Retail Electric Competition and Restructuring in New York

1
Retail Electric Competition and Restructuring in
New York

• Gerald A. Norlander, Executive Director Public
  Utility Law Project of
• New York, Inc.
• March 8, 2007

2
ESCO Switching Statistics After Ten Years

• Industrial - TOU 57.8, 70 load
• Residential 10.7, 11.6 load,
• 7 if LIPA is not excluded
• No study shows switchers pay less over time

3
In the Absence of Proven Commodity Price Savings,
What Drives Switching?

• Since 1996, the NYPSC has approved
• Cash incentives to customers who switch
• Cash incentives to ESCOs for each customer
• Cash incentives to utilities for each customer
• Cash incentives to utilities for customers who
  stay away
• Backout credit adders to reduce delivery rates
• Utility newspaper, radio and billboard
  advertising
• PAC newspaper, radio and billboard advertising
• Utility bill insert messages and brochures
• Voice Your Choice ballots
• Energy Fairs
• NYPSC Power to Choose Website
• Sales tax break on delivery service
• ESCO Referral Programs

4
At What Cost?

• 100 Million

5
ESCO REFERRAL PROGRAMS, Or STATE SPONSORED
SLAMMING?

• Customers are baited with uniform slight
  discount, 7 off commodity rate for two months,
  promoted by NYPSC and utilities
• Distribution utilities are paid migration
  incentives for each customer switched
• No disclosure of post-introductory rates, terms
  and conditions before switching
• Customers may be assigned randomly to ESCO
• New rates terms and conditions mailed during
  introductory period take effect without express
  consent
• No comparison of post introductory ESCO rate and
  rates of traditional utility

6
ESCO SERVICE ATTRIBUTES

• Lack of price transparency
• Onerous, one-sided contract terms and conditions
• ESCOs initially allowed by PSC to operate outside
  of HEFPA, corrected in 2002 by Legislature
• High complaint rates

7
TERMS AND CONDITIONS of ESCO SERVICE

• ESCO Contract Boilerplate
• Variable price contracts without price limits
• Fixed rate customers bound to price for contract
  duration, while ESCOs typically have outs to
  revise their fixed prices on one months notice
• Automatic renewal windows
• Early termination charges

8
Role of the Power Authority of New York State
(PASNY/NYPA)

• PASNY is largest single owner of generation,
  including Niagara and St. Lawrence hydro projects
  and fossil plants in NYCity.
• Divested nuclear plants
• Poletti retirement postponed to meet capacity
  reserve needs
• Owner of 1,000 miles of transmission lines
• Wholesale energy sales to upstate IOUs and munis
• Retail NY City and economic development
  customers
• Pre-restructuring PASNY proposed to operate the
  grid and the ISO
• Vision order PSC sought reduced role
• Now seeking supply in markets to meet PASNY
  customer load

9
Post Restructuring State Power Authority as
Builder/Facilitator/ESCO of Last Resort

• PASNY constructed 10 GTs after NYISO prices began
  spiking in 2000
• PASNY constructed new 500 MW Poletti plant when
  permitted load pocket merchant plants were not
  constructed
• Old Poletti plant retirement postponed due to
  capacity reserve needs
• Financial support for new transmission line to
  connect NJ plant in PJM to NY City
• Possible role in facilitating new coal plants

10
Average Retail Price of Electricity National
1973 - 2006
11
Comparison of Connecticut Residential, Commercial
Industrial Electricity Rates Pricing 1990 -
2006 Average Cost Per kWh
12
Comparison of New York Residential, Commercial
Industrial Electricity Rates Pricing 1990 - 2006
Cost per kWh
13
Comparison of Texas Residential, Commercial
Industrial Electricity Rates Pricing 1990 - 2006
Average Cost Per kWH
14
New York Typical Residential Bills