Business & Tech

O&R Asks for 11.9% Rate Hike Over Three Years

Utility seeks state OK for plan that could be plugged in.

Orange and Rockland Utilities today filed a request for an increase in its electric base rates with the New York State Public Service Commission that would increase customer bills by 11.9 percent over three years.

The proposed rates for electric service are necessary to meet O&R customer needs by providing for the safety, reliability and security of the electric delivery system, according to the utility.

The proposal provides for revenues to meet operating and infrastructure needs, taxes and fees and increased costs associated with employee health care and pensions. The proposed rates also support the company's ability to maintain a level of creditworthiness sufficient to raise necessary capital within the competitive market, according to O&R.

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O&R is seeking approval of an electric distribution base rate plan that would increase customers bills overall by 11.9 percent, or $78 million over three years, beginning July 1, 2011. The increase would total an average of approximately 4 percent annually.

O&R says its last rate hike request was 17 years ago.

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Under the plan, the overall bill for a typical residential electric customer using a monthly average of 677 kWh would increase an average of $13.66 per month, from $131.31 to $144.97. In the second year of the plan, the monthly increase is $4.93, making the monthly bill $149.90 and in the third year of the plan, the increase is $2.70, making the monthly bill $152.60.

The first year of the proposal reflects a higher increase than subsequent years to allow the company to begin recovering costs that it incurred over the past three years, such as storm restoration costs, which were not passed back on to the customers.

In the event that a three-year plan is not approved, O&R also is filing a one-year rate plan that calls for an increase of 7.3 percent to the total bill.

O&R contends the three-year plan serves the rate stability interests of its customers better than the one-year plan and it provides the company with the necessary flexibility to develop infrastructure and energy-efficiency programs. The company is also offering a revenue-equivalent, multi-year option that would divide the rate increase into three equal parts over the three-year rate period.

In none of these cases would customer base rates increase prior to July 2011.

"We keenly understand that we need to continue to work harder and smarter to reduce costs, particularly during these economic times," said O&R President and CEO Bill Longhi. "We also recognize how vital a dependable electric system is to a strong community, a healthy local economy and the well-being of its residents. That's why O&R has tried to strike a balance in this proposal between keeping the rates as low as we can while meeting the need to maintain the safe and reliable operation of the electric system."

In a statement today, O&R says it has taken steps to control the wages, as well as implementing programs to increase productivity and efficiencies. The also says it has redesigned its healthcare plan, increased employee contributions to healthcare costs and changed its insurance carrier — all to save money. O&R also replaced its traditional pension plan with a plan for all new employees that will cost customers less over time.

O&R says it also tries to keep costs down by challenging what it considers to be unreasonable property tax assessments when they occur. The company also opposed legislation that places upward pressure on rates. Taxes, fees and permits accounted for 15 percent of O&R's operating budget in 2009, according to the utility.

Cited by O&R as the most dramatic increases in this cost category has been the State Energy and Utility Service Conservation Assessment. That one measure, effective from 2009 through 2014, increased O&R's cost for this fee in its electric bills from $1.3 million in 2008 to $13.1 million in 2009. For electric and gas bills combined, the increase was from $2.1 million in 2008 to $21.5 million in 2009, according to O&R.

In the past year, O&R also played helped form a coalition of civic and business leaders to oppose efforts to increase the Gross Receipts Tax by 200 percent and two separate attempts to impose prevailing wage requirements on utility companies' contracts — one for excavating contractors and one for support services contractors.

Al Samuels, president of the Rockland Business Association, said the rate hike proposal from O&R is not surprising. He joins the utility in pointing to rising government fees and proposed rules such as the prevailing wage measure as expenses that end up being paid by the consumer.

"The problem is not the utility, the problem is the government," said Samuels.

Since its last rate hike filing, O&R says it has made substantial investments in its electric distribution system that serves about 223,700 customers in Rockland and parts of Orange and Sullivan counties. O&R reports it has spent more than $137 million since July 1, 2008 on new electric system construction, upgrades and maintenance.

O&R says it plans to continue upgrading its electric system by constructing a number of new substations. Among those proposed projects are: West Nyack ($15 million), Goshen ($13 million), Orangetown/Corporate Drive ($33 million), Orangetown/Tappan ($15 million), Little Tor in Clarkstown ($7 million) and West Warwick ($25 million). Also planned are upgrades for the existing Sugarloaf substation in Chester ($11 million), the New Hempstead substation in Clarkstown ($12 million), and the Port Jervis substation ($18 million). Plans also call for the construction of a new transmission line from the Ramapo substation to the Sugarloaf substation ($13 million).

O&R also will be implementing further elements of its multi-year Smart Grid pilot project ($2 million) which includes improvements to its electric distribution system in the West Nyack area, improvements to its West Nyack substation and the incorporation of Smart Grid technology in the proposed new Snake Hill Road substation in West Nyack.

Smart Grid technology includes communication equipment that can signal the status of electric system components and indicate where attention may be needed.

To help attract more new business to the community, O&R proposes doubling its business relocation and expansion incentive rates from a 10 percent discount on electric delivery rates for five years to 20 percent. O&R also is proposing to lower, from 250 kW to 100 kW, its threshold for business customers to receive additional contributions from O&R for facility extensions associated with new building construction or expansion, making this program more available to mid-sized business customers.

O&R's current energy efficiency programs include support of efficiency measures for small businesses where O&R picks up 70 percent of the cost, and rebates for businesses that install energy efficient lighting, HVAC, motors and refrigeration equipment. The company has also filed a program to assist residential customers with the purchase of energy-efficient appliances. That program has not yet been approved.

O&R also is proposing the development of a targeted energy efficiency model which, by focusing on particular areas of increased customer consumption, may defer the need for constructing more delivery infrastructure. O&R's plan calls for sharing any identified avoided costs with customers.

And, O&R says it is proposing to establish a new outreach function designed to help its customers save energy and money, and reduce greenhouse gas production. The initiative calls for the development and deployment of O&R energy experts to advise customers through public meetings, in publications and through other media. These experts will provide information about programs, procedures and products that will help customers save energy, use it safely and wisely and realize dollar savings that energy efficiency can provide.

O&R has experienced a significant demand from the public for this kind of information and expects the demand for energy-efficiency information and customer education services to increase even more as new technology and customer products become increasingly available.


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