The New York State Public Service Commission (PSC) Wednesday voted to approve the terms of a joint proposal, which will increase electric and natural gas delivery rates for Central Hudson Gas & Electric Corp. customers through June 30, 2009. Noting that Central Hudson’s electric and gas delivery rates have not increased in over a decade, the PSC determined that the new rate plan will enable the company to increase infrastructure investment, expand assistance to low-income customers and meet “unavoidable” cost increases.
Under the terms of the rate plan, revenues from electric delivery service would increase by $17.9 million in each of the three rate years, or about 9.4% annually on average. The total bill (delivery and commodity service) for a typical residential electric customer using 500 kWh/month would increase by 5.4% in the first rate year, 5.0% in year two, and 4.6% in year three, assuming current commodity prices.
Natural gas delivery revenues would increase by $8 million (about 19%) and by $6.01 million (about 11.8%) in the first and second rate years, respectively. Gas revenues and rates will not change in the third rate year. The total bill for a typical residential gas customer would increase by 6.4% in the first rate year and 5.2% in year two, based on current commodity prices. To more properly align rates with the fixed costs of operating the gas delivery system, the minimum monthly charge will increase from $7.20 to $14.00 a month during the first rate year. The rate design change is part of the overall rate plan and will not change the revenue figures.
“Central Hudson’s customers have benefited from many years of stable rates, even as the company’s costs and expenses have increased significantly,” said PSC Chairman William M. Flynn. “The commission recognizes the importance of constraining rate increases, but those efforts must be balanced against the equally important goal of ensuring safe and reliable service. The plan approved today strikes a reasonable balance between the interests of ratepayers and the long-term viability of the company.”
To protect customers, the rate plan contains an earnings sharing requirement if the company exceeds the permitted return on equity of 9.6%. If earnings are between 10.6-11.6%, that amount would be shared equally by the company and ratepayers. Earnings above 11.6% and up to 14.0% would be shared 35%/65% between the company and ratepayers, respectively; and, all earnings above 14.0% would be deferred for customers’ benefit.
To maintain both electric and gas system reliability and enhance the overall safety of the gas distribution system, the rate plan includes funds that will be used to construct a new electric substation, expand electric transmission right-of-way maintenance efforts and replace cast iron and bare steel pipe on the gas system. If the dollars targeted for electric and gas capital improvements are not spent by the end of the third rate year, any shortfalls in these expenditure levels would be deferred for ratepayer benefit.
In addition, the rate plan includes Customer Service Quality and Gas Safety programs with targets designed to encourage the company to maintain and improve overall service, safety and reliability. The Service Quality Performance Mechanism includes a customer satisfaction measure and a PSC customer complaint rate measure. The Gas Safety program addresses leak management, prevention of excavation damages, and emergency response. If the company fails to meet these program targets, as well as targets for the frequency and duration of electric service outages, it would be subject to revenue adjustments.
In an effort to further improve customer service and increase efficiency, Central Hudson will develop a study of the costs and benefits of converting to a monthly meter reading and billing system. The company also will develop an electric Automated Meter Reading (AMR) pilot that would include 5,000 electric and gas meters. Both the billing study and AMR pilot must filed with the PSC for approval.
To promote the development of customer choice and competition, electric and natural gas rates will be further unbundled or itemized on the bill to make it easier for consumers to compare the commodity price of natural gas or electricity offered by Central Hudson with the prices offered by competing marketers. Other customer choice initiatives and best practices such as the Market Match, Market Expo, ESCO Ombudsman, and the ESCO referral program known as “Energy Switch” will continue under the new rate plan. Also, Central Hudson will expand and enhance programs designed to assist low-income customers.
The joint proposal was supported by Central Hudson, PSC staff, multiple intervenors (a group of large industrial and commercial customers) and the Department of Defense on behalf of the U.S. Military Academy at West Point. The written order, when available, will be published on the PSC website at www.dps.state.ny.us by accessing the Documents section and referencing Cases 05-E-0934 and 05-G-0935. The order also may be obtained from its File Office, 14th floor, 3 Empire State Plaza, Albany, NY 12223; (518) 474-2500.
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