One of my readers sent me some documents related to the implementation of New York’s Climate Leadership & Community Protection Act (Climate Act) from the Central Hudson rate case, CASE 23-E-0418. I asked if I could credit him for providing the material for this post but he prefers to be anonymous: “I don’t need the re-education task force tracking me down.” This post highlights some commonsense issues related to the effects of Climate Act implementation on a utility rate case.
I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 380 articles about New York’s net-zero transition. The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.
Overview
The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council (CAC) is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.” In brief, that plan is to electrify everything possible using zero-emissions electricity. The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies. That material was used to develop the Draft Scoping Plan outline of strategies. After a year-long review, the Scoping Plan was finalized at the end of 2022. In 2023 the Scoping Plan recommendations were supposed to be implemented through regulation, PSC orders, and legislation. Not surprisingly, the aspirational schedule of the Climate Act has proven to be more difficult to implement than planned and many aspects of the transition are falling behind, and the magnitude of the necessary costs is coming into focus. When political fantasies meet reality, reality always wins.
Central Hudson Rate Case
Central Hudson Gas & Electric Corporation (Central Hudson) is a “regulated transmission and distribution utility serving approximately 315,000 electric customers and 90,000 natural gas customers in a defined service territory of New York State’s Mid-Hudson River Valley”. On July 31, 2023 Central Hudson submitted revisions to its electric and gas rates (“Rate Case”). It includes double-digit gas and electric delivery rate increases and the public outcry has been intense. In this post I highlight some of the issues that affect costs that are imposed by the Climate Act.
There is a dynamic at work for all New York corporations relative to the Climate Act. All companies know it is going to cost a lot of money, threaten reliability and will not make much of a difference to global warming. However, not unlike the Star Trek line used by “the Borg in the series, who assimilate various cultures into their own and warn the encountered species, that ‘resistance is futile’”, companies have few options opposing the Climate Act. If they publicly oppose the Climate Act well organized environmental organizations will claim that they are against solving the existential threat of climate change. Recent administrations in New York have an outsized and weaponized influence on regulatory actions. As a result, criticizing a political policy will adversely affect doing business with state agencies and very likely impact the outcome of rate cases. There are no upsides to opposition in my opinion.
Central Hudson has done about as much as they could to educate their customers. Their Energy in Transition webpage addressed the question: “How quickly can we transition to an energy system that protects the environment without compromising highly consistent and reliable service at a reasonable cost?”. It describes the Climate Act, outlines Central Hudson’s position, and includes examples of what people are saying about the risks of the net-zero transition. Also included are videos on implementation of the Climate Act and New York Independent System Operator (NYISO) videos that help New Yorkers understand the important changes and challenges ahead. All this is accompanied by the following:
Residents and businesses should be aware of the changes that are coming and help shape the transition by contacting your state legislator or contacting the Governor’s office if you have thoughts about how these changes may affect you.
On the other hand, the balance between trying to appease politicians and providing customers with electric and gas service upon demand at a reasonable price is a challenge. The primary point in the comments described below is that Central Hudson went too far trying to appease the State at the expense of its customers.
Climate Leadership and Sustainability Panel
In the initial submittal Central Hudson included the Direct Testimony of its Climate Leadership and Sustainability Panel (CLSP) along with exhibits. The stated purpose of the Panel’s testimony in the Rate Case says:
Central Hudson has made substantial efforts and investments to facilitate and support New York State’s decarbonization and environmental justice objectives as established within New York State’s Climate Leadership and Community Protection Act (“CLCPA”). The Panel will first outline the requirements of the CLCPA itself, as well as the outcomes of the Company’s facilitation and support of the CLCPA goals. The Panel will explain the need for a deferral mechanism for costs that are incurred in support of CLCPA compliance. The Panel will also present the Company’s completed, ongoing, and planned activities that are consistent with the CLCPA, including the Company’s Sustainability Strategy and Efforts; Climate-Driven Planning, Studies, and Reporting; Gas Initiatives; Electric Vehicle (“EV”) Make Ready Programs (“MRP”), Supplemental EV programs; Electrification of Central Hudson’s fleet; and the Company’s Onsite Solar Proposal. The Panel will explicitly identify the Company’s proposed CLCPA-aligned initiatives and associated recovery mechanisms within this proceeding.
