By William Opalka

New York regulators approved Central Hudson Gas & Electric’s three-year rate plan in an order that also says one demonstration project the company filed in the state’s program to revamp the utility industry shows promise.

The New York Public Service Commission on Wednesday approved a joint proposal by the company, PSC staff and stakeholders that will increase electric rates by $43.4 million through 2017 (14-E-0318). The company had initially proposed a one-year plan with a $40.1 million increase.

Much of the commission’s discussion Wednesday focused on the state’s Reforming the Energy Vision. Utilities have been ordered to file demonstration projects by July 1, but Central Hudson jump-started the process by proposing six projects in a proceeding that ran parallel to its rate case that started last July. The proceedings are on separate regulatory tracks, however. (See Central Hudson Case Provides Early Test of NY REV.)

‘Non-Wires’ DR Plan

PSC staff said a “non-wires alternative” proposed by Central Hudson and its stakeholders in a status report filed in May met the criteria to move forward. The alternative is a demand response proposal in three congested areas of the service territory. The company was given 30 days to file additional details on proposed cost recovery and incentive mechanisms.

The other five demonstration projects either lacked specificity or didn’t meet the criteria needed to define a workable business plan with other private sector partners, according to the PSC. (See New York PSC Bars Utility Ownership of Distributed Energy Resources.)

The PSC said a net customer benefit would have to be shown for approval, including “forgoing the capital investment associated with a traditional [transmission and distribution] solution.” To expedite implementation, the order defers cost recovery until Central Hudson’s next rate case — no sooner than June 2018.

That prompted concerns from Commissioner Diane Burman. “Is the rate case driving the policy, or is policy’s generic proceeding driving the rate case?” she asked.

Burman also complained that commission staff were driving the demonstration project approvals. “I really think that it’s an inappropriate delegation of authority for me to give up the review of that,” she said.

Chairman Audrey Zibelman said she understood the concern. But after “long conversations … I know staff ended up feeling this is the right process and I’m comfortable with it,” she said.

Rate Case

Distribution rates for Central Hudson have not changed since 2012. Its last rate case was approved in 2010, and the PSC’s 2013 approval of its acquisition by Canadian holding company Fortis included a two-year rate freeze that expires on July 1.

The rate order calls for graduated increases over the next three years beginning July 1:

• In 2015, electric rates will increase $2.3 million, or 38 cents/month, for the average residential customer, a 0.3% increase based on the total bill.
• In 2016, rates will increase $17 million, up 3.4% or $3.86/month.
• In 2017, rates will go up $24.1 million, up 4.8% or $5.58/month.

The impact is softened over the three years by the use of $27 million in customer credits that Fortis provided during the 2013 takeover.

Other provisions include the shift from bimonthly to monthly billing and the creation of a “major storm reserve” — Central Hudson is the only New York utility without one. The fixed monthly service charge of $24 will not change. The company had sought a $5 increase.

Central Hudson is also allowed a 9% return on equity.