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NYSEG rate hike hits strong opposition

A nearly 10 percent electric rate hike sought by New York State Electric & Gas Corp. ran into opposition Wednesday from Gov. David A. Paterson, the state Public Service Commission's staff and U.S. Sen. Charles E. Schumer.

Paterson said he was "disappointed" that NYSEG and its sister company, Rochester Gas & Electric, are seeking a rate increase for its electricity and natural gas customers, after agreeing not to try to raise rates until October, at the earliest.

"I oppose the increase and ask that the company honor its commitment to New Yorkers," Paterson said in a statement.

The proposed 9.9 rate increase would add $8.80 to the average residential customer's monthly electric bill. NYSEG's natural gas customers, which are limited locally to portions of Niagara County and the Southern Tier, would face an 8.8 percent hike, or an average of $12.20 per month, under the proposal.

Paterson urged the PSC to do a thorough review to determine if an early rate increase is needed, while also "giving due consideration to the difficult economic circumstances facing all New Yorkers."

Paterson was joined in opposing the rate increase by the PSC's staff, which plans to recommend that the commission reject the rate hikes. The PSC staff, which can only make recomendations to the full commission, will contend that NYSEG and RG&E have not demonstrated that their financial performance had not deteriorated to the point where it would be permitted to seek a rate increase, said PSC spokesman James Denn.

NYSEG's parent company, Energy East Corp., agreed last September not to seek a rate hike for at least 13 months as a condition for the PSC approving its $4.5 billion merger with Spanish power producer Iberdrola SA.

The only way NYSEG can raise rates earlier was if it can convince the PSC that its financial condition has weakened to the point where it putting safety and reliability at risk. The PSC's staff indicated at a preliminary meeting Wednesday in Albany that it will argue in a filing it expects to make on Friday that NYSEG and RGE have not met that threshold, Denn said.

A conventional rate increase request typically takes 11 months from the time it is proposed until the commission acts on it, Denn said. NYSEG and RG&E are seeking an accelerated timetable for its rate hike plan, one that would render a decision by July 1, if the commission agrees to consider it at all.

An Energy East spokesman said the company did not have an immediate comment Wednesday. The utility previously told the commission that the rate hike is needed because the company expects "a significant shortfall in cash needed to make required infrastructure improvements."

NYSEG said in its filing that the current credit crisis is doing just that, a problem that is being compounded by the company's credit ratings, which are are at the lowest investment grade level and lower than any other major New York utility, driving up borrowing costs and periodically making capital less available.

The rate increase would allow NYSEG to potentially invest more than $800 million to improve reliability, expand infrastructure and increase the generation of hydropower. The utilities also pledged to increase aid to low-income customers by 20 percent and to develop new energy efficiency programs to help consumers use less energy.

Sen. Charles E. Schumer, D-N.Y., repeated his opposition to the rate increase on Wednesday, saying it violates the terms of the merger deal and "reeks of profit-mongering."

Schumer said he was troubled by the utilities' recent decision to reduce capital spending this year and urged the PSC to make sure Energy East lives up to its promise under the merger to spend $200 million on renewable energy projects in the state over the next two years.

NYSEG's last increase in its electricity delivery rates came in 1996, and those rates have been decreased twice since then. To win approval of the merger from state regulators, Iberdrola agreed to set aside $275 million for potential rate reductions or to offset future rate increases.

The rate increase would apply only to the cost of delivering electricity and natural gas to consumers -- the only portion of utility bills regulated by the PSC. The actual cost of the l electricity or natural gas used by consumers is based on market prices.

e-mail: drobinson@buffnews.com

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