March 12, 2010

Hon. Garry A. Brown, Chair New York State Public Service Commission Three Empire State Plaza Albany, New York 12223-1350

Dear Chairman Brown:

As you know, on March 11th, the Public Service Commission held hearings in Kingston and Poughkeepsie on the Joint Proposal agreed to by Central Hudson Gas and Electric, Department of Public Service Staff and Multiple Intervenors to raise gas and electric delivery rates by nearly $40 million over the next three years. I appreciate the Commission's efforts to coordinate with my office in scheduling these hearings as requested in my letter dated January 27, 2010.

I offer this letter as a summary of my comments at the Kingston hearing. The rate increases included in this plan are excessive and unduly burdensome. The Commission should reject the Joint Proposal and require the full litigation of the one year rate plan filed by the utility on July 31, 2009. The outcome should be a plan that assures a balanced rate and a fiscally stable Central Hudson while also taking into account the extremely difficult times households and small businesses are experiencing in this fragile economy.

I recognize the need for Central Hudson to be able to raise revenue for critical investments in infrastructure and to keep pace with rising costs associated with property taxes, state assessments, pensions and employee benefits. I also fully support and encourage efforts to ensure a safe, reliable and efficient system. Any approved rates beyond what is necessary to meet those expenses should be rejected. Just as all of us, including the Department of Public Service, are being asked to do more with less, so should Central Hudson.

In their July filing and again here in the Joint Proposal, the company is pointing to energy conservation efforts as a central argument behind their request to increase rates. Central Hudson's desire to punish their customers for using less energy is an abomination and contrary to public policy. When households make the effort to reduce their energy consumption, they do so to achieve savings and to attain a certain level of predictability to their monthly bill, not to line the pockets of utility shareholders.

As I stated in my January 27th letter, the revenue decoupling mechanism approved in the previous proceeding should have eliminated any validity to these claims. Central Hudson must no longer be allowed to punish their ratepayers for using less energy. As an alternative, the Commission should consider measures that would allow investor owned utilities to add energy efficiency services as an additional product to offer to the households and businesses they serve.

Shareholder expectations should be tempered as well. The ten percent return on equity and the forty-eight percent common equity ratio included in the Joint Proposal is well above what most investors could reasonably expect in today's economic climate. Instead of attempting to assure a certain rate of return the final plan should be designed to protect ratepayers with an absolute cap on how much company can profit at their expense.

The fact that the Consumer Protection Board is not a party to this proposed settlement should serve as a strong indication that the interests of the average residential and small business ratepayers, those who make up the bulk of the customers served by the utility, were not adequately represented. Multiple intervenors, who already have great influence over the rate structure and are not bound by the minutiae of the Joint Proposal, should have very little to say about the rates and priorities this plan would impose on everyone else.

The Joint Proposal is another example of how limited the average consumer is when it comes to influencing proceedings involving requests for rate increases and highlights the need for intervenor funding for residential consumers. I have introduced a bill (A 8722B) that is designed to give the average consumer more influence in future proposals seeking to increase rates.

It is vital that you remain committed to this mission by striving to ensure that Central Hudson will continue to have the resources to maintain a safe, reliable and efficient system while mitigating the financial impact on ratepayers to the fullest extent possible.

I appreciate your consideration.

Sincerely,
Kevin A. Cahill
Member of Assembly