The request, filed with the state Public Service Commission, seeks to increase overall electric delivery rates by 2.5 percent and natural gas delivery rates by 8 percent. The costs of the electricity and gas themselves are unregulated and market driven; only the cost of delivering those commodities are regulated.
The filing sets in motion an 11-month review process by the Public Service Commission. And with opposition already lining up, the process promises to be at least as controversial as the utility's last rate hike, approved by the commission in 2006.
Michael Mosher, vice president of regulatory affairs for Central Hudson, said in a statement issued on Thursday that the Poughkeepsie-based utility, like area residents, is facing tough economic times.
On Monday, Central Hudson announced that its earnings for the first half of 2008 were lower than in the same period a year earlier.
"We have had tough choices to make about how to adequately fulfill our obligations to our customers and investors during these times of rising prices," Mosher said. "Considering the shortfalls in previously authorized revenues, we've reached a point where we must raise our rates in order to recover the costs of providing the level and quality of service that our customers expect and require."
Central Hudson spokesman John Maserjian said that, under the proposed increase, the typical residential customer will pay $3.50 more per month for the delivery of electricity.
By industry standards, the "typical" customer is one who uses 500 kilowatt hours of electricity per month. Maserjian conceded, however, that that standard was set a number of years ago, and he said the average Central Hudson customer likely uses more than the industry standard.
Customers who heat with natural gas, he said, would see that portion of their bill rise by about 8 percent, or $14.70 per month when averaged over 12 months.
The electricity increase is expected to net the company $14.2 million in additional revenue, Maserjian said, while the gas rate hike would net the utility an additional $14.6 million.
In 2006, the state Public Service Commission approved a controversial three-year plan that allowed Central Hudson to raise its overall electric and natural gas delivery rates by 11 percent and 9.5 percent, respectively. For residential customers, the increases worked out to 15.7 percent for electric service and 11.9 percent for gas service over three years.
Those increases were designed to generate $72.1 million in additional electric revenues and $22.2 million in additional natural gas revenues over three years, for an expected 9.6 percent rate of return. The utility has said it's actual rate of return is now expected to be around 6 percent.
Ulster County Legislator Robert Aiello, an outspoken critic of the last rate hike, reacted swiftly to news that Central Hudson would again seek to raise its rates, calling on the Public Service Commission to reject the utility's request.
"Central Hudson is victim to an economy running out of steam and must satisfy shareholders," said Aiello, R-Saugerties. "What the company needs to remember is that demand is low because the very customers it serves are telling the utility they can't afford anymore."
Maserjian said a key component of the new rate proposal is a "revenue-decoupling mechanism," which would break the link between sales and earnings by giving the utility the ability to periodically adjust its delivery rates to compensate for increased or decreased usage, thereby assuring the company the revenues necessary to operate and maintain the system despite drops in consumption. He said the proposal also contains several conservation measures proposed by the utility.
