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 discernible 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 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 is now accepting public comments and will make a decision to reject, accept, modify or get more information. Citizens for Local Power wants the PSC to hold an evidentiary hearing and submit a recommended decision. “It’s very unusual no evidentiary hearing has been held to date,” said Duthie. An evidentiary hearing requires management to explain in detail the terms of the deal and defend its position.
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 eight 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.”
Organized opposition
A newly formed group called Citizens for Local Power hosted a press conference prior to the Kingston hearing, the fourth held by the PSC on the proposed merger. Several union and labor representatives spoke. So did Kingston alderwoman Elisa Ball, representing state Sen. Cecilia Tkaczyk, and Rosendale Town Supervisor Jeanne Walsh.
A week after the Kingston hearing, which was conducted by PSC administrative law judge David Prestemon and commissioner Gregg Sayre, the PSC announced that the two administrative law judges charged with deciding whether the sale goes through will be issuing what is called a Recommended Decision. This requires a detailed look at the evidence, pro and con, and also allows groups and individuals to write their own briefs. Assemblyman Kevin Cahill, who opposes the merger, called the decision “a victory” for opponents, even though it is non-binding.
Citizens for Local Power hopes to form a consortium of municipalities passing resolutions opposing the deal. Rosendale is the first to contribute $1500 toward fighting the merger. The towns of Rosendale, Woodstock, New Paltz, Olive and Marbletown, have passed resolutions against the merger. So have the legislatures of Ulster and Dutchess counties.
In a late development, New Paltz’s town board voted on April 25 to commit $1500 to the legal fund to challenge the $1.5-billion bid for Central Hudson by the Canadian energy firm.
New Paltz joins consortium
Both the town and village governments in New Paltz already approved a resolution asking the state Public Service Commission to reopen 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 Duthie, the lawyer representing the consortium members. “You’re going to see higher rates.”
Town officials in New Paltz say they’ve been caught up in red tape and slowed down by Central Hudson in setting up a municipal solar array at the town landfill. Board members said they couldn’t imagine a Canadian company would be more responsive. “If you want to see more solar, this is a bad deal,” said Rodriguez.
New Paltz’s resolution included language asking the PSC be aware of New Paltz-specific local issues such as keeping connection fees affordable to further the town’s ability to build a municipal solar array, and the flooding of the Wallkill River currently associated with the Dashville dam in Rifton.
Block it. If Central Hudson needs capital raise it the old fashion way – through investors, on Wall Street…but don’t let the Canadians run our local grid.