If
you’re like most people — about 70 percent at the time of this writing —
you’ve put off making a decision about your electricity supply until the last
possible minute.
Well, the last possible minute has
arrived. After December 30, Rochester Gas & Electric will automatically
make the decision for everybody who hasn’t made their own. (The change will
affect only electricity, not gas.)
But for all the hype and money the
company has spent on its Voice Your Choice campaign, and despite the growing
complexity of the energy market, the choice you’re being asked to make is
essentially a simple one: Are you willing to risk the ups and downs of the
wholesale electricity market in hopes of saving money? Or do you need the
certainty of knowing what you’ll pay for electricity up front?
If you’re willing to gamble a
little, hoping that the price of electricity will fall, you’ll want to choose a
“variable” rate. If you worry that the price will go up, not down, you may
prefer a “fixed” rate.
You can also choose to change energy
suppliers — from RG&E to another supplier, for example. (A supplier is
the company that sells you the electricity; the distributor is the utility
company that delivers it to your home. RG&E does both.) You can make that
decision any time; there’s no deadline. But if you do decide to change
suppliers, your fixed-or-variable choice will follow you to the new supplier
for the rest of the year.
“Once a customer is in a pricing
option, they’re in that option for all of 2005,” says RG&E spokesperson
Yvonne Selbig. “There’s no getting out of it.”
That’s important, because the cost
of the electricity itself is a major component of your bill. Regardless of
which company you buy your electricity from, RG&E will continue to deliver
it to you over the wires that it owns and maintains. For that delivery, every
electricity user pays RG&E the same amount: $20 per month and 2.3 cents per
kilowatt-hour. Think of that money as the shipping and handling charges for the
electric power you’ve ordered. That price is mandated through a rate agreement
with the state Public Service Commission until 2008. It’s the price of the
electricity itself for which you’ll now be able to shop.
Like other
consumer goods, the flow of electrons through the myriad pipes and wires
that make up the fabled grid has a price tag attached. And like other valuable
commodities that can be bought wholesale, its price fluctuates daily, based on
the vagaries of free-market forces like supply and demand.
In the past, retail consumers of
electricity (that’s you) were protected from such ups and downs by the
legalized monopoly we know as the utility company. In the new world of
deregulated electric supply, you can still enjoy that protection — for a
small premium. Or you can opt to take your chances in the market.
Imagine that you could lock in the
price you pay for the gasoline your car will burn in the next year at, say,
$2.35 per gallon. That’s more than you’d pay at your local filling station
today. But on the other hand, you wouldn’t have to worry about the political
instability of the Middle East, whether hurricanes have shut
down oil rigs in the Gulf, or what OPEC’s up to this month.
Selbig
uses the phrase “market volatility” to describe the difference. “With the
variable-price option, the customer is actually absorbing the volatility in the
market,” she says. “The customer’s kind of paying that market price. RG&E
is less in the picture. With the fixed-price option, RG&E is taking on the
market volatility, taking on that risk.”
If you choose the fixed-price option
offered by RG&E, there’s no mystery about what you’ll pay for electric
supply: 7 cents for each kilowatt-hour. That’s about an 11 percent hike over
2004 rates. If RG&E can buy that electricity at a substantially lower rate,
it will pocket the difference. “The fixed-price option is sort of an insurance
policy,” Selbig says. “Customers are essentially
paying a slight premium for locking in a price.”
With the variable-rate option, by
contrast, if RG&E saves money when it buys power, so do you. And if the
price skyrockets, it comes out of your pocket, not RG&E’s. The rate early
this week was about 5.4 cents per kilowatt hour; it has fluctuated from as
little as 4.9 cents at the start of October to as high as 6 cents in
mid-November. When it calculates your bill, RG&E will take the average rate
over that particular billing cycle. The principle remains the same from one
supplier to another, although the rates differ.
