Kingston, NY – A storm on July 3rd disrupted Central Hudson’s power service for roughly 12% of its customers. Below is Assemblymember Shrestha’s comment:

“First and foremost, I want to thank all the Central Hudson workers who’ve been working relentlessly to restore outages that affected approximately 12% of customers in yesterday's storm—they're out there doing dangerous work instead of spending the holiday with their family. The problem with our grid, however, is systemic.

A fundamental reason why investor-owned utilities like Central Hudson don't have a resilient grid, and are increasingly vulnerable to weather events, is because their financing model is inherently in conflict with prioritizing resiliency. In the case of Central Hudson, Fortis shareholders provide 48% of the funding with their investments, and in return, they need to be rewarded with handsome profits. The amount of these authorized profits is calculated by applying the rate of return on equity to the total shareholder investment in capital projects. This means the more Central Hudson invests in capital projects, the higher the profits for the shareholders. Meanwhile, the customers have to pay bills that are high enough to cover 100% of the costs of running the company plus the profits. This model makes it effectively impossible to invest in a resilient infrastructure: maintenance like tree trimming doesn’t generate profits and capital-intensive solutions like burying power lines underground would be too expensive because of its impact on authorized profits, as well as Central Hudson’s inability to access low-cost capital.

On our street, where several fallen trees took out power lines, the power went out almost immediately, and is not expected to be back until tomorrow. According to Central Hudson, affected areas in Ulster are not expected to be restored until 4pm tomorrow, and those in Dutchess are not expected to be restored until 10pm tomorrow. This is a significant Class 2 Event, only one level less severe than the most severe. In the Netherlands, however, all low-voltage and medium-voltage power lines are buried, and in Germany, almost all of medium-voltage power lines and almost 90% of low-voltage power lines are buried, significantly reducing outages and electricity-related injuries (high-voltage lines are not suitable for locating underground). In New York, a PSC study found that the total cost of burying lines would be so capital-intensive – including the high profits it would generate – that the price would be unacceptably high for the customer.

If Central Hudson were to be replaced with the publicly-owned corporation we have proposed, the Hudson Valley Power Authority (HVPA), things would be different. First, the most significant and immediate impact would be a change in the financing model, eliminating the windfall profits that come with capital-intensive projects. Second, HVPA would also eliminate other costs borne by the customers, such as state and federal taxes and high interest rates Central Hudson currently pays. With access to low-cost capital, and elimination of profits, HVPA would be able to implement efficiencies and upgrades that would increase reliability and lower bills.

Lower bills would also create the opportunity to (1) conduct tree maintenance more regularly and thoroughly, and (2) invest in resiliency of which the upfront cost can be spread out over a long time so as to minimize or even neutralize the impact on customer bills, and of which the cost would be lower when a state corporation does it because of access to lower-cost capital and elimination of profits.”

The Office of Assemblymember Shrestha will be hosting in-person town halls this summer to discuss details of the bill and take questions.