apologetic.”
A formal complaint sent on March 3 by then-county executive Pat Ryan to Christian triggered the investigation into Central Hudson’s service irregularities.
Misery to thousands
The report lists the bare numbers of those charged too much, alleging that 6804 different customers had been double-billed or overcharged for reasons like rate-category mismatches, generation miscalculations, improper updating of “banked generation,” and weather normalization miscalculations. A rainbow of mistakes.
About 1300 of those overcharged customers could least afford to pay, Hudson Valley residents who qualify to participate in the energy affordability program know as HEAP because of income levels, household size or the presence of disabled family members in the household.
Perhaps the most immediately consequential demand of the Public Service Comission is that Central Hudson submit a plan to eliminate bimonthly estimates entirely and evaluate potential impacts of such a change on customers.
Unlike most utility companies in New York, Central Hudson does not read each meter every month. Instead, customer meters are read every other month, with an estimated bill during the non-read months. This practice had caught Hinchey’s eye last December, when she sponsored a resolution to curtail the practice. That bill remains in committee.
“There are widespread reports,” said Hinchey at that time, “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.”
Backbilling was another major issue that got the utility in hot water. The PSC has expanded customer protections by limiting the backbilling of residential customers from six to four months. Central Hudson argued that system transition issues were causing billing delays when the new system went live.
The PSC ruled that any residential bill rendered more than four months, and any nonresidential bill rendered more than six months after September 1, 2021, was an illegal backbill and as such should be refunded.
The report claims that Central Hudson improperly sent 1600 backbills to residential customers in violation of law, regulations and commission orders, and finds that Central Hudson should be ordered to refund those payments.
Central Hudson represents that it has spent over $88 million on the CIS modernization project, with some additional spending expected. The company, through June 30, 2023, expected that over $42 million will either have been collected from Central Hudson’s ratepayers or borne by shareholders. Of that $42 million, it is estimated that Central Hudson’s ratepayers will have paid $21 million by June 30, 2023, as provided for in the company’s two most recent rate plans.
At least 11,000 Central Hudson electricity customers had experienced billing problems in the seven months after the implementation of the new system meant to create “a seamless customer experience.” Described in the report, what it brought instead was misery to thousands.
“Riddled with defects”
Depending on Central Hudson’s response, the Public Service Commission may also seek to recoup expenses made by the company related to the development, preparation and implementation of the customer information system and Project Phoenix.
To date, Central Hudson affirmatively represents that it has spent over $88 million on the modernization project, with some additional spending expected. The company expected that over $42 million will through June 30, 2023 either have been collected from Central Hudson’s ratepayers or borne by shareholders. Of that $42 million, it is estimated that Central Hudson’s ratepayers will have paid $21 million by June 30, 2023, as provided for in the company’s two most recent rate plans.
At the heart of the maelstrom lies Project Phoenix, the winning proposal submitted by the digital consultancy Ernst & Young (EY). Flawed from the outset, date riddled with system defects and programming errors, the report recites a litany of sad consequences from the implementation of the new billing system. Inadequate training, inadequate testing, inadequate staffing, and a lack of candor with customers and the public all combined “to prevent Project Phoenix from taking flight,” the report claims.
“Central Hudson will continue to dedicate significant resources toward resolving any lingering issues with the billing system,” promised Central Hudson CEO Charles Freni. “We will always be committed to finding ways to improve the customer experience.”
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