mediacontact


For Immediate Release: 03/14/2024 Rory M. Christian, Chair Contact: James Denn \| James.Denn@dps.ny.gov \| (518) 474-7080 http://www.dps.ny.gov http://twitter.com/NYSDPS 24019/21-M-0541 March 14, 2024
PSC Modifies Central Hudson’s Implementation Plan and Directs Central Hudson to Implement Audit Recommendations
Audit Examined Information Systems Planning and Implementation, Customer Operations, Improvements to Support Clean-Energy Goals, and Contractor Oversight Customer Billing Problems and Previous Bill Surges Remain Under Regulatory Microscope ALBANY — The New York State Public Service Commission (Commission) today ordered Central Hudson Gas & Electric Corporation (Central Hudson) to implement the recommendations made in the independent, comprehensive management and operations audit of Central Hudson to improve the utility’s construction program planning and operational efficiency, as well as improve how Central Hudson plans for and manages information systems projects, customer operations, and pipeline safety. Meanwhile, the investigation into Central Hudson’s customer billing problems remains ongoing. “Our audit examined Central Hudson’s electric and gas operations in New York State, as well as governance, management, and customer operations, including bill estimation processes,” said Commission Chair Rory M. Christian. “This detailed review provided an assessment of Central Hudson’s grid modernization efforts and examined how the company is planning for and managing projects related to the Climate Leadership and Community Protection Act or Climate Act.” The law provides the Commission the authority to conduct management and operations audits of natural gas and electric utilities. For large electric and natural gas utilities, such as Central Hudson, the law requires such audits at least once every five years. The law further authorizes the Commission to approve or modify a utility’s implementation plan, at which time the plan becomes enforceable. The scope of the audit was consistent with the statutory directive to review the company’s construction program planning and operational efficiency. The scope included a follow-up review of certain issues from the previous management and operations audit, such as electric system planning, project and program management, and work management processes. The scope also included a review of information systems planning and implementation, elements of customer operations, and pipeline safety, including the company’s leak-prone pipe replacement program. Furthermore, the audit scope required the consultant to review improvements to electric load forecasting processes to support grid modernization goals. The audit also reviewed how the company incorporates those goals, New York State’s Climate Act goals, and other regulatory objectives into performance management and construction program planning processes. The audit identified significant opportunities for improvement at Central Hudson: Billing and Information Systems: Central Hudson experienced numerous billing issues after replacing its 40-year-old customer information system. After implementation, the company experienced a dramatic 900 percent increase in adjusted bills resulting from the customer information system’s replacement. The auditor found the company’s implementation suffered due to the inexperience of the company’s information technology (IT) leadership team and its heavy reliance on software vendors for tasks typically managed internally. The consultant noted Central Hudson’s practice of issuing bills monthly but reading meters every other month contributed to billing issues and a large increase in customer complaints. The consultant further noted that, as of June 2022, only 53 percent of Central Hudson’s electric and gas meters featured Automated Meter Reading technology, which provides walk-by or drive-by read capability. The auditor recommended that Central Hudson read meters monthly to better align consumption with changing energy prices and reduce billing issues and resultant customer complaints. In July 2023, Central Hudson agreed to a monthly meter reading pilot program that is under review. Executive Management: The auditor found that Central Hudson’s executive management organizational structure was suboptimal and recommended that Central Hudson’s Board take steps to ensure appropriate oversight of critical functions such as customer service and gas operations. Central Hudson’s final implementation plan accepted this recommendation but identified only one-time actions to respond to the auditor’s concerns. The Commission modified Central Hudson’s plan to implement this recommendation by requiring Central Hudson to annually report changes to its executive management team. Strategic Planning and Climate Goals: The auditor found that Central Hudson has improved its strategic planning process since the last audit but noted several opportunities for additional improvement. The auditor found that climate goals are not included in yearly business plans and performance management team goals. Further, the auditor found that the company’s formal strategic plans did not identify business opportunities linked with climate change initiatives, nor were these potential benefits considered at the Board level. Central Hudson’s final implementation plan requires the company to enhance its strategic planning to demonstrate commitments to meeting Climate Act goals with corporate objectives and team goals updated to better integrate climate commitments in its performance management process. Benchmarking: The consultant found that Central Hudson had not advanced its benchmarking practices since the prior management and operations audit. The consultant discovered that Central Hudson does not benchmark its customer service performance against other similar utilities, nor does it share best practices outside of its parent organization, or utilize its compensation program to seek performance improvement for its customers. Central Hudson’s final implementation plan requires the company to implement performance benchmarking for customer service operations in multiple areas using an accredited benchmarking data source. Further, Central Hudson will prepare formal performance assessments using industry benchmarking data from recognized national organizations and develop plans for improving low-performing areas. The Commission modified Central Hudson’s plan by requiring Central Hudson to integrate the results of these benchmarking exercises with its compensation program to drive improvements to its performance for customers. On April 20, 2023, the Commission ordered the release of the resulting final report which contained 37 recommendations for improvement at Central Hudson. On May 22, 2023, Central Hudson submitted its initial implementation plan to implement the audit recommendations. Staff reviewed the company’s initial plan and noted that the proposed implementation approaches were likely to result in Central Hudson taking no action to implement certain recommendations or fully address the auditor’s underlying findings. On January 31, 2024, Central Hudson filed its revised implementation plan for the audit. With today’s decision, the Commission approves and modifies the final implementation plan and directs Central Hudson to implement the plan as modified by the Commission. Today’s decision may be obtained by going to the Commission Documents section of the Commission’s Web site at www.dps.ny.gov and entering Case Number 21-M-0541 in the input box labeled "Search for Case/Matter Number". Many libraries offer free Internet access. Commission documents may also be obtained from the Commission’s Files Office, 14th floor, Three Empire State Plaza, Albany, NY 12223 (518-474-2500). If you have difficulty understanding English, please call us at 1-800-342-3377 for free language assistance services regarding this press release.

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PSC Modifies Central Hudson’s Implementation Plan and Directs Central Hudson to Implement Audit Recommendations