Fortis foes allege eco-misdeeds

Retired SUNY New Paltz English professor Karl Budmen speaks at May 23’s press conference. (Photo by Dan Barton)

Summed up Kennedy, “So much for the ethics, managerial expertise, and public service record of Fortis, Inc.”  He also expressed financial concerns and objected to Fortis’ pro-fracking stance regarding natural gas. Kennedy joined Citizens for Local Power in calling for the PSC to hold an evidentiary hearing on the proposed acquisition, where witnesses would be able to be cross-examined by the opposing side. “Such a hearing would create a documentary record against which the truth value of Fortis’ statements could, and should, be tested,” he concluded.

‘Fabulous stuff’ — Fortis exec defends power company’s environmental record

Contradicting statements by local opponents to Fortis Inc.’s proposed $1.5-billion takeover of Central Hudson, Barry Perry, vice president of finance and chief financial officer at Fortis, claimed the Canadian-based power conglomerate has done “a lot of fabulous stuff with regards to the environment.”

In an interview last week, Perry said Fortis has been committed to green energy. He cited its record in Prince Edward Island, which Canadian province gets 30 percent of its electrical power from the wind and where the Fortis-owned utility is facilitating the connection of that power with the electrical grid. He said Fortis would be committed to governor Andrew Cuomo’s Energy Highway Initiative to bringing wind energy down to New York City through upgraded transmission lines.

Fortis’ environmental record has come under criticism from locals who want the state Public Service Commission to reject the proposed takeover of Central Hudson. Concerns about the way Fortis treated customers in the Central American nation of Belize and the western Canadian province of British Columbia were discussed at Citizens for Local Power’s May 23 press conference in Kingston. (See accompanying article.)

Fortis in the Caribbean

In 2011 the government of Belize nationalized Fortis’ BEL subsidiary. Perry said the government took over a telecommunications company and water company at the same time, suggesting the action was part of an overall “trend” rather malfeasance on Fortis’ part. He said currently electrical power generated by the three dams Fortis owns in Belize is being sold at ten cents per kilowatt-hour, “the second lowest price of power in Caribbean.”

Why had the company charged much higher rates when the dam opened — 24 percent more in a six-month period, according to Fortis’ 2006 annual report? Perry said a two-year delay linked to environmental challenges in the construction of the Belizean Chalillo dam had temporarily forced Fortis to buy more expensive power from Mexico and to rely on inefficient oil-fired diesel plants. “Over the longer term the hydro power prices have remained stable, in the ten-to-eleven-cent range,” he said.

Perry claims in a video posted on the Central Hudson website that the dam area “has been restored” and that the rare scarlet macaw is back. He said Fortis had constructed artificial nesting sites for the birds as a mitigation of the impact of the dam reservoir. The birds are presently threatened not by habitat displacement by the dam, he said, but by illegal poaching. Furthermore, “we’ve done everything we had to do for environmental compliance. [Dam opponents] lost every time they’ve gone to court.” The Chalillo dam has prevented flooding that otherwise would have occurred, he said. The Belize government was so pleased with the Chalillo dam, Perry said, that it subsequently contracted with Fortis to build a second, larger dam.

Fortis also responded by e-mail to some of the points made by Belize-based activists at the press conference: The existing sandstone contains granitic material, which is suitable for dam construction. The government, not Fortis, is responsible for the early warning system in case of a dam failure. Cracks in the dam, found in the plastering, are superficial. If the dam were to be destroyed, BECOL (the Fortis-owned subsidiary that operates the dam) has public liability, which is standard for hydro facilities. The secret, pre-dam agreement between Fortis and the government “was made available to the public through the [Belizean] Public Utilities Commission for review.”

BEL executives received “golden parachutes” when the government nationalized the utility. “BEL did not transfer assets [to BECOL], and an audit that was carried out has exonerated the executives of these claims,” said Perry.

Fortis in British Columbia

In British Columbia, FortisBC Energy received complaints about its rate increases. Fortis has had to make massive upgrades in the system, Perry said, which was in poor shape when Fortis purchased the utility in 2003 from an American company.

“The transmission system was not at the right level of reliability and we had to upgrade it to bring its redundancy up to the right standards,” said Perry. Fortis has reinvested $1 billion since the 2003 purchase, he said. The two-tiered rate structure, in which customers pay a higher rate if they exceed a certain threshold of power usage — a system causing much hardship among local ratepayers, according to news reports — was implemented by the British Columbia Public Utilities Commission, not FortisBC, he said.

Contrary to claims by British Columbia activist Harry Levant, Perry said the poles the company erected through the right-of-way “were the same poles we said we’d put up.” Fortis forwarded an April 18, 2011 letter from the British Columbia Public Utilities Commission in response to multiple complaints about the upgraded transmission line. The letter confirmed that the project was in compliance with Canadian regulations, and that FortisBC had properly met its obligations.

Fortis in the Hudson Valley

As noted in its application before the Public Service Commission, Fortis plans to spend $600 million over the next five years should the merger be approved in maintaining infrastructure, a rate close to what Central Hudson has been spending, Perry said. “There are a couple of areas where we might increase the investment. One is on the transmission side. A separate initiative would be extensions of natural gas distribution to more customers.”

Regarding Fortis’ $1.5 billion of good will — the amount paid for assets above their “book value” — which will increase by $500 million more if the CH merger is approved, “there’s no customer impact associated with that good will.” He said the corporation’s total amount of debt “on a consolidated basis” is 55 percent, comparable to Central Hudson’s level.

Fortis raised $600 million in subscription money from its shareholders for the CH purchase. The funds must be returned on June 30 if the deal is not approved, Perry claimed. The company, which is pushing the PSC to approve the deal at its June 13 meeting, is applying for an extension. If it doesn’t get one, Fortis would pursue private financing, Perry said. The final deadline for the deal is August 20.

Might Fortis attempt to circumvent state regulations by invoking provisions of the North American Free Trade Agreement (Nafta)? Perry said that issue was “a red herring.” In the two decades of Nafta’s existence, and despite the fact that other Canadian utilities are owned by American companies and vice versa, “there has never been a claim under that agreement in the regulated utility space,” he said.