Storm of opposition rising over Fortis’ Central Hudson bid

A sign at the April 18 public meeting. (Photo by Lynn Woods)

But Maserjian says the merger would not result in substantive changes to Central Hudson’s existing commitment to clean energy. “All of Central Hudson’s environmental initiatives will continue, such as net metering and energy-efficiency incentives and programs,” he said. “The energy sources for Central Hudson will remain the same.”

Randolph Horner, a local renewable energy developer and consultant, said the need and vision for building a smart grid with a greater focus on renewables was “the furthest thing from what a group of foreign investor franchises want to happen.” He said the deal, which would be partially funded by $500 million in debt, was a leveraged buyout. “Fortis says they will obtain economies of scale because they’re no longer a public company,” said Horner. “Sounds like Enron to me. By taking a public company private, they will evade and avoid appropriate public scrutiny and regulations in their dealings.”

One advantage of the deal was that Fortis would write off the $35 million of Central Hudson’s outstanding costs, including $22 million incurred from the damage from Sandy and other storms,” said Maserjian. But in its comments PULP derided the $35 million, saying it “consists only of accounting adjustments to write off questionable amounts claimed by Central Hudson to be due from customers for storm damage costs. There will be no discernable change in rates and charges paid by customers to reflect these accounting adjustments.”

In their preliminary remarks, ALJ Prestemon and PSC member Sayre asked speakers to note changes that might make the joint proposal more acceptable. Several people at the hearing were not interested in that perspective. They said they were opposed to the deal no matter what.

Would NAFTA rules apply?

“This is a corporate takeover, which will result in higher costs, fewer jobs, poor service, and lack of care,” said Doug Eighmey. The Canadian company might try to override state regulations through the North American Free Trade Agreement. “It’s two separate sets of rules, and NAFTA will hurt us,” Eighmey warned.

Duthie noted at the Citizens for Local Power press conference that a local newspaper had quoted Fortis Vice President Barry Perry as saying the company “wouldn’t pledge not to use NAFTA as it applied to property and equipment.”

The PSC also certifies power plans and gives out permits for related investments. “If the PSC decided not to let Fortis build a power plant or make a major capital investment, Fortis would have recourse to NAFTA,” said Gerald Norlander of PULP. “If an investor felt inhibited by management or the operation of assets by regulators, they might have a claim.”

The PSC was accepting public comments until May 1, after which time it will make a decision to reject, accept, modify or get more information.

Despite the significant synergies that may be involved in utility mergers, said Duthie, past corporate takeovers have been plagued by problems. The takeover of Niagara Mohawk by National Grid, a corporation based in Great Britain, initially reduced rates by 8 percent but resulted in an accounting “disaster,” he said. Regulators discovered that personal expenditures, such as one executive’s tuition for his child’s private school and transport of his wine collection, had been embedded in Niagara Mohawk’s costs.

In the past, mergers had been allowed among in-state utilities. “It was two adjacent utilities merging for economies of scale and to integrate,” Norlander argued. “What we’ve seen since the repeal of the holding-company act is the financially driven merger, where there is no real synergy in improving the operations of the two utilities. Utilities become attractive when held by other entities because of production tax credits or a dream of income. There’s pressure to cut jobs and costs to improve the income stream.”

And what has happened to the regulatory structure? Corruption, Duthie concluded. “Utilities have contributed to politicians’ campaigns and killed consumer protections,” he said. “No one is paying attention to the ratepayer.”

New Paltz joins consortium

In committing $1,500 to the legal fund to challenge the $1.5 billion bid this week, New Paltz’s town board had additional concerns in voting to oppose the purchase of Central Hudson by Canadian energy firm Fortis.

Both the town and village governments in New Paltz already approved a resolution asking the state Public Service Commission to block the merger deal and to allow for more public comment. But joining the consortium adds a different layer of involvement. “This second step, though, is a bit more harder and it’s putting your money where your mouth is,” said county legislature Minority Leader Hector Rodriguez of New Paltz, who said he was leading the fight to get the county government to sign up with the consortium as well.

“We believe that this is not in the best interest of the community, because we’re not getting anything out of this deal of any consequence. It’s great for Fortis,” said Daniel Duthie, the lawyer representing the consortium members. “You’re going to see higher rates.”