Winter, county tax, new fees add up to higher electricity bills

Craig Wolf - Poughkeepsie Journal - March 2, 2014

Winter, county tax, new fees add up to higher electricity bills

Electricity costs are about to give consumers a shock. Sticker shock.

Bills are headed up.

Customers are already seeing higher bills and can expect more, according to utility officials. The impact is widespread, as Central Hudson Gas & Electric Corp. serves about 116,119 electric customers in Dutchess County and 87,601 in Ulster County. New York State Electric & Gas serves about 15,386 customers in Dutchess and 5,355 in Ulster. Four separate factors are creating the perfect storm of higher costs, especially for Dutchess.

• Many consumers used more power in January as cold snaps hit the region. Plus, more demand across much of the nation caused a spike in market prices. Winter’s not over.

• In Dutchess, a 3.75 percent energy tax hit as of Saturday on all energy forms, including electricity.

• In May, a “new capacity zone” charge imposed by a federal and state plan will boost costs by an estimated range of 6 percent to 10 percent for local consumers.

• And this summer, Central Hudson will ask the state to let it raise delivery rates effective in July 2015, ending a two-year rate freeze.

“I think it’s not good for us,” said Eric Fuegel, a senior citizen living in the Town of Poughkeepsie. “I get a big bill,” about $500 to $600 every two months, for both gas and electric service, he said. Hearing for the first time about the “new capacity zone” plan, he thought it “weird” and compared it to the Metropolitan Transportation Authority charges that hit the lower Hudson Valley in payroll and telephone taxes.

Cold and costly

Utility bills are divided into two main parts, electricity and natural gas. Each of those is divided into “delivery charges” and “supply charges.” It’s important to understand the difference.

Supply refers to the commodity itself — the amount of electricity that is consumed. Central Hudson buys this in the wholesale power markets at market rates, or under contracts, and passes it on to consumers with no markup.

“It’s a dollar in and a dollar out,” said Steven Lant, CEO of CH Energy Group, parent of Central Hudson.

Widespread cold has swept the nation, simultaneously increasing both usage of energy and the price of it.

Central Hudson said gas usage was up 25 percent in January and power draw rose by 7 percent versus last year. More usage means more cost.

But it’s worse than just usage. At the same time, supply charges that Central Hudson pays to buy gas and power — it produces no gas and very little of its own power — rose in the open markets.

Market supply charges jumped 66 percent in January for gas that Central Hudson bought. Bulk electricity purchases got more costly by 88 percent. Those costs flow through to the “supply” part of the consumer bill, which is usually smaller than the “delivery” part. The delivery charge does, however, go up somewhat with volume.

The net result was that a total home gas bill, both supply and delivery, likely was up about 25 percent, said James Laurito, president of Central Hudson. And a total home electric bill, supply and delivery, typically would be up 38 percent.

“Think of it as a traffic jam at rush hour,” Laurito said.

A tax is levied

This energy tax kicked in on Saturday for Dutchess County residents. It was born in the fall when County Executive Marc Molinaro proposed a new way to raise revenue: repeal a home energy-tax exemption that had long been in place. This was expected to bring in about $7.8 million. It passed the Legislature with a 14-10 vote and it has remained controversial.

The tax applies to delivery and supply charges, the whole bill, for those who take full service from Central Hudson, said spokesman John Maserjian. But those customers who have gone to a third-party vendor for the supply portion will only pay the tax on that portion, according to state tax laws, he said.

This item won’t be a separate line, Maserjian said, but will be included within the existing line called “NYS & Local Taxes & Surcharges” and will only apply to Dutchess residents.

This will add $18.75 to a $500 utility bill for a full-service customer.

‘New capacity zone’

This surcharge will cost consumers between 6 percent and 10 percent more on their bills, Laurito estimates. An earlier version was worse.

The Federal Energy Regulatory Commission, or FERC, and the New York Independent System Operator, or NYISO, have put this charge in place because they see a clear need to get more power production in southeastern New York, an area that covers most of Central Hudson’s territory and utilities to the south, including in New York City.

This is the state’s big “load pocket” and it has been losing power plants.

The zone customers will pay extra to make the region more attractive to private companies that would therefore be more likely to build power plants or upgrade old ones, so the theory goes.

Central Hudson officials and the state Public Service Commission on Friday said they continue to challenge the FERC decision.

“What federal regulators fail to recognize is the ongoing state initiatives now underway that are designed to resolve the transmission constraints between upstate and downstate that led FERC to take this anti-consumer action,” said PSC Chair Audrey Zibelman in a statement.

Those state efforts involve the current power transmission line review, with four competitors offering plans to modify transmission lines to get at least 1,000 megawatts more power from cheaper upstate sources to downstate zones.

They have all been recently invited to submit alternative plans to stay within existing power line corridors.

Central Hudson is part of one competing outfit, called NY Transco.

Central Hudson’s Lant said Friday, speaking to the Poughkeepsie Journal Editorial Board, that the need for more power is real but the method is wrong.

Companies that already have power plants will benefit. “The incumbent suppliers get the price increase instantly,” he said. But the plan “may or may not give us any relief to the capacity constraints.”

Laurito said that though consumers will pay, “Those payments create no jobs, no economic vitality and no guarantee that any power plants would even get built.”

Rate increases coming

None of the above impacts are “rates.” That term refers solely to the delivery part of a utility bill. This part is regulated and only changes under the OK of the state Public Service Commission. To get that OK, a utility must start a rate case, and it takes about a year to go through one.

For Central Hudson customers, there has been a rate-hike holiday that is part of the deal in which Fortis Inc. of Canada bought CH Energy Group and Central Hudson in June in a $1.5 billion deal.

The rates in place when the deal was done have been kept and stay through June 2015. But this summer, Central Hudson will go to the PSC and ask for a boost, company officials confirmed Friday.

They have not said how much. But they have continued a $215 million investment in the system without getting any more rate allowance for it.

“It will be structured to reflect the fair and adequate costs necessary to provide safe and reliable service to our customers,” said Maserjian.

Customers have been vocal at past rate-hike proceedings. Given the mounting costs of energy they must bear, that plan could face plenty of consumer heat when the time comes.


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