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Enron Mail |
Price freeze could well cost electricity consumers
Source: Times Union Publication date: 2001-05-19 Arrival time: 2001-05-22 New York State Electric and Gas is working hard to convince consumers and the Public Service Commission that its plan to lock in prices for seven years is a good thing. That campaign includes two recent full-page ads in the Times Union taking issue with a story exploring the ramifications of the proposal that NYSEG hopes the Public Service Commission will approve by June 27. A rate freeze sounds good. Nobody wants to see their electric bill climb, especially when stories about California's energy crisis and a potential electricity shortage in New York City fill the paper. But as prices fall, as they may do within the next seven years, NYSEG customers will be stuck with higher costs. In fact, NYSEG's freeze request would nullify an existing PSC order directing the utility to implement a 5 percent rate decrease on March 3, 2002. An April 25 PSC paper clarifying NYSEG's price structure found that the company would, therefore, get a 5 percent price hike as part of the rate freeze plan. Over six years this would result in about $55 million more for the company. At the same time, NYSEG customers would be denied the benefits of lower electric prices that building new power plants should provide. This same PSC study also found that NYSEG's current rates are generating earnings of 35 percent, which according to the PSC is in "excess of returns authorized for electric, gas or telephone corporations." NYSEG vows that customers unhappy with its rates will be able to switch suppliers, but that isn't easy, as Kenneth Aaron, the author of the Times Union story in question, points out. As power plants planned for construction come on line, prices should fall. More plants equal more power. The more plentiful a product is, the cheaper it becomes. The best way for NYSEG to provide low-cost power for its customers is to let New York's still-young competitive energy market run without allowing a major transmission company to lock in prices for most of a decade. Companies that take the financial risk of building New York's required power plants need to know they'll be able to get a fair price for the electricity they sell. A large chunk of the market must not be shut to them with very long-term contracts.
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