Rate Cases and the Climate Act
This post highlights the Direct Testimony of Allan R. Page on behalf of Dutchess County New York: “The primary purpose of his testimony is to “express the concerns of Dutchess County as the concerns relate to how climate is being addressed in these rate cases.” He founded A. Page & Associates after a 32-year career with Central Hudson. His testimony focused on Central Hudson’s proposed expenditures to meet the requirements of the Climate Act.
In the testimony, Dutchess County gave reasons why “Central Hudson should not pursue any emissions reduction initiatives beyond what is required by state regulation” as proposed by its Climate Leadership and Sustainability Panel. The testimony expressed “concern about the overall cost of achieving state clean energy policy objectives and the impact such costs will have on customers”, stated that “emissions reduction efforts within New York State will have little impact on the global climate and that New Yorkers, including those residing in disadvantaged communities (“DACs”), may not directly benefit. For these reasons”.
I address three of the Dutchess County concerns raised: the costs and customer benefits of clean energy investments, funding for the supplemental electric vehicle programs; and the company’s onsite solar proposal. The Direct Testimony of Allan R. Page (“Dutchess County Testimony”) and the Rebuttal Testimony of the Climate Leadership and Sustainability Panel (“Rebuttal Testimony”) documents in the Public Service Commission docket for the Central Hudson rate case proceeding were used for the following.
Clean Energy Investments
The Dutchess County Testimony describes Panel proposals that will increase costs with minimal benefits to customers. For example, it notes that Central Hudson’s is “taking ‘significant steps’ ‘to enhance corporate focus on sustainability and incorporate climate change considerations into its operations’ while building upon ‘understanding stakeholder interests” but points that the focus “does not
come free of change” nor does it provide tangible benefits to its customers.
The Rebuttal Testimony comment summarizes the Dutchess County concerns with clean energy investments:
The Panel acknowledges Dutchess County’s concerns regarding the overall cost of achieving the CLCPA emissions reduction and clean energy goals. The future costs, as well as responsibility for those costs, are not fully understood at this time. The Company supports a balance, one where safety, reliability, and just and reasonable rates are core elements of the Company’s utility planning and operations, while the incorporation of clean energy initiatives provides support for the achievement of New York’s CLCPA targets. As Dutchess County indicates in its testimony, “Through PSC regulation and orders, balance is defined.” The Company’s clean energy investments are consistent with those included in recent Public Service Commission (“PSC” or “Commission”) orders approving utility rate plans.
The statement that “future costs, as well as responsibility for those costs, are not fully understood at this time” is absolutely true. To the defense of Central Hudson, the Scoping Plan is no more than an outline of control strategies with incomplete cost documentation. There has never been a feasibility analysis to determine how the strategies might work and how the costs might be assigned. Dutchess County Testimony correctly points out that the ratepayers will be the losers as a result.
The Rebuttal Testimony responds to an estimate of total costs where they claim “Dutchess County’s testimony is inconsistent with a Company interrogatory response relating to the cost of carbon reduction”:
Dutchess County seems to have inadvertently mixed and matched parts of the Company’s response. First, the net present value of $300 billion was identified in the response as a modeling estimate in the January 2022 Climate Action Council Scoping Plan, noting that the predicted costs through 2050 that underlay that net present value calculation ranged from $594 billion to $627 billion, in 2020 dollars.
Second, our response also stated that these costs are relative to (i.e., net of) the Climate Action Council Scoping Plan Reference Case costs of $4.269 trillion, in 2020 dollars, through 2050 but we did not describe what the Reference Case includes. Absent clear definitions in the Scoping Plan documentation, we do know with certainty what comprises the Reference Case. As a result, Central Hudson neither stated nor implied that the costs in New York related to the reduction of carbon are around $4.6 trillion.
Both testimonies miss a complicating factor in the interpretation of the Reference Case results. Contrary to usual practice the Scoping Plan baseline was a case that included “already implemented” programs. In other words, there are some programs incorporated into the Reference Case that only exist to reduce GHG emissions. As a result, I agree it is impossible for anyone to determine the total Climate Act costs. Again Central Hudson ratepayers are the losers.