What doesn’t
change is RG&E’s obligation as an electricity delivery company. With 16,000 miles
of wires strung across a quarter of a million poles throughout parts of seven counties,
the company remains deeply invested in the power transmission infrastructure.
In fact, it’s always been skewed toward supply and delivery and away from
generation; even when it was the region’s sole electricity provider, RG&E
always bought power from other generators.
“RG&E internally produced about
60 percent of our customers’ needs from Ginna,
Russell, and the Beebe station when it was operating, and the hydro plants,”
says Selbig. “We never produced ourselves enough for
all of our customers’ needs. We always went out and purchased other
[electricity] contracts.”
RG&E still operates a handful of
small hydroelectric dams along the GeneseeRiver, and Russell
Station in Greece, but Russell
is slated to go offline in 2007.
“We’re focusing on being a
pipes-and-wires company,” says Selbig. That means
that even under deregulation, RG&E is accountable to the state Public
Service Commission for the upkeep of its infrastructure.
“There are strict standards that we
have to adhere to and targets that we have to meet regarding customer service,”
says Selbig. Among those targets are maximum
standards for the frequency and duration of power outages, for example, she
says.
The Public
Service Commission is also responsible for preventing the kinds of
catastrophic problems — rolling brownouts and price-fixing scandals — that
gave electricity-market deregulation a black eye in California. PSC
spokesperson Edward Collins says that the different structure of deregulation
in New York will help his
agency do that job. California experienced
such problems, Collins says, because unlike New York, it
deregulated legislatively, rather than administratively. That’s a “huge, major
difference,” he says. “In California, when issues
surfaced they had to be dealt with legislatively. That can take an enormous
amount of time. I think that most experts around the country who follow the
introduction of competition would tell you that California was actually straightjacketed by legislative fiat.”
That won’t happen in New York because the
PSC has the flexibility needed to respond to such problems, says
Collins.
“Because it was done
administratively, the commission and its staff is able to take action really on
a moment’s notice when issues surface,” he says. “We’ve got engineers, we’ve
got technicians, we’ve got economists, we’ve got consumer experts; we’ve got
people in all these key fields watching and monitoring and intervening in terms
of ensuring that competition is evolving in the best public interests.”
What’s more, he adds, the PSC has
the bite to back up its bark: “An order from the commission has the force of
law,” says Collins.
Not everyone shares Collins’
confidence in the PSC’s regulatory authority or in its commitment to the public
interest.
“No one really is answering to the
public,” says Jason Babbie of the New York Public
Interest Research Group. “It [the system] is getting further and further away
from having to answer to the ratepayers and to the consumers. The more it slips
away from that, the less the average New Yorker is going to be able to
influence the decisions and probably the less favorable the policies are going
to be toward them.”
Allowing citizens a greater stake in
the system is vital, because electricity “is not simply a commodity, which is
basically what it’s been turned into,” says Babbie.
“I mean, you buy and sell it just like you do soybeans or whatever. But
electricity is a vital part of our lives. So it needs to be treated differently
than simply another market commodity.”
Upholding that important distinction
— between an essential service and any average commodity — is a duty that
belongs to the PSC, and it’s one that they’ve largely abdicated, contends Babbie.
“I’m not saying that we need to reregulate, but I’m saying that we need to have much better
control and accountability and transparency,” he says. “It’s the state’s
responsibility to help provide that to New Yorkers.”
The Voice Your
Choice campaign would have been one opportunity for the PSC to provide a degree of
such transparency — and a useful service to the public — by compiling the
competing rates, pricing options, and services each electricity supplier is
offering in a central location. Such information would have saved state
residents countless hours on the phone and the web checking rates, and would
have reduced the complexity of sorting through competing offers.
But that hasn’t happened. As it
stands, electricity users must call around to each company individually or
search company websites for the information they need to make a choice.
For an agency powerful enough to
order large companies around, the PSC is oddly limited. Asked why the
commission hadn’t compiled a chart of rates offered by each company, Collins
replies that they had indeed asked each company to provide that information.
