Spitzer To Fight Pending Niagara Mohawk Rate Requests

Stressing that lower utility costs are a critical component in helping to create jobs in Western New York, Attorney General Spitzer today announced that he will fight a number of requests that Niagara Mohawk has pending before the state Public Service Commission.

Spitzer spoke out today about NiMo's current rate increase request, as well as rate proposals the utility is making in conjunction with its request to merge with National Grid USA, at Oehler Industries, a small Buffalo business that is heavily dependent on electric power.

"One of the key components that businesses look at when considering whether to locate or expand in an area is utility costs, and right now, Niagara Mohawk's policies, as well as its pending requests, are contributing to Western New York being behind the eight ball when it comes to competing for jobs," said Spitzer.

"The Public Service Commission will be making decisions in the near future on a number of NiMo requests that will have real life and long-term consequences on the area's ability to attract and retain jobs. That is why it is so critical for all of us to speak out now."

As Attorney General, Spitzer has the right to file objections to any utility request in front of the PSC. He has directed his Telecommunications and Energy Bureau to oppose a number of NiMo measures that will be decided by the PSC by the end of the summer.

Spitzer's four rate payer areas of concern are:

  • Stranded Costs - all NiMo customers - commercial, small business, and residential - are now being and, under the utility's current rate request, will still be charged for the utility's losses on the sale of its Nine Mile 1 and Nine Mile 2 power plants. The losses could total $1.1 billion; Spitzer believes NiMo shareholders, not its customers, should absorb these costs. While the sale of the nuclear plants will reduce some of these costs, the Attorney General feels that all stranded costs need to be borne by the company, not its customers, and that the company needs to commit to that policy now.
  • Exit Fees - Currently, NiMo has the power to charge exorbitant fees to those customers seeking to leave the utility and set up their own competing systems. NiMo is the only utility in the state that the PSC has given this power to. The exit fees virtually eliminate any competition because of the great expense that any municipality would incur if it left NiMo's distribution system;
  • Automatic Pass-Through Mechanism - NiMo is currently seeking an automatic pass-through system for all of its customers. Under such a plan, the utility would be permitted to pass along to its customers all of its costs for power, fuel, and many other expenses. Spitzer believes that the total pass-through of all power costs to residential and small business customers places an unfair burden on those customers who can least make an impact on the electric power markets. The pass-through removes incentives for the utility to engage in hedging strategies in order to get the best price for power.
  • Length of Request - In the rate proposal pending as part of the merger plan, the utility is seeking approval for a ten year plan with the PSC. Spitzer believes that is far too longgiven the current state of transition in the power market.

"In sum, the current requests made by Niagara Mohawk to the PSC violate each of my rate payer protection principles and represent nothing less than a 'utility protection' plan," said Spitzer. "NiMo is looking for a long-term, virtually risk-free agreement that will leave its customers holding the bag and footing the bill for both its past mistakes and future cost increases.

"It is incumbent upon the PSC to protect consumers and businesses, not the utility. Over the next few weeks, we have a moment in time to ensure that all of our voices are heard on these critical issues. If NiMo gets its way on its current requests, the fragile Western New York economy will pay the price for years to come."

Spitzer was given a tour of Oehler's operations by company owner Barry Appelbaum, who joined him at the news conference along with the Chairman of the Erie County Industrial Development Agency, Bill O'Laughlin.

A few months ago, the Attorney General released an action plan to help solve the state's energy problems. In it, he called for a comprehensive approach that included increasing generating capacity, decreasing demand, expanding transmission capacity and more reliance on renewable energy sources.

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