Proposed Takeover of Central Hudson by Canada-Based Multinational Fortis, Inc., Could Constrain New York Energy Policy

CONTACT : Susan Gillespie (845-658-9820)
Jennifer Metzger (845-658-8967)
Manna Jo Greene (845-807-1270)
Dawn Meola (845-658-3036)

Free-Trade Agreement May Tie Hands of N.Y. Public Service Commission to Regulate in the Public Interest

Rosendale, NY. - Fortis Inc., the Canadian multinational holding company seeking to acquire Central Hudson, appears to view this deal as key to establishing a foothold for future expansion in the U.S regulated utility market in ways that could constrain New York State energy policy. The corporation’s proposed acquisition of CH Energy is currently before the Public Service Commission (PSC), which must decide whether the deal benefits the public.

In Ulster County, a group of citizens have stepped forward to oppose the merger on grounds that the acquisition of the New York utility by Newfoundland-based Fortis, Inc., would limit New York State’s ability to effectively develop and regulate its energy policy. While New York Governor Andrew Cuomo, in his State of the State Address, called for increased use of alternative energy sources, distributed generation, and other measures to increase the state’s resilience in the face of major storms, Fortis, Inc., states on its website that projections of its profitability depend in part upon “no significant changes in government energy plans and environmental laws that may materially affect the operations and cash flows of the Corporation and its subsidiaries.”

The 17-member Ulster County citizens’ group, led by Manna Jo Greene, Jennifer Metzger, Susan Gillespie and Dawn Meola, points out that the North American Free Trade Agreement (NAFTA), could be used by Fortis to override the PSC’s jurisdiction to regulate utilities in the public interest. Legal experts at the Public Utility Law Project, a New York consumer protection organization, told the PSC in written testimony in February that NAFTA poses “unmitigatable risks to consumers and to the sovereignty of the utility consumer protection and regulatory regime in New York which could trump or constrain future [Public Service] Commission regulatory action” — a warning that was echoed by State Assembly member Kevin Cahill (D-Kingston), former Chairman of the Assembly’s Energy Committee, at a February 21 public hearing in Kingston on the proposed Fortis-CH Energy merger. Both the U.S. and Canada, along with Mexico, are signatories to the free trade agreement, which applies to cross-border investments in addition to trade.

In this connection, the citizens’ group noted that Fortis is engaged in a partnership with the U.S. firm AbitibiBowater Corp., which initiated a NAFTA claim against Canada when Newfoundland expropriated property there, including property belonging to Exploits Hydro Partnership, in which Fortis owns 51percent and AbitibiBowater, 49 percent.

The citizens’ group argues that the deal is not in the long-term benefit of New York residents, on grounds that it would undercut self-reliance, hurt economic sustainability, and create a barrier to improvement of New York’s resilience in the face of climate change. “First and foremost, local self-reliance is a basic principle of creating and assuring a sustainable future: local jobs, local capital being re-circulated in the local community (not exporting our dollars to a Canadian multinational corporation), local (in this case NY State Public Service Commission) control over decision-making,” they wrote in a letter to local, county, and state elected officials representing the Central Hudson service area. In their letter, the group noted that the proposed Joint Agreement makes no mention of sustainable energy, and pointed to Fortis’s track record in the Central American country of Belize: “Fortis constructed a dam in Belize over strong environmental objections, resulting in such high rates that the Belize government expropriated Fortis’s distribution utility there,” the group wrote.

The International Brotherhood of Electrical Workers Local 320 also strongly opposes the proposed merger, which the union expects will result in cost-cutting measures like the elimination of jobs and increased reliance on less experienced contract workers. In written testimony submitted to the PSC, the union stated that the deal would end up “eviscerating the knowledge base of gas and electric operations and will result in longer restoration periods for gas and electric emergencies and in unnecessarily higher costs to ratepayers.” The union has grounds for concern: The Fortis Inc. website cites the risk to profitability “associated with defined benefit pension plan performance and funding requirements” — a risk they could look to minimize by eliminating union jobs.

A growing number of public officials are expressing opposition to the proposed Fortis-Central Hudson merger. U.S. Senator Charles Schumer (D-NY) criticized the proposed merger agreement for failing to include “a robust plan for storm restoration, investment in flood prevention, and concrete commitments to restoration of services in the event of future storms.” At the Kingston public hearing, Assemblyman Kevin Cahill (D-Kingston) warned, “Fortis and Central Hudson shareholders are about to get away with stealing money from the ratepayers of this community.” And on March 13, the Rosendale Town Board unanimously adopted a resolution opposing the Fortis-CH Energy merger as proposed, citing concerns about impacts on local jobs and lack of commitment to alternative, sustainable energy and investments in grid modernization.

The Central Hudson service area includes 375,000 customers affecting ca. 680,000 residents of Ulster, Dutchess, and Greene Counties, as well as portions of Albany, Columbia, Orange, Putnam, and Sullivan Counties.

The N.Y. Public Service Commission could decide whether or not to approve the proposed acquisition as early as April. The PSC’s public comment period on the proposed deal will close on March 22.