News from New York State Public Service Commission

For more information contact: James Denn, 518-474-7080

PSC Establishes Permanent Electric Rates for O&R

ALBANY, NY (10/17/2007; 1428)(readMedia)-- The New York State Public Service Commission (Commission) today established permanent electric rates for Orange and Rockland Utilities, Inc., (O&R or the company). Rates will remain unchanged from those currently in effect. The Commission increased allowances included in the company’s rates for the cost of pensions and other post-employment benefits (OPEBs) incurred by O&R. The Commission also set the company’s prospective earnings at a more appropriate level, rather than at the excessive levels experienced by the company most recently.

“The Commission’s concern regarding excessive earnings levels, resulting in rates that were not just and reasonable, led us to institute a proceeding and make O&R’s rates temporary as of March 1 of this year,” said Commission Chairwoman Patricia L. Acampora. “Today the Commission applied ratepayer over-payments made since March 1 to the company’s deferred balances of amounts due to pension and OPEB expenses. This action by the Commission avoids adverse consequences for O&R’s customers resulting from escalating pension and OPEB costs that were not being covered by current rate revenue. While customers will not receive a check or direct refund, they will benefit from the reduction of what would otherwise be a large future ‘IOU’ to the company.”

Permanent Rates

In establishing permanent electric rates for O&R, the Commission determined that rates will remain unchanged from current levels. However, the Commission increased the allowance included in base rates by approximately $13.1 million for the costs of pension and OPEBs. The increased imputation for pension and OPEB costs will come from a decrease in the allowed return on equity (ROE) to the level of approximately 9.1 percent. The overall effect of the Commission’s action is to shift some of the revenue currently being collected in base rates from earnings to pensions and OPEBs.

Temporary Rates

In order to capture customer overpayments made during the temporary rate period, all earnings above an ROE of 9.1 percent will be attributed to ratepayer benefit. Rather than actual refund checks, ratepayers will receive this benefit through payments to pension and OPEB deferral balances. By reducing those balances, this action reduces the amount of the “IOU” that would need to be recovered from ratepayers in the future.

Property Tax Refunds

Consistent with a longstanding policy of the Commission, O&R will be allowed to retain 10 percent of the tax refunds resulting from litigation with the Towns of Orangetown and Haverstraw in Rockland County. The Commission determined that retention of 10 percent of the property tax benefit for O&R’s shareholders is ample award for the company’s efforts to pursue tax reductions in this instance and incentive to continue such efforts in the future. The remaining tax benefits will be attributable to ratepayers and included in the netting of regulatory credits and debits.

Incentive Programs

O&R will continue to operate under customer service and service reliability performance incentive programs, subject to negative revenue adjustment if the company fails to maintain targeted levels of performance. Today the Commission increased O&R’s level of revenue at risk for these programs to move the company more in line with other utilities in the state, which all operate under similar performance incentives with significantly greater amounts at risk. Also, the increase in the level of revenue at risk for failure to meet performance targets is necessary to continue to make the incentive programs meaningful.

Energy Efficiency Program

The Commission today authorized O&R to use unexpended funds to prepare for the implementation of a future energy efficiency program. The unexpended funds may be spent to fund a study and hire staff in contemplation of implementing a future energy efficiency program, at a cost of $150,000-$200,000 for the study and $140,000-$160,000 for the staff.

Low Income Program

The Commission today expanded O&R’s existing low-income program to provide a higher credit to low-income heating customers. Under the expanded program, low-income heating customers will receive a credit of $10 rather than $5 per month and non-heating Home Energy Assistance Program or HEAP-eligible customers will receive a $5 bill credit every month rather than just during the months of May through September. On an annual basis, total program costs will be $430,000, which will be funded through use of available credits, at least through the upcoming rate year.

The Commission’s decision today in Cases 06-E-1433 and 06-E-1547, when issued, will be available on the Commission’s www.dps.state.ny.us Web site by accessing the File Room and searching for those case numbers. Many libraries offer free Internet access. Commission decisions can also be obtained from the Files Office, 14th floor, Three Empire State Plaza, Albany, NY 12223 (518-474-2500).

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