The Settlement Agreement between the two utilities indicates that the acquisition is in the public interest pursuant to New York State Public Service Law, Section 70 and, therefore, the aforementioned parties recommend approval of the Settlement Agreement by the NYCSC. Support was also received from several counties for the portions of the Settlement Agreement of relevance to the respective counties' interests. Closing of the acquisition is now expected to take place during the second quarter of 2013, subject to receiving approval from the NYCSC.
"This Settlement Agreement provides multiple and substantive benefits to our customers and the communities we serve," said Steven V.
Lant, Chairman of the Board and President of CH Energy Group. "The proposed terms also retain substantial autonomy for Central Hudson, allowing us to continue our mission of serving our customers well, while providing opportunities to improve service through a close association with the Fortis family of utility companies. We are pleased and excited to have reached this step toward finalizing the transaction with Fortis."
"Fortis worked closely with management of Central Hudson through this thorough regulatory approval process and has gained increased knowledge about the utility's operating philosophy and the regulatory oversight requirements in New York State," said Stan Marshall, President and Chief Executive Officer, Fortis Inc. "This Settlement Agreement will provide tangible benefits to Central Hudson's customers and will strengthen the utility's ability to meet the energy needs of its current and future customers."
The Settlement Agreement will moderate future customer rate increases by providing $35 million to cover expenses that normally would be recovered in customer rates, for example significant restoration expenses related to Superstorm Sandy, the October 2011 snowstorm and Tropical Storm Irene, and other similar expenses. Also, under the terms of the Settlement Agreement, Central Hudson customers will save a guaranteed $9.25 million over five years resulting from the elimination of costs the utility now incurs as a public company.
Additionally, the Settlement Agreement requires that customer delivery rates be frozen until July 1, 2014 and requires the establishment of a $5 million Customer Benefit Fund for economic development and low-income assistance programs for communities and residents of the Mid-Hudson Valley.
Becoming part of the Fortis family of utilities, which currently serve more than two million customers, will bring benefits to Central Hudson, explained Lant. "Central Hudson will be in the position to benefit from shared experiences and knowledge from other Fortis utility companies, as all of us seek to continuously improve our operations," he said.
"In addition, Fortis has greater access to capital that will enhance Central Hudson's ability to make significant investments in the electric and gas system to improve customer service and system reliability, including those recommended in the Governor's Energy Highway initiative."
Central Hudson will continue to maintain its name and Poughkeepsie headquarters, as well as all of its employees and the utility's substantial civic and community presence in the Mid-Hudson Valley. The Settlement Agreement also provides financial protections for CH Energy Group, Central Hudson and its customers as part of the larger Fortis organization, and Central Hudson will continue to have annual independent financial audits. Within one year, the Board of Directors of Central Hudson will transition to a majority of independent directors, increase members from the Hudson Valley and New York State, and include representatives from Fortis.
"Fortis remains focused on closing the acquisition and providing the benefits to Central Hudson customers as quickly as possible," concluded Marshall.
The definitive merger agreement was announced between CH Energy Group and Fortis in February 2012. CH Energy Group shareholders approved the transaction in June 2012, and several other required regulatory approvals by U.S. federal agencies were subsequently received. For more information and to view the Settlement Agreement, visit www.CentralHudson.com or www.FortisInc.com.