“We don’t have the legal authority to compel the companies to give us that
information,” he says, adding that the commission is still hopeful the
companies who withheld the information will rethink that decision.
Of course, the stated purpose of
deregulating and offering choices is that competition could drive down prices.
But with such a complicated system to navigate and with basic information so
difficult to track down, can there be any meaningful competition? Who is
deregulation really benefiting? Collins points to the almost 300,000 New
Yorkers — about 34,000 in RG&E’s service area — who switched from their
local utility to another electricity company even before Voice Your
Choice-style campaigns.
That’s “a good sign that people are
able to get this information and use it,” he says.
Still
frustrated? Don’t waste too much time worrying about it: You’ll have the chance to “voice
your choice” again next year. And again the year after that.
RG&E’s current rate agreement
for delivering your electricity lasts until 2008, when the company again
negotiates with the PSC over what it will charge for delivery and what options
it will offer customers.
Learning more
Early this week, the Public Service Commission announced two
“energy fairs” to let RG&E customers meet individually with representatives
of each of the electricity suppliers participating in the Voice Your Choice
program. The representatives will provide additional information about their
offerings.
The fairs:
• Sunday,
December 19: 1-7 p.m., Holiday Inn Rochester
South, 1111 Jefferson Road,
Henrietta.
• Monday,
December 20, 1-8 p.m., RochesterAirport Marriott, 1890
West Ridge Road.
People who
aren’t able to get to one of the forums can get rate information about some of
the suppliers — but not all — on the PSC’s website: www.askpsc.com.
Getting
your power
Here
are the choices you can make about electricity supply for your home:
Fixed
price vs. variable price
You choose whether to pay a fixed
rate for your electricity during 2005, or pay a rate that varies with the
electricity wholesale market. Once you choose which type of rate you want, you
keep that pricing option for the whole year.
The
electricity provider
You can buy electricity from
RG&E or from any one of six other energy companies that operate in
RG&E’s region. You can change from one electricity supplier to another at
any time. (RG&E will continue to deliver
your electricity.) How do you choose? You’ll have to get price information
from each supplier.
Here’s a list of addresses, phone
numbers, and websites for companies offering residential electricity supply in
RG&E’s service area (you can also find this list, with links, at
www.rge.com):
• Agway Energy Services LLC, PO Box 4819, Syracuse13221;
888-982-4929; www.agwayenergy.com
• ConEdison Solutions, 701
Westchester Avenue, Suite 300E, White Plains, New York10604;
877-238-2143; www.conedsolutions.com
• ECONnergy Energy Company, PO Box 1020, Spring
Valley, New York10977;
800-805-8586; www.econnergy.com
• Energetix, Inc., 755 Brooks
Avenue, Rochester14619; 800-544-0182;
www.energetix.com
• NYSEG Solutions, Inc., 81 State
Street, Stephens
Square, 5th floor, Binghamton, New York13901;
888-971-2455; www.nysegsolutions.com
• US Energy
Partners LLC, 8555 Main Street, Buffalo14221;
716-631-0504; www.energypartnersusa.com
Budget
billing
Regardless of your supplier or your
pricing option, you have the right to a budget billing plan that spreads out
the cost of your electricity use over the entire year rather than having it
fluctuate, peaking during peak usage seasons.
Green
power
Care about the effects of your
energy consumption on the planet? Whether you choose a variable or fixed
pricing option, many energy companies let you buy some or all of your
electricity from renewable, environmentally friendly sources like wind or
hydroelectric power. Since electricity generated from the burning of fossil
fuels is still usually cheaper than most renewables, be prepared to pay a small
premium — usually a penny or two per kilowatt hour — for your
conscientiousness.
Still
have questions? Visit the New York State Public Service Commission at
www.askpsc.com for more information, including a list of helpful questions to
ask prospective electricity suppliers.
This article appears in Dec 15-21, 2004.
