New York Reviewing Higher Energy Costs

by | Oct 22, 2012

The New York State Public Service Commission is beginning a formal proceeding to assess retail energy markets after internal reviews have reported that “many residential and small non-residential ESCO customers paid a higher price than they would otherwise have paid as full-service utility customers.” It is seeking comments addressing possible actions that could be taken by the commission to improve the operation of the markets.

The energy industry in New York was restructured more than a decade ago. Currently, utilities provide commodity service that, for residential and small non-residential customers, reflects some hedging to reduce retail price volatility. All customers of major electric and natural gas utilities in New York State have the choice to purchase energy from their utility, or from an energy services company (ESCO). Approximately 85 ESCOs are certified to provide electricity in New York State and more than 100 ESCOs are certified to provide natural gas.

The Wall Street Journal reports that “49 percent of upstate customers paid at least $20 more per month, according to the PSC. Downstate customers more often paid less than if they stayed with their utilities.”

“Department staff has been reviewing the performance of the retail electricity and natural gas markets particularly for residential and small non-residential customers,” says commission chairman Garry Brown. “Department staff has raised concerns and questions about certain aspects of the retail market; as a result, the commission will begin a new proceeding to further examine the operations of these markets and explore possible actions to improve their efficiency.”

In the current retail market, ESCOs can compete directly with the utility or can offer options for consumers that traditional utilities do not offer. These options include products with less price hedging or certainty than the utility offering, products with more hedging or price certainty than the utility offering, electricity reflecting a greater percentage of renewable resources than the utility offering, and value-added services such as home heating equipment repair and maintenance, airline miles or similar rewards. The Commission does not regulate prices charged by ESCOs.

The commission’s staff says that it is very difficult for energy consumers, particularly residential and small non- residential customers, to know and compare prices of electricity and natural gas commodity services that are available from the utility and ESCOs. It also reports that the pricing and billing data that it reviewed for residential and small non-residential customers reveals a wide range of prices paid by ESCO customers. Some of the variations in prices may be because of value-added services offered by ESCOs, such as fixed prices and electricity from renewable sources.

The department says it recently worked with Central Hudson and National Fuel Gas to design and implement a pilot program under which ESCO customers can use an on-line tool to compare the amount they paid for ESCO service and the amount they would have paid if the energy had been purchased from the utility. The proceeding commenced by the Commission today will explore additional ways to improve retail energy markets.


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