Central Hudson Closes Sale on Roseton and Danskammer Generating Plants; Divestiture Means Immediate Changes in Customer Bills

Business Wire, Jan 30, 2001

Business Editors

POUGHKEEPSIE, N.Y.--(BUSINESS WIRE)--Jan. 30, 2001

Central Hudson Gas & Electric Corporation has finalized the sale of its interest in the Roseton and Danskammer electric generating plants in the Town of Newburgh to Houston-based Dynegy Inc. Central Hudson was the sole owner of the 500-megawatt Danskammer Plant, constructed between 1951 and 1967; and owned 35 percent of the 1,200-megawatt Roseton Plant, which went on line in 1974 and was co-owned by Niagara Mohawk Power Corporation (25 percent) and Consolidated Edison (40 percent). The sale price for both plants was $903 million. Central Hudson's estimated share of the sale, after recovery of taxes and undepreciated book costs, is approximately $296 million.

"We wish Dynegy well in the continued operation of these units, which served our customers with reasonably priced, reliable electricity for decades. Dynegy's reputation in the industry bodes well for the residents of the Hudson Valley.

"We're also quite pleased that our former employees were offered positions by Dynegy and will continue to operate the plants. We express our appreciation to them for all they did on behalf of our customers," said Paul J. Ganci, Chairman of the Board and CEO of CH Energy Group, Inc. (NYSE:CHG), the parent company of Central Hudson Gas & Electric.

Ganci explained the proceeds from the sale will ensure that shareholders recover their past investments and that customers will benefit in several ways, too. First, they will be free of special wire charges to recover investments, so-called "stranded costs." Second, customers will also have access to a fund in excess of $100 million that includes not only the premium proceeds from the sale but also surpluses from mitigation measures taken by Central Hudson. That fund, which is unique among electric New York utilities, is available to provide longer-term customer benefits including service reliability enhancements and price stability.

"We also negotiated a purchase power agreement with Dynegy to provide Central Hudson electric customers with some degree of price stability over a three-year period when tight supplies are likely to make the competitive wholesale market for electricity volatile," Ganci added.

Customer Bills to Change Immediately

Ganci said that while the transition power agreement ensures customer prices will remain relatively stable during the next few years, the divestiture of the generating plants also means that customer bills will be comprised of different components. Effective immediately, electric bills will be composed of separate delivery and supply charges. A minimal "Competitive Transition Charge" will also be included on bills through mid-2001, when it will be eliminated after the projected sale of Central Hudson's interest in the Nine Mile Point 2 Nuclear Power Plant.

"The components of future bills are the result of a completely restructured industry. Our customers now have the opportunity -- and will increasingly be encouraged -- to buy their electricity from another supplier. For the first time since our founding a century ago, we can no longer make electricity at our own plants, with the exception of several small hydropower and gas turbine peaking plants and our interest in Nine Mile for the next several months," Ganci stated. "Customers need to understand that we're now the delivery company -- only."

He also cautioned that Central Hudson's ability to control future supply costs is limited. "Though we have contracted to purchase a portion of the output from the Roseton and Danskammer plants to stabilize bills for the next few years, we don't have the ability to control electricity supply costs in the long term because we no longer own large generation plants. In the future, the market will determine prices," he said.

Central Hudson has prepared an informational brochure, titled "Today's Transforming Electric Business," to explain changes in the industry and the impact on customers and their bills. To request a free copy, Central Hudson customers need only call, toll free, 1-866-CH-WATTS (1-866-249-2887), or, they may visit the utility's website at www.centralhudson.com.