Can Central Hudson merger be overturned?

Prospects for an appeal

Daniel Duthie, a utilities attorney representing CLP, said his client might consider an appeal. He outlined two options, though both are long shots: the first is filing a petition with the Commission for a rehearing, which would have to be submitted within 30 days of the written order. The chances of success are slim, “particularly when a decision is unanimous”—as is the case here, Duthie said.

The second would be to appeal on the grounds that the decision was “arbitrary or capricious,” and lacking substantial evidence. Duthie said Central Hudson was making a higher profit than it should have, and that the Commission had previously cited another company, National Fuel Gas, for having a Return on Equity (aka profit) of over 11 percent when it should have been more like 9 percent. Central Hudson’s number was 10.65 percent last year. One could say the Commission was being “arbitrary or capricious” by going after one company and not the other, said Duthie. Plus, the “whole premise of the enhancements in the Fortis deal was to benefit the ratepayers,” and locking in rates that yield excess profits for the utility is not in the interest of the ratepayer, said Duthie. Cuts that would result in a profit of 9 percent would provide significant relief to ratepayers, much more than any other provision in the deal.

Couldn’t withstand charm offensive

Cahill criticized Central Hudson’s “multimillion dollar media campaign blitz in the closing weeks of the approval process, which created the false impression there was growing public support.” In fact, one of the commissioners who voted in the unanimous decision to approve the deal alluded to that “support,” Cahill said. Half of the not-for-profit groups listed in a Central Hudson ad hailing the merger had a Central Hudson executive or employee on their board, he said, and “virtually all had been recipients of the utility’s public giving programs”— programs that are funded by ratepayers, he noted. “More than one of these organizations came to me and said they were intimidated into supporting the Central Hudson and Fortis proposal.”

Such tactics do not bode well for the future, Cahill said. Had there been more community activism and media coverage early in 2012, when the acquisition was first announced, perhaps the outcome would have been different, he said—although again, the lack of ground swell of attention early on “was largely because there was no consumer apparatus out there to develop that critical view.” As it is, Citizens for Local Power did “a remarkable job,” Cahill said. “What we didn’t have at our disposal was a multimillion-dollar media ad campaign and giant sledgehammer that we are going to kill your funding.”

At least somebody’s happy

As one might expect, Central Hudson and Fortis hailed the commission’s vote. “Our new association with Fortis provides substantial and lasting benefits for our customers, and the Fortis business model retains Central Hudson as a standalone company,” said Steven V. Lant, chairman of the board and president of CH Energy Group, in a release issued in the wake of the commission vote. “In our capital-intensive and increasingly consolidating industry, becoming a member of the Fortis federation of utilities ensures we are able to effectively serve our customers now and in the future. Central Hudson’s ability to make required energy infrastructure investments, which are expected to be more than $100 million annually over the next five years, is strengthened by being a part of the Fortis federation.”

“Central Hudson is a well-run utility whose employees, like those throughout the Fortis federation of utilities, are committed to serving their customers and their communities,” stated Stan Marshall, president and CEO of Fortis, in the Central Hudson release. “We welcome the employees of Central Hudson to the Fortis team, and we look forward to their contribution as we continue to meet our customers’ energy needs safely, reliably and cost effectively,” he said.

According to the PSC, the deal brings numerous benefits to Central Hudson customers: $35 million for storm restoration costs, a $5 million community benefit fund, a nine-year commitment to the utility’s 2011 charity levels and various fiscal safeguards. Further, Central Hudson extended its deal with Local 320 of the International Brotherhood of Electrical Workers, which represents 526 of the utility’s 875 workers, through June 30, 2017; an assurance of no layoffs through June 30, 2017; the addition of 35 new union jobs; and “a commitment to hire, retain and train skilled union craftspeople.”