A pair of Energy East Corp. subsidiaries have asked the New York State Public Service Commission (PSC) to approve rate increases for both natural gas and electricity that they said are necessary to cover increasing operation and maintenance costs and to help pay for significant infrastructure investments.

The increases would be the first for New York State Electric & Gas Corp. (NYSEG) and Rochester Gas and Electric Corp. (RG&E) since the mid-1990s.

The proposed delivery rates would increase typical NYSEG residential gas customer bills approximately $25.34/month (17.4%) and RG&E $21.03/month (15.2%). Typical NYSEG electricity bills would increase approximately $12.39/month (18.6%) and RG&E $11.86/month (16.1%). If approved, the rates are expected to go into effect next summer.

In April the PSC denied rate hikes the two companies had said they needed because of “a significant shortfall in cash needed to make required infrastructure investments” (see Daily GPI, April 8). Sen. Charles Schumer (D-NY) had appealed to the PSC to deny the increase, which he said “reeks of profit mongering.” NYSEG and RG&E had been prohibited from filing for rate relief under the terms of their acquisition by Iberdrola SA (see Daily GPI, Dec. 10, 2007) unless they could demonstrate that their ability to provide safe and reliable service would be jeopardized (see Daily GPI, Feb. 17).

The latest rate increases requested by the companies are substantially higher than those denied by the PSC in April. In that round of rate requests the increase in the average NYSEG residential electricity bill would have been approximately $8.80/month (9.9%) and the average NYSEG residential natural gas bill would have increased approximately $12.20/month (8.8%). The increase in the average RG&E residential electricity bill would have been approximately $8.80/month (11.9%) and the average RG&E residential natural gas bill would have increased approximately $7.88/month (7.4%).

The rate increases now being requested are unavoidable despite the implementation by both companies of aggressive spending controls, including salary and hiring freezes, sharply reduced business travel and elimination of all non essential external services, according to NYSEG and RG&E CEO Michael Conroy.

“While our electricity service rates have declined and our natural gas rates have remained essentially flat since 1996, the expenses necessary to provide safe and reliable service to our customers have climbed year after year,” said Conroy.

Electricity and natural gas supply costs, which have declined for the companies, could keep the average bills of many customers below 2008 levels even if the higher rates are approved by the PSC, he said.

NYSEG and RG&E said their “BBB” credit ratings — the lowest of any major gas or electric utility in New York — were partly to blame for the need for rate increases. The proposed rate increases would begin moving the companies toward “A” ratings, which the PSC has historically targeted for New York State utilities, the companies said.

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