Publication Date: Winter 1998

Energy Deregulation Update

Following the nationwide trend to promote lower prices through competition, the State of New York is deregulating natural gas and electricity. In June 1998, pursuant to a procedure orchestrated by the Public Service Commission (PSC), the deregulation of electricity will begin in New York City with a pilot program designed to encourage customers to buy up to 500,000 megawatts of electricity from independent sources. Energy Service Companies, called ESCOs, will aggregate the purchasing power of many clients, making it possible for even the smallest customers to participate. Those interested must commit to this program during April 1998, and, since it is impossible to predict the level of interest, provision is made for a lottery to select participants if the pilot is oversubscribed.

Cover of Con Ed Pamphlet

Con Edison has described this opportunity fully in an insert with all March bills (click here or on the photo at right to link to full text of the pamphlet); its TV commercial has a postman alerting customers to read this brochure, which offers an incentive to customers who leave Con Edison and commit to purchasing their electricity from an independent ESCO.

In brief, deregulation gives customers the option of purchasing electricity and gas from an ESCO and a gas marketer. These entities are not regulated; the PSC determines their eligibility to sell, but it cannot mediate any disputes that arise between customers and energy providers.

What is NOT deregulated is the transmission function of the utility in bringing gas or electricity to your stove or VCR. This basic function continues to be supervised by the PSC, which further requires that the utility serve as the energy provider of last resort, ensuring that no customer will be without power.

If you switch to an independent energy provider, your local utility will continue to provide transmission of your power and to bill you for this service. You will generally receive a separate bill from your ESCO for the energy itself, although in some cases the ESCO will absorb your utility billing and send one consolidated bill. Most ESCOs will seek a commitment of one year from you, though either party can typically terminate the agreement upon notice. If this should happen, you will not be without electricity. You can go to another ESCO or return to your local utility.

Savings are anticipated to be modest in the first few years of deregulation, as Con Edison has been allowed to charge substantial transmission rates until it defrays the stranded costs of infrastructure that it had to develop in the past to meet customer needs. With time, competition is expected to bring significant savings to all ratepayers.

Marketers and ESCOs are already contacting customers with proposals. Careful research will be important as you choose among them. Issues to consider include deposit requirements (if any), the handling of payments -- including disputed amounts -- and the record and reputation of the supplier. If you opt to sit out this pilot program, you will have future opportunities as additional 100,000 megawatt programs are planned for the next two years.

Energy deregulation is a complex and challenging issue that will touch even the smallest of New York cooperatives and condominiums. For detailed, plain-language answers to your questions, consult the Websites of the PSC at http://www.dps.state.ny.us, and Con Edison at http://www.coned.com/athome/custnews/retailchoice.html. You can also call the Public Service Commission at 1-888-ASKPSC1.

On Tuesday evening, April 7, 1998, CNYC, the Coordinating Council of Cooperatives and the Federation of New York Housing Cooperatives will present a joint seminar on Energy Deregulation. A PSC representative will describe the opportunities and answer all questions; information will be provided on aggregators, gas marketers and ESCOs. Advance registration is required.