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Freeport electric sues state PSC charging improper 'intervention' by commissioner

Freeport's electric utility, which serves 14,700 customers in

Freeport's electric utility, which serves 14,700 customers in the village, has sought a 4.65% rate hike to help cover costs related to Superstorm Sandy and COVID-19.  Credit: Yeong-Ung Yang

The Village of Freeport’s electric utility is in "perilous and unsustainable" financial straits after the state Public Service Commission in November denied a rehearing of the utility’s request for a rate hike, according to a suit filed against the commission seeking to reverse the ruling.

In the suit, filed Nov. 3, the village alleged that a PSC commissioner "personally intervened" to object to the 4.65% rate hike Freeport’s electric utility had sought to help cover costs related to Superstorm Sandy and COVID-19. The amount to be collected from the village’s 14,700 ratepayers would have brought the utility around $1.26 million.

In its lawsuit, the village alleges that in December 2019, the commissioner requested a meeting with the village mayor to discuss an unspecified "controversy" unrelated to the rate case, but the village declined the request.

"From this point forward, all prior discussion" of the village’s need for a rate hike was "effectively disavowed" by the commission, the Freeport suit charges. The village said it learned that a subsequent delay in its rate-hike request was the result of "direct intervention" by the commissioner, who is not named in the suit.

The PSC, in a court response to the suit filed in state Supreme Court in Albany in December, said, "The village’s accusation of improper bias is false."

In their court filing, lawyers for Freeport noted that the assessment for a village power plant paid by ratepayers had stood unchanged for more than 17 years at $3.6 million. But after Freeport filed for a rate hike, the PSC directed the so-called tax-equivalency payment for its power plant be reduced by 62%, or $2.227 million, to $1.443 million.

Last week, in response to Newsday questions, a PSC spokesman noted the village "was put on notice by a commission order issued in 2014" about potentially reducing the tax-equivalent payment, "well before" the commissioner alleged to have intervened had been appointed to the PSC.

The village in the suit called the intervention and the outcome "arbitrary and capricious" and seeks reversal of the order denying the rate hike and lowering the tax payment.

Newsday has previously reported that the commissioner is Tracey Edwards. In a statement to Newsday Tuesday, Edwards, a former Huntington Town Board member who also is Long Island regional director of the NAACP, said, "I recused myself from this action and I was not on the Public Service Commission in 2014," when the PSC said it first telegraphed to the village that it was examining the tax-equivalent payment. "I look forward to continuing to protect the interests of ratepayers and other stakeholders as a Public Service Commissioner."

The suit says Freeport's electric utility "cannot balance its budgets for 2021 without the [tax] payment" without incurring "substantial irreparable harm."

Howard Colton, the Freeport Village attorney, said the village has advanced some $3.5 million to operate the utility over the past year in the absence of the rate hike and COVID-related arrears from customers.

A Public Service Commission spokesman declined to comment and pointed to responses in court and PSC filings.

In its answer to Freeport’s lawsuit, the PSC said its analysis of the utility’s finances resulted in its determination not to allow it to increase rates. As for the tax-equivalency payment, the commission argued it is "entitled to use any ratemaking methodology that it sees fit as long as the end result is just and reasonable."

The PSC, in its answer, also called "specious," the village’s assertion that the rate proceedings were "tainted by one commissioner’s bias."

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