Supplemental Electric Vehicle Programs
Dutchess County recommended the removal of funding for the Company’s Supplemental Electric Vehicle (“EV”) Programs. The Dutchess County Testimonial stated:
Fifth on the list of Panel proposals, deals with electrifying the Central Hudson fleet of vehicles. Certainly, as vehicles are retired and a competitive EV market exists for the replacement of similar in-kind vehicles, EV’s should be purchased. However, to prematurely replace existing functional vehicles to advance climate goals in other market sectors unfairly burdens electric customers with addressing the emission needs of other sectors of the New York State economy. The transportation sector should be pulling its fair share to address climate change. The Panel’s position that it desires to lead by example is misplaced. The example that customers desire most from Central Hudson is a high quality, reliable energy product at the lowest reasonable price.
In a victory for commonsense Central Hudson agreed to remove these programs from this proceeding. The company and the PSC Staff agreed that sufficient funding was available within its authorized EV Make-Ready programs to conduct the additionally proposed activities.
Central Hudson Onsite Solar Proposal
The CLSP proposed the installation of solar arrays on Central Hudson offices in Catskill, Kingston. Eltings Corners, and Poughkeepsie. Dutchess County Testimony note that “Justification for the installations is that Central Hudson desires to be a “role model and leader in promoting local and carbon-free technologies.” Some quotes from the arguments:
Central Hudson customers have been exposed to significant amounts of leadership distribution in the State of New York. If there is one area in New York State where the State can claim a significant amount of leadership distribution it is in the area addressing climate change. Electric customers are or will be on the hook for contributing billions of dollars of personal fonds to meet the State’s leadership initiatives.
……
From the current day to 2050 the State measures success through partnerships, outreach and education. and workforce and economic development. implementing the Plan produces no measurements of electric or natural gas customer cost savings, or reducing climate change threats, or reducing carbon in the atmosphere in Dutchess County.
……
To reiterate. Central Hudson’s desire to “support the state’s ambitious solar generation goals” increasing customer costs to Dutchess County customers. in order to promote partnerships, education, and development, provides no tangible Dutchess County customer benefits.
The Rebuttal Testimony responds to the question whether Central Hudson agrees with Dutchess County’s characterization of the Company’s Onsite Solar proposal as increasing customer costs without providing tangible benefits?
No. The Onsite Solar proposal benefits customers in that it contributes to CLCPA emissions reductions targets and by setting an example, the project could encourage customers to participate in distributed generation projects, which lower their energy costs.
They did not respond to the reasons provided in the Dutchess County Testimony. Probably because there is no reasonable response. In my opinion, this Central Hudson program is transparent pandering to the State’s narrative.
It is also possible that the company has looked at the long-term and thinks an energy future where everything is electrified might be good business. That is disappointing because I believe there are plenty of technical people at the company that know that the Climate Act net-zero transition plan is impossible on the mandated schedule and very unlikely in any event. There are too many untested components necessary for reliability and too many upgrades to infrastructure to keep it affordable.
Conclusion
I believe that low cost and reliability are overarching concerns for electric and gas ratepayers. The Hochul Administration has been hiding the total costs of the transition throughout the process. The other missing piece is an energy plan feasibility study that would enable Central Hudson to determine what aspects of the transition they will be expected to implement. This uncertainty and the desire to placate the political aspirations of the Administration to improve the chances for a favorable rate case outcome ultimately impacts ratepayers negatively. The double-digit rate increases for this Central Hudson rate case will become the norm until New Yorke voters demand the politicians back off.
There are many good points in the Dutchess County Testimony relevant to the Climate Act net-zero transition. The following example sums up the problem:
The purpose of Dutchess County government is to serve the citizens of the County and to fulfill its fiduciary responsibilities to provide a safe clean environment promoting fulfilling life styles. In commenting on the Draft Scoping Plan, the County points out the economic pain being imposed on individuals and businesses and the extreme societal risk created by replacement of reliable, secure energy infrastructure with intermittent renewables. While affirming its support for solar and wind power the County notes that the feasibility of meeting arbitrary timing mandates is slim to none but in the process of attempting to meet those mandates the State will require that residents help fund trillions of dollars of unproven energy systems. CO2 emissions are a world-wide phenomenon and for all the pain, sacrifice, and cost the State’s contribution to the reduction in world wide emissions is miniscule. The transition required under the Plan for transportation, buildings, residences, is massive and to avoid catastrophic New York State economy collapse a modified plan is imperative.
Pragmatic Environmentalist of New York 