Staff of the New York Public Service Commission (PSC) was expected to file a motion Friday to dismiss rate hike requests from New York State Electric & Gas (NYSE&G) and Rochester Gas & Electric (RG&E). The utilities have said they face “a significant shortfall in cash needed to make required infrastructure investments,” but Sen. Charles Schumer (D-NY) appealed to the PSC to deny the increase, which he said “reeks of profit mongering.”
Schumer pointed out that the terms of the PSC order approving the takeover of the utilities’ parent company, Energy East, last September by Spain’s Iberdrola SA stated there were to be no rate hikes for 13 months after completion of the deal unless safety or reliability were threatened.
The utilities said last month that the increase in the average NYSEG residential electricity bill would be approximately $8.80/month (9.9%) and the average NYSEG residential natural gas bill would increase approximately $12.20/month (8.8%). The increase in the average RG&E residential electricity bill would be approximately $8.80/month (11.9%) and the average RG&E residential natural gas bill would increase approximately $7.88/month (7.4%). They blamed the credit crisis and their “BBB” credit ratings — the lowest of any major gas or electric utility in New York — for necessitating the hikes.
“While considered ‘investment grade,’ in the current credit crisis these ratings have meant dramatically higher costs and periodically lower availability of essential capital,” the companies said. “Historically, the PSC has preferred having New York State utilities maintain ‘A’ level credit ratings. NYSEG and RG&E share this goal, and have designed the rate requests in a manner that would begin moving the companies toward the achievement of an ‘A’ level credit rating and a reduction in borrowing costs.
Portland, ME-based Energy East was acquired by Iberdrola SA last year for $4.5 billion (see NGI, Sept. 22, 2008). The PSC approved the deal over the objection of staff. At the time Iberdrola was bound to the delay of any utility rate hikes.
“…[T]he PSC’s order authorizing the purchase of the NYSEG and RGE by Iberdrola clearly stated that in order to protect ratepayers and possibly pass along synergy savings to them, the earliest the next rate-case could be filed was ’30 days following the first anniversary of the acquisition,’ or 13 months,” Schumer told the PSC in a letter. “The commission did allow that a request could be filed earlier, but only if they could demonstrate that their ‘financial performance…would fall to levels that would jeopardize safe and reliable service.'”
Standard & Poor’s Director Peter Rigby recently warned of political pressure on regulators to keep a lid on rate hikes as one risk to the energy sector during the recession.
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