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New York mitigates authorized $85M Central Hudson rate hike to $47.5M

New York regulators have authorized a three-year $85 million rate increase for Central Hudson Gas & Electric Corp.'s electric and natural gas customers but effectively reduced the rate hike to $47.5 million through the application of $37.5 million in regulatory liabilities. The rate plan covers the period from July 1, 2018, through June 30, 2021.

The New York State Public Service Commission in a 3-1 June 14 vote adopted a joint proposal that establishes a three-year electric and gas rate plan for Central Hudson but uses regulatory liabilities to limit the overall three-year rate hike to a $37.4 million increase for electricity customers and a $10.1 million increase for natural gas customers. Commissioner Diane Burman dissented over concerns regarding certain nonrate aspects of the joint proposal.

The joint proposal authorizes $19.7 million electric and $6.7 million gas delivery rate increases for the first year, effective July 1, followed by second-year increases of $18.6 million for electric and $6.7 million for gas delivery and third-year increases of $25.1 million for electric and $8.2 million for gas delivery. Rates in all three years are based on an 8.8% return on equity.

To mitigate the impact of the delivery rate increases, the approved joint proposal permits Central Hudson to use available regulatory liabilities to apply electric bill credits of $6 million in the first year, $9 million in the second year and $11 million in the third year, as well as gas bill credits of $3.5 million the first year, $4 million in the second year and $4 million in the third year. As a result, the net electric rate increases are limited to $13.7 million in the first year, $9.6 million in the second year and $14.1 million in the third year, while net gas rate increases are limited to $3.2 million in the first year, $2.7 million in the second year and $4.2 million in the third year.

Central Hudson in July 2017 initially proposed a $85.6 million rate hike. That proposal, which was premised upon a 9.5% ROE, would have seen a $63.4 million revenue increase in electric rates and a $22.2 million increase in natural gas rates.

Under the new approved rate plan, a typical residential customer using 625 kWh of electricity per month would see a total monthly bill increase of $1.46, or 1.3%, in the first year, followed by $3.31, or 3%, in the second year and $5.04, or 4.4%, in the third year. A typical residential heating customer using 910 therms of gas annually would see an average monthly bill increase of $2.54, or 2.1%, in the first year, followed by $5.59, or 4.4%, in the second year and $7.22, or 5.5%, in the third year.

The PSC said the rate plan reflects the lowering of the federal corporate income tax rate and bonus depreciation prospectively, with a net first-year benefit for customers totaling $18 million. Eligible low-income electric customers will see a bill reduction of up to 65%.

In support of the Gov. Andrew Cuomo's Reforming the Energy Vision initiative, the rate plan will provide more than $31 million in benefits to low-income customers through discounts. That is in line with the commission's policy of limiting energy costs of low-income households to no more than 6% of household income, according to the PSC.

Low income electric heating and non-heating customers will see discounts of between $19 and $39 per month, gas heating customers between $30 and $50 per month, and gas nonheating customers of $3 per month, the PSC said. Those discounts are greater than the current monthly discounts of $5.50 for nonheating gas and nonheating electric customers, $17.50 for electric heating customers, $5.50 for gas heating customers, $23 for heating customers utilizing both electric and gas, and $11 for nonheating customers utilizing both electric and gas.

Along with providing funding for technology upgrades and expanded tree-trimming, the rate plan increases Central Hudson's energy efficiency program and authorizes Central Hudson to provide a $264 annual credit to customers who install qualified geothermal systems.

With respect to natural gas safety and reliability, the rate plan seeks to provide Central Hudson with incentives to replace leak-prone infrastructure and accelerate its repair of nonhazardous leaks. The PSC said the utility also is encouraged to pursue non-pipes alternatives in meeting demand for heating fuels.

Among the signatories to the proposal — which reflected the terms of a negotiated settlement — were Central Hudson, staff of the state Department of Public Service, Acadia Center, the Public Utility Law Project of New York Inc., and the Natural Resources Defense Council. The PSC said no party opposed the joint proposal. (Case Number 17-E-0459/17-G-0460)