Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations of: CASE 20-G-0429 Central Hudson Gas & Electric Corporation
CITIZENS FOR LOCAL POWER STATEMENT ON THE JOINT PROPOSAL
Susan H. Gillespie President of the Board POB 3013
Kingston, NY 12471
Tel.: 845-658-9820
Email: susan.h.gillespie@gmail.com September 21, 2021
BEFORE THE NEW YORK STATE
PUBLIC SERVICE COMMISSION
Introduction
Citizens for Local Power (“CLP”) is a party to these rate cases and participated actively in settlement negotiations that resulted in the Joint Proposal (“JP”) executed on August 24, 2021. Although we elected not to sign the JP, we want to express appreciation to all the parties for their contributions to the process, for the generally constructive dialogue that characterized negotiations, and for achieving consensus and compromise in some important areas where agreement did not previously exist. As a non-profit organization dedicated to helping communities in the mid-Hudson region transition to a locally based clean energy economy, CLP sought in this rate case to address issues of significant impact to our municipalities, residents, and small businesses, and to ensure that the rate design and utility programs support objectives of affordability, equity, and sustainability – both economic sustainability as our society emerges from a damaging and painful pandemic, and environmental sustainability as we confront a climate crisis that is worsening daily as a result of anthropogenic warming of the earth’s atmosphere due to the burning of fossil fuels. In this statement, we wish to comment on provisions of the JP that relate to some of the issues we had raised in our direct testimony and had further explored through interrogatories and during the confidential negotiation process.
In the following, we will first respond to those matters where we feel that the JP responds adequately to the challenges of this moment (rate decreases/increases; Spanish language; response to the Climate Leadership and Community Protection Act (“CLCPA”) I – Gas Sales Targeting a Reduction of Greenhouse Gas Emissions).
Subsequently, we will describe the areas in which CLP believes the JP fails to respond adequately to the demands of the climate crisis or the economic circumstances faced by its customers (Response to the CLCPA II – Leak-Prone Pipe; Response to the CLCPA III – Distribution Investments; Finances – Rewarding the Shareholders at the Expense of Ratepayers’ Future; Debt Relief).
Rate Decreases/Increases
CLP welcomes the unusual rate decrease that Central Hudson’s customers will experience during Year I of the new three-year rate period. It is surely appropriate given the devastating impacts of the pandemic on individuals’ and businesses ability to pay.
The savings that were made available for Year I were actually spread out over the three years of the rate case, thus reducing the potential savings in Year I but keeping the forecasted average bill increases for Years II and III relatively modest. We support this decision in the interest of providing ratepayers with more predictable costs. As a result, average projected residential electrical rates are due to decline $.33 per month in year I, and will increase $1.72 and $1,82, respectively, in years II and III. Unfortunately, the JP foresees no corresponding decrease in residential gas bills, which are projected to increase by $1.64, $2.17, and $1.50 per month, respectively.
We particularly welcome the provision in the JP that, in keeping with the Energy Affordability Order of August 12, 2021, expands eligibility for the HEAP program to include federal Lifeline program recipients. This will consequently help keep winter home heating bills down for those low- and middle-income customers who are dependent on gas heating.
Spanish Language
CLP, which raised this issue in the course of the rate case, welcomes the Company’s explicit commitment to provide Spanish-language informational materials and bills to its customers who require them. As detailed in Appendix Z of the Joint Proposal, Central Hudson is committed to translating its website into Spanish by December 31, 2021, and to providing Spanish forms and letters by the first quarter of 2022.The Company also commits to evaluating the process of providing bills in Spanish by the first quarter of 2022, and to issuing Spanish-language bills to identified customers no later than the second quarter of 2023. We fail to grasp the reasons why this will take so long, particularly given that the utility bill is the Company’s most important means of communication with customers, and is used to convey vital information, such as the fact that customers who have been impacted by Covid-19 may request an additional 180 days of shutoff protection. We earnestly hope that in fact the Company will be able to introduce this important change before the end of this three-year rate case in June 2023.
Response to the Climate Leadership and Community Protection Act (“CLCPA”)
I. Gas Sales Targeting a Reduction of Greenhouse Gas Emissions
As part of the Joint Settlement, Central Hudson has committed to develop a greenhouse gas emissions reduction plan. As described in JP Appendix BB, the plan will allow the Company to “reduce its greenhouse gas emissions relative to 2019 activity. Factors to be considered will include: Electric and Natural Gas load growth; Potential initiatives to reduce emissions within operations (incorporation of renewables, electrification of fleet, other operational improvements); and Opportunities to influence indirect emissions. The Plan will include Central Hudson’s positive environmental actions and their expected impact relative to 2019 baseline levels.” Specifically, as codified in Appendix BB, “During the period 2021 through 2025, Central Hudson is targeting cumulative savings that equates to approximately 2.5% from 2019 gas sales. These savings will be driven by, and exceed, Central Hudson’s current Energy Efficiency and Heat Pump programs.” In other words, the Company has now formally adopted a specific, legally binding “target” for the reduction of its natural gas sales.
Frankly, this reduction is too little, too late, and the savings will come from efficiencies, rather than from any actual reduction in the Company’s gas business. Nevertheless, the act marks a notable moment in New York utility policy, since,
although NYSEG RG&E recently committed to a zero increase in its natural gas sales, to our knowledge no other New York-based investor-owned utility has committed to reducing gas sales. We welcome this move, and we also welcome the Company’s parallel commitment that “During the period 2021 through 2025, Central Hudson is targeting cumulative savings that equates to approximately 6.9% of 2019 electric sales. These savings will be driven by Central Hudson’s current Energy Efficiency and Heat Pump programs.”
CLP also welcomes the changes to the Company’s website that are reflected in specific detail in Attachment CC of the JP. As just one example, the Company will remove its previous references to natural gas as a “clean” energy source: “Central Hudson will remove and not include language stating that Natural Gas is cleaner or more environmentally friendly, than fuel oil or other fossil fuel.”
Appendices AA – CC, which are attached at the very end of the Joint Proposal, may not be the most obvious thing to catch the eye of the press, or the public, but they contain essential commitments, including target dates for implementation. Although these commitments are not as far-reaching or responsive to climate crisis as CLP would wish them to be, it is important to us and to society that the Company fulfills them as the minimum for which they are held legally and regulatorily responsible.
Response to the CLCPA II – Leak-Prone Pipe
CLP would like to reiterate here the objection, made in our initial Statement, to the scope and scale of the Company’s “leak-prone pipe replacement” plans. We understand that safety is of paramount concern, and that there is pressure from many sides to replace pipe that is old or might fail. Nevertheless, we remain unconvinced that the identification process is adequate to the task at hand, and we feel that the more than
$40 million dollars that will be dedicated to this process every year would be better spent on urgent climate-related changes.
As noted in CLP’s initial Statement, the Company’s own financial expert, John Stewart, described in great and gory detail the danger that its gas infrastructure will become “stranded assets.” As Mr. Stewart argued in that testimony, it is “not tenable” for Central Hudson to invest up to $216 million over the next five years in assets that are destined to become stranded, leaving years of depreciation on the table as a net loss to the Company and its ratepayers. We agree. While it is surely imperative for the Company to promptly and carefully carry out scheduled inspections and respond immediately to observed or reported threats, we do not find it to be reasonable or sensible to continue to quantify the replacement need at 15 miles/year -- or to sanction the Company by awarding negative performance assessments if it fails to reach this arbitrary target.
Response to the CLCPA III – Distribution Investments
A much better use of the millions of dollars that will be spent on “leak-prone pipe” replacement would be a program to identify and build out enhancements to the distribution grid that will allow the interconnection of new local distributed energy resources (“DER”), and/or to reduce the often prohibitive cost of interconnection. The failure to build out the distribution grid is an enormous geopolitical oversight that has not yet been addressed in New York.
Finances – Rewarding the Shareholders at the Expense of Ratepayers’ Future During the continuing pandemic, it is unconscionable for the Company to increase the profit earned by its shareholders. The increase, from 8.8% to 9%, is unwarranted and unnecessary. Other recent rate cases in New York have resulted in reductions in the ROE. In the recent NYSEG RG&E case, for example, the Public Service Commission – in response to widely varying recommendations by the Company and participating parties -- reduced the companies’ ROE from 9.0% to 8.8% (PSC Order of 11-19-2020 in case 19-E-0378). CLP cannot sign on to a Joint Proposal that responds to the severe economic impacts of the COVID-19 pandemic, during which the stock market repeatedly broke historic records and interest rates fell to the lowest levels in decades, by increasing stockholders’ returns on equity.
Debt Relief
Finally, and in our opinion most crucially, CLP cannot sign on to a Joint Proposal that does not include a mechanism for debt relief that commits to meeting the needs of the tens of thousands of customers who, when the moratorium on utility shutoffs expires, will be unable to pay their bills and will be shut off. In February, 2021, Central Hudson had more than 23,000 residential and 2,500 business customers who were 60 days or more behind on their bills and thus would have been subject to cutoff but for the moratorium. The average arrearage of Central Hudson customers who are 60 days or more behind on their bills at that time was more than $660 for residential and $1,600 for business customers. No doubt the amounts have since risen.
In the Affordability case 14-M-0565, DPS staff has recommended that “each major utility should adopt an arrears management plan with the program funding at 10% of its incremental arrearage balance over a two-year budget (outside of the EAP
budget)”1 The PSC has since issued an Order addressing some recommendations from the White Paper, but has not yet acted on arrearages. Meanwhile, it appears from the Company’s response to an Interrogatory submitted by DPS Staff in case 14-M-0565 (DPS-8 IR-019, dated May 7, 2021) that Central Hudson has determined that its new,
1 This quotation is from a staff power point presented March 9, 2021, addressing its white paper in cases 14-M-0565 & 20-M-0266.
million-dollar SAP Customer Information System’s billing program will have no capability for arrears management. Without evidently taking any notice of the gravity of the problem, or of Staff’s recommendation, Central Hudson’s response to the IR states that “Staff’s white paper recommends that the arrears management program is a temporary program and as such, Central Hudson has decided to not implement this program in our new billing system and to instead manage this program manually.” In fairness, it should also be said that the other NY utilities also expressed an inability to get this done at reasonable cost.
In the end, unlike NYSEG RG&E, in its recent rate case, Central Hudson has failed to commit to reinstituting its arrears program, which it ended in 2018. In response to insistent calls for action by PULP, AGREE, CLP, and others, the Company did agree to engage in a “collaborative” process if the PSC has not addressed the customer debt problem by September 15, 2021,2 and 45 days after a collaborative is convened to file a report on “any arrears resolution program that the Company is planning to undertake.” September 15 has now come and gone without a resolution from the PSC, although a Working Group has been established and will meet on September 28 in cases 14-M- 0565 and 20-M-0266. We are not holding our breath – we are organizing to demand what people need and deserve according to the most basic standards of social equity.
In the world’s wealthiest country, it is simply not acceptable for people to be deprived of access to the power they need for housing, illumination, and work – including schoolwork – which is increasingly reliant on virtual connectivity.
Conclusion
CLP appreciates the opportunity to participate in rate case deliberations and takes seriously the obligation to educate and inform the public about what happens there. We thank the other parties and the Company for their efforts to ensure that a civil and responsible dialogue contributes to public understanding and engagement in the interest of a more just society and vitally necessary actions to avert the climate crisis.