Chalillo Dam

Fortis proposed buyout of NY utility jeopardized by corporate reputation

(June 12, 2013) As Canadian electric utility holding company Fortis Inc. awaits a decision on its proposed $1.5-billion buyout of New York’s CH Energy Group, a coalition of groups opposed to the takeover see Fortis’ past performance in Belize and British Columbia as a warning of what may lie in store for them. Probe International provides a round-up of reports on the controversy.

Fortis Inc.’s proposed acquisition of CH Energy, the parent company of electric and gas utility Central Hudson, represents a substantial merger that would impact 375,000  electric and gas customers in New York State’s Mid-Hudson River Valley. Public concern over the takeover escalated in temperature after a Central American watchdog group in Belize and a homeowners association in British Columbia shared their experiences with Fortis, leaving mid-Hudson ratepayers worried.

Citizens for Local Power (CLP), a grassroots group of ratepayers against the buyout, state in documents filed with New York’s Public Service Commission (PSC): “Fortis’s record in Belize speaks volumes about the company’s behavior, whether the investment is in generation, distribution, or anything else,” reports the Poughkeepsie Journal.

PSC may determine as early as this week whether or not Fortis can acquire CH Energy, or whether the proposal requires further investigation.

At a press conference airing opposition to the takeover by the groups, including statements via Skype from groups in Belize and British Columbia, CLP attorney Daniel Duthie said: “We’re seeing a trend in Belize and British Columbia of misinformation and a lack of trust, and we’re seeing this the more research we do.” [See Kingston Times, “Fortis foes allege eco-misdeeds”].

At issue in Belize, is Fortis’ construction of a multimillion-dollar 7 MW dam project in Belize’s Macal River Valley and the 35-kilometre stretch of unique rainforest habitat flooded by the dam: an area of immense ecological and cultural value; the last, large rainforest refuge to certain rare and endangered species, and the site of several ancient Mayan settlements.

Robert F. Kennedy Jr., an attorney for the Natural Resources Defense Council, an international environmental advocacy group that supported the Belize campaign against the Canadian-backed hydro dam, sent a letter to the PSC in late May expressing his opposition to the proposed Fortis merger in New York. In a commentary for New York’s Times Union, Kennedy writes about his experience with Fortis in Belize:

Fortis solemnly promised that the dam would not raise electric costs while concealing secret studies proving the opposite. In 2005, two years after the dam went live, Belize’s electric rates climbed 25 percent. Belizeans paid twice as much for electricity as their neighbors in Mexico and Guatemala. In 2008, when Fortis moved to jack rates another 25 percent, Belizes newly elected government expropriated the company’s assets.

Fortis digitally removed nearby fault lines from the geological map it provided to regulators to deceive them about dire earthquake hazards at the proposed dam site. Only after the dam won approval and construction began did this become public.

Fortis knowingly lied when it claimed its dam would not harm wildlife. The project destroyed Central America’s last large habitats for endangered jaguars, tapirs and scarlet macaws.

Fortis hid its study showing hazardous levels of neurotoxic mercury in the Macal River, caused by another Fortis dam, until a year after its Chalillo Dam was complete. During that period, Belizeans continued to drink river water and swim, wash, bathe and fish — all activities perilous to their health.

These are only a few examples of Fortis’ willingness to deceive the public and government regulators while profiteering from reckless activities. If it gobbles Central Hudson, Fortis won’t build dams in New York. Nevertheless, the company will monopolize electric and gas delivery services that are both essential and dangerous when poorly managed. An already overstretched PSC will have to research, oversee and monitor Fortis to keep the company honest — with no guarantees of success, given Fortis’ history.

The Poughkeepsie Journal reports Belize Electricity Ltd., which buys approximately half of its energy from Fortis’ hydroelectric generating plants, raised its rates in January by nearly 17 percent, according to a website attached to Great Belize Television/Channel 5.

Candy Gonzalez of the Belize Environmental Law and Policy Office (BELPO), instrumental in the Belize campaign against the dam, has shared affidavits and background material with Citizens for Local Power from lawsuits and injunctions launched in Belize that demonstrate Fortis is “anything other than environmentally conscientious or friendly or open to public participation.”

Gonzalez says the documents show that Fortis has “continually tried to boost our rates and they’re making all the same promises” to New York ratepayers about lower rates and concerns over health and safety. In July 2007, Belizean environmentalists won a court case ordering the government to monitor water quality in the Macal River, where the Chalillo dam is located, establish an emergency warning system to protect downstream residents in the event of a dam break, monitor levels of mercury in the fish and inform the public of findings.

In a recent radio interview with KREM, Belize, Gonzalez said:

“We still have no real dam break emergency plan here … we haven’t found anything out about the water quality and there’s been nothing in terms of the levels of mercury in the fish from two years ago when we went to court, so that’s a really poor record in terms of [Fortis] demonstrating not only environmental conscientiousness but also in terms of communicating and listening to the people. So that’s the information that we’ve provided the people in New York.”

Gonzalez and her husband George, a fellow activist, say that if the dam should break, Fortis would not be held liable. “They could collect insurance and sell the dam to the government for $1,” said George. [See Kingston Times, “Fortis foes allege eco-misdeeds”].

Defending Fortis’ conduct in Belize, the Daily Freeman reports Fortis vice-president Barry Perry as saying in April:

“It was a seven-megawatt plant that we built in conjunction with support of the Belizean government to supply energy in Belize that attracted some environmental attention,” Perry said. “They challenged our process for approval. We went to court over it and won something like 11 straight court cases.”

New York’s Kingston Times notes that while affluent homeowners in a British Columbia resort area may represent a direct contrast to the vulnerability of a developing country like Belize, its experience with FortisBC Energy, a utility owned by Fortis, affords parallels with the Belize example. Representatives of the Heritage Hills & Lakeshore Highlands Homeowners Association of the eastern Lake Skaha region in British Columbia, addressing via Skype last week’s press conference in opposition to the CH Energy buyout, revealed the utility had made misrepresentations about an upgraded transmission line running through a right of way in the BC lakeside residential community. Reports Kingston Times, residents were told the new line replacing existing wooden H frames would take the form of “small brown creosote poles,” but that the poles used were in fact “enormously taller,” made of metal and “did not represent what we were told would be built,” said Harry Lavant, an association member. The Times continues:

The new, 70-kilometer transmission line, which was installed in 2010, has depressed house values 20 percent, said Lychak, contradicting the assertion by a Fortis-hired expert that the upgrade would not impact values. In a follow-up e-mail, Levant noted that “the homes that are now for sale in our area are mostly located along the power line and none are selling … who wants a home next to a giant high-voltage power line?”

In addition to depressed property values, FortisBC customers have had to cope with, according to local news stories, electric rates increasing by 10 to 20 percent. The rates “are rising faster than the actually approved amounts due to a new two-tiered rate system, in which above a certain threshold of monthly usage the utility rates jump to a new level,” wrote Levant in an e-mail. “The threshold is set so low that it is impossible not to exceed it.”

Levant worried the same thing could happen to Hudson Valley customers. “I strongly believe they are just adding to the rate base to wrest more money from ratepayers,” he added, noting that Fortis’ $900 million Waneta hydro-dam, under construction near the U.S. border, “will only elevate the need for further rate increases.”

The Daily Freeman writes John Maserjian, a spokesman for CH Energy Group, said Central Hudson would not lose control to Fortis in the buyout:

“As a regulated utility, Central Hudson would be operated as a stand-alone company with local management and its own board of directors, just as the other regulated utilities in the Fortis federation are.”

New York’s Citizens for Local Power, however, believe Fortis’ record in other markets is a threat that speaks for itself.

“What we learn from this is what we learn about Fortis’ corporate culture and values and how it behaves in other communities,” said CLP spokesperson Jennifer Metzger. “It just showed an utter and complete disregard for the benefit and welfare and communities in which it invested.” [See Daily Freeman, “Hudson Valley opponents of Fortis-CH Energy deal gain support from anti-Fortis group in Central America”].

*****

For more on Fortis Inc.’s record in Belize, see Probe International’s Chalillo Dam archive here.

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