Public Utility Law Project presents findings on Central Hudson investigations

Brooke Stelzer BSP Reporter

The Public Utility Law Project of New York, also known as PULP, presented findings from an ongoing investigation into Central Hudson’s billing challenges at the Marbletown Town Board meeting on Tuesday, Feb. 21.

PULP is New York state’s only independent nonprofit law firm that advocates on behalf of low-income utility customers. The organization has been operating since 1981 and offers direct services for low-income ratepayers experiencing problems with their utility, such a termination notice for nonpayment or negotiating an affordable deferred payment agreement. They also participate in rate cases and broader policy proceedings that will have an impact on affordability. Last year, PULP participated in over 26 energy debt relief events around the state, including several in the Hudson Valley.

Laurie Wheelock, lawyer and executive director of PULP, shared that the organization has been monitoring Central Hudson since their system became flooded with complaints starting in September 2021. At that time, Central Hudson had launched a new customer information system for billing purposes, replacing its 40-year old system software. Wheelock has been on a public information tour, sharing PULP findings and the current status of the investigation, which includes a class-action lawsuit, with municipalities in the Hudson Valley.

Wheelock began by sharing background on the investigation, which was revealed by the Public Service Commission in March 2022, announcing three investigations into Central Hudson. In April 2022, the Office of Investigations and Enforcement, under the Department of Public Service, began an investigation requiring the company to secure and retain documents related to the launch of its new billing system. The investigation involved reviewing over 4,700 documents, meetings with Central Hudson and interviews with senior-level employees who were responsible for the new billing system, which was meant to be an upgrade.

From February 2022 to December 2022, PULP’s investigation was underway, which included sending a letter to the PSC highlighting concerns about Central Hudson’s billing and operations – including high bills, no bills, automatic withdrawals, inaccurate billing, and questions surrounding whether the billing portal was working. PULP then filed a motion with the PSC requesting a prudence review be conducted following DPS’s investigation, as well as a penalty review.

DPS completed its investigation and released its report on Dec. 15, 2022, which outlined Central Hudson’s 2017 request for a five-year, $96.286 million investment to replace the billing system with modern software that would “improve customer experience.” The PSC approved the funding in June 2018. By August 2021, Central Hudson reported that, after delays in the “go-live” launch of the new software, the project was over-budget by $6.046 million.

DPS reported that the new system had “system control failures” that resulted in incorrect customer bills, as well as overcharges on more than 8,000 customer accounts. The report also found delayed bills and that, as of September 2022, over 8,000 customer bills were still not correct.

Between September 2021 and June 2022, over 30,000 customers who would have normally received an automatic bill had multiple months’ worth of charges automatically withdrawn from their accounts, totaling over $16 million. Between September 2021 and September 2022, DPS received over 2,000 customer phone complaints and over 4,000 comment complaints. The report also detailed the impact the system failures had on community solar and retail energy projects.

Between Sept. 1, 2021, and April 25 2022, over 14,000 customers participating in community solar received late bills, delays which then continued into July for more than 1,000 customers. Community distributed generation (CDG) partners reported delayed payments for net-crediting projects and the inability to help customers due to a lack of information from Central Hudson. The issues also impacted third-party energy suppliers, known as energy service companies (ESCOs). On March 25, 2022, Agway Energy Services filed a petition with the PSC for a deregulation ruling based on Central Hudson’s failure to provide accurate bills. Agway filed complaints mirroring all of the DPS’s investigation findings.

DPS concluded that Central Hudson was aware of “major defects” associated with complex billing prior to the go-live launch date. Upon launch, hundreds more defects were found. The training curriculum for employees included zero hours for training in “complex billing,” “net metering” or “manage retail choice suppliers.” In the months leading to go-live, Central Hudson staff flagged risks, but leadership delayed response until after the launch. Employees also revealed that the Billing Tower Test Group was “not at all ready” for launch of the new software program, both in terms of testing and staffing. DPS also discovered that Central Hudson avoided transparency with billing system issues with customers, instead deflecting to “energy supply prices,” “cold weather” and “increased global demand.” While DPS acknowledged that price increases impacted customers’ bills, they determined that lack of candor on the scope of billing system problems only resulted in further confusion.

As a result of all findings, DPS outlined several violations of the Public Service Law, which included lack of prudence as outlined in the findings, overcharges and delayed billing, back-billing and improper estimates. In conclusion, DPS found that the transition to the new system and failures that followed were foreseeable and avoidable, and that Central Hudson decisionmakers were “negligent and reckless,” according to PULP’s presentation.

The OIE made five recommendations following the investigation, including that Central Hudson should be required to show why the PSC should not commence a civil penalty action and/or an administrative penalty action, pursuant to Public Service Law 25 and 25-[a] for violations. The OIE also recommended that the PSC initiate an administrative prudence proceeding to recoup imprudently incurred expenses made by Central Hudson as it relates to launch of the new system. Further recommendations include requiring Central Hudson to conduct actual readings of customer meters each month and discontinue alternative month estimates. And finally, that PSC should order a refund of payments made by customers who were illegally back-billed, as well as providing DPS’s report delivered to chief executive and general counsel of other gas and electric utilities in New York.

On Jan. 17, 2023, Central Hudson filed a 92-page response to the DPS investigatory report and the PSC order, defending their actions and explaining why the PSC should not begin a proceeding or penalty actions. They also filed a motion to begin a proposed plan to adjust billing practices and to conduct monthly meter reads, eliminating alternate month bill rates. The timeline included phased-in readings, with completion slated for February 2026.

On Jan. 24, 2023, Agway Energy sent a letter to the PSC arguing that Central Hudson did not correct their billing issues and asked the commission to hold them accountable. As of this BSP printing, the PSC is reviewing Central Hudson’s reply, the DPS report, Agway’s letter and public comments to decide whether to open a prudence review and penalties.

In addition to the DPS report and PSC’s investigation, there is a New York state investigation, led by Sen. James Skoufis (D, 42nd Senate District). That report was released in December 2022 about billing issues, supply volatility and more as it relates to the community choice aggregation program (CCA) throughout the Hudson Valley.

In July 2022, participants in Hudson Valley Community Power – a CCA serving Beacon, Poughkeepsie, Clinton, Marbletown, New Paltz, Philipstown, Red Hook, Saugerties and Cold Spring –were returned to Central Hudson when Columbia Utilities Power defaulted as the provider. Central Hudson absorbed about

23,000 customers at that time, but billing didn’t resume until October 2022.

The law firm of Lowey Dannenberg filed a consumer class action lawsuit in the Supreme Court of New York at Dutchess County against Central Hudson at the end of December 2022.

In a statement to BSP on Feb. 22, Wheelock stated, “From the very beginning, PULP knew firsthand that something was awry, and the Department of Public Service’s inquiry into Central Hudson all but confirmed that. Although the Company has finally begun to acknowledge the frustrations, economic injustices and widespread harm that they have caused their customers, more needs to be done. Customers need to know they will be made whole and that Central Hudson will be held accountable for their negligence. We will therefore continue to call for the Commission to commence a prudence review and assess potential financial penalties.”

Wheelock’s advice for Central Hudson customers is to try to speak with Central Hudson first, acknowledging that the experience may be frustrating. The second step, if customers can’t reach Central Hudson or if there is no resolution, is to file a complaint against the company with the Department of Public Service by calling 1-800-342-3377, or by filing online. The Public Utility Law Project can be reached by calling the hotline: 1-877-669-2572, or via email – info@ utilityproject.org.