NY PSC Phases-In Hike to Soften Blow in Weak Economy

July 22, 2010 - Weekly Update From Utility Regulatory News #3977: In recognition that the local economy remains in an underperforming mode, the New York Public Service Commission, in authorizing new rate schedules for an electric and natural gas utility, has postponed as long as possible certain of the rate increases approved therein. The commission said the new three-year plan for Central Hudson Gas & Electric Corp. (CHG&E) takes into account the torpid economy and seeks to mitigate the impact on ratepayers by delaying a substantial portion of the increase to the plan’s second and third years, in the hopes that the economy will have improved by then.

For electric distribution service, CHG&E is allowed to raise rates by $11.8 million in the first year, $9.3 million in the second year, and $9.1 million in the final year. Of the initial increase, the commission estimated that approximately 80 percent of the higher charges were necessary to cover additional local property taxes, the capital costs of infrastructure projects, and uncollectibles expenses, which have grown as the economy has soured. For natural gas delivery service, CHG&E is permitted to raise rates by $5.7 million in the first year, $2.3 million in the second year, and $1.6 million in the third year. According to the commission, about 50% of the first year increase is attributable to the same three items cited for the electric increase.

The rate plan includes an earnings sharing mechanism that is weighted toward customers, with ratepayers entitled to 50 percent of any earnings exceeding a 10.5 percent return on equity (ROE) in any one year. Should CHG&E’s earnings exceed an 11 percent ROE, the customer share would rise to 80 percent, and that share would go as high as 90 percent if the utility’s ROE reaches 11.5 percent or higher.

The commission expressed optimism that the earnings sharing mechanism will be of significant value to ratepayers should the economy finally begin to recover. Subscribe to URN for the full story.