The 2012 move by Canadian energy company Fortis Inc. to acquire CH Energy Group encountered whitewater May 3 with an administrative court ruling that contends the current deal”™s negatives outweigh its positives.
The ruling came from a pair of administrative law judges assigned to oversee the proposed $1.5 billion deal. It is part of ongoing fact-finding efforts that include a public comment period open till May 17. Both Fortis and Central Hudson are proceeding toward hoped-for fruition, which requires state Public Service Commission approval.
The so-called “recommended decision” maintains that without modification of the terms of the proposal filed Jan. 25, “the benefits of the acquisition are outweighed by perceived detriments remaining after mitigation.” Comments received by May 17 are due responses by May 24.
The PSC listed its concerns last month, including:
- financial measures to protect the financial integrity and credit standing of Central Hudson;
- a freeze on CH electric and gas delivery rates through July 1, 2014;
- a guarantee of $9.25 million in savings to ratepayers over five years;
- provision of $35 million to cover expenses that would normally be included in rates, such as storm restoration costs associated with Hurricane Sandy;
- establishment of a $5 million Community Benefit Fund for economic development and low income customer assistance programs;
- continuation of customer service, reliability and safety mechanisms with increased negative revenue adjustments for failure to meet targets;
- adoption of provisions to ensure that funds provided in rates for planned maintenance and capital improvements are timely expended;
- establishment of a pilot program to test ideas for economically expanding gas service to new customers; and
- assurance of local representation on the Central Hudson board of directors and a requirement that any proposed relocation of Central Hudson headquarters outside the service territory be approved by the PSC.
“We intend to participate together with Fortis in further proceedings and discussions with the Public Service Commission and other parties to gain approval of the merger agreement,” said Steven V. Lant, Chairman, president and CEO of CH Energy Group, parent of utility Central Hudson Gas & Electric Corp.
He noted that while there can be no assurance that such approval will be granted, Central Hudson believes that the concerns expressed in the Recommended Decision can be successfully resolved, and that the transaction is expected to close during the second quarter of 2013.
In a statement, Fortis said it “intends to engage in further discussions to obtain the Commission”™s approval of the acquisition, although there can be no assurance that such approval will be granted.”
Fortis is the largest investor-owned distribution utility in Canada, serving more than 2 million gas and electricity customers. Its regulated holdings include electric distribution utilities in five Canadian provinces and two Caribbean countries and a natural gas utility in British Columbia, Canada. The Corporation owns non-regulated generation assets in Canada, Belize and upstate New York. It also owns hotels and commercial real estate in Canada.
Poughkeepsie-based Central Hudson serves some 300,000 electric customers and another 75,000 gas customers regionally across 2,600 square miles. Its subsidiary, Griffith Energy Services, serves 56,000 customers in the mid-Atlantic region.
