Privately-owned energy distribution utility Central Hudson, lone provider of gas and electric for over 380,000 customers in the Hudson Valley, finds itself once again in legal combat resulting from its July 31 request to hike its rates for electricity 16 percent and gas 19 percent. On October 31, the Public Utility Law Project (PULP) filed a motion to deny the increases.
“If investor-owned utilities like Central Hudson want more money from ratepayers on the delivery side of the bill,” explained PULP executive director and general counsel Laurie Wheelock, “they have to file a rate case with the Department of Public Service (DPS) and the Public Service Commission (PSC). Sorry, but everything has an acronym in the utility world.”
Wheelock noted that the increases sought by Central Hudson for electricity were steep, amounting to a dollar a day more. “And if you’re also a gas customer, it’s another dollar on the gas side,” said Wheelock, “So you’re looking at 30 to 60 bucks more a month, depending on your usage.”
The real problem, according to Wheelock, has to do with the timing of the utility’s ask. “They have two years of billing issues happening,” she said, “It just kept coming back to the concern we have: Is this really in the public interest?”
Central Hudson has had a rough go of it. No question about that.
After a disastrous seven months of billing irregularities following a system-wide Customer Information System changeover, three simultaneous investigations were launched in March 2022 into the utility’s billing practices by DPS. A 59-page report in December 2022 excoriated Central Hudson. In February 2023, CEO Charlie Freni stepped down.
Administrative penalty proceedings, civil penalty actions, and the contemplation of prudence proceedings to investigate the propriety of the costs related to implementation of the customer information system remain under consideration.
“Customers rightly expect to receive timely and accurate bills for their utility services,” said DPS CEO Rory M. Christian in July. “Unfortunately, our investigation and audit found that Central Hudson wasn’t meeting this basic expectation.
DPS and Central Hudson agreed to install PA Consultants as an independent monitor to be paid by the utility’s shareholders a sum not to exceed $750,000 to examine the utility’s billing system.
The agreement does not resolve potential violations arising from the company’s development and deployment of modifications to the utility’s billing system. Another investigation launched in December 2022remains ongoing.” DPS says that it will determine the appropriate penalty and prudence remedy for billing system failures.
An administrative proceeding
Under new CEO Christopher Capone, Central Hudson seems to believe that it is emerging out from under the dark cloud of the last couple of years and that the rate increases it is requesting should be considered separately from the investigation and on its own merits. Spokesperson Joseph Jenkins noted that the company has “fully cooperated with the Public Service Commission’s investigation into the implementation of its billing system” and that the rate case filing was “the start of a nearly yearlong and transparent process.”
“We have received and answered many inquiries from both our regulators and other stakeholders regarding our proposal,” said Jenkins. “Our goal is to work with all parties to arrive at an agreement that balances affordability with meeting the evolving needs of our customers and New York State energy policy.”
Jenkins maintains that the rate hikes are needed to replace and to upgrade aging infrastructure, to better prepare and respond to severe weather events, to comply with New York’s clean-energy policies, and to increase its workforce to better serve its customers.
The legal process to decide on the rate increase is what is known as an administrative proceeding similar to how interested parties can sign onto to a court case as a friend of the court (amicus curiae) or as friends of the administrative proceeding — which is how a group such as PULP was able to file a motion to deny the requested rate increase.
Unlike in a court, there are no accusations of criminal behavior to be ruled upon. There is only what the utility wants versus what the regulatory body of the commission allows them to have, which can be nothing, everything, or anywhere in between.
The decision the PSC hands down regarding the rate increase will have real consequences for the utility. With a reported 300,000 electricity customers and 84,000 gas customers, an extra dollar a day from every customer, would raise an amount worth fighting for.
On one of its website carousel splash pages, parent company Fortis claims a consecutive 50 years of dividend increases. On another, it reports $11 billion in fiscal revenue for the year 2022. Its operations span five provinces of Canada, ten U.S. states, one Central American nation and three tropical islands.
Hearing the public
PULP cut its teeth in the non-profit advocacy game by drafting the Home Energy Fair Practices Act (HEFPA), New York’s energy consumers’ bill of rights. That 1981 legislation provides residential energy customers with comprehensive protections in areas such as application for service, customer billing, and payment and complaint procedures. Forty years later, Wheelock says PULP’s ten-person staff is now the largest it’s ever been.
“We’re small but mighty,” said Wheelock.
Numbers requested by Communities for Local Power, another friend of the administrative proceeding, show that Central Hudson has budgeted 1.55 million to pay for all exigencies that come about from the rate case. What proportion of that amount has been spent on outside counsel and legal services can only be guessed at. That data point has been redacted from the document posted on the commission’s website.
The whole process is being paid for with ratepayer money.
“The PSC handles rate cases using internal resources,” explained James Denn, the DPS public information officer. “The agency is funded by ratepayers, not taxpayers.”
What is certain is that PULP will fight on.
“There’s a billing monitor that was just placed at the company a few months ago who is even now working on a report,” said Wheelock. “So in our world, we’re looking at all this, we’re hearing the public and we’re just saying this has got to stop. This is not in the public interest to proceed with all this happening at the same time.”
Other models
State assemblymember Sarahana Shrestha, a vocal critic not only of Central Hudson specifically but also of privately-owned energy in general, has just completed a seven-town-hall tour in Kingston, New Paltz, Saugerties, Woodstock, Olive, Esopus and Rhinebeck. She has been sharing the feasibility of other energy production and delivery models under the rubric of Energy Democracy. It’s her position that electricity can be provided more cheaply, more dependably and more efficiently if the shareholders of the utility are the people being served.
“Given that the utility is granted a license to operate as a monopoly and its parent company Fortis paid a billion dollars in dividends to shareholders in 2022, Central Hudson can afford to continue operating without the rate cases,” Shrestha said.
She pointed to the upstate Town of Massena, whose residents voted to buy their local grid from their incumbent utility. Under public ownership, Massena sells its electricity with all charges included for four cents per kilowatt hour (kWh).
Here in the Hudson Valley, 268 miles south of Massena, the average cost of electricity over the last twelve months as estimated by Central Hudson has been 11.146 cents per kWh. Under its proposal, that price would rise to 14,759 cents per kWh.
Central Hudson has not yet filed a response to PULP’s motion. The utility has until November 8 to do so.
Public participation in the administrative proceeding is welcomed. To leave public comments, read the comments of others or just stay abreast of the action, go to the case search page of the New York State DPS and enter the case number: 23-G-0419
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