Article

Slim odds for energy savings

But research by the Times Union found that while switching to an ESCO might be relatively easy -- the process begins with a simple phone call -- getting clear and definitive pricing information from the ESCOs is extremely difficult.

When New York began deregulating the state's electricity market in the late 1990s, the presumption was consumers would benefit from more choices and lower prices, just like they did in the airline and telephone industries.

So, at the urging of the state Public Service Commission, the utilities sold off their power plants and focused on delivering electricity to customers rather than producing it.

But a decade later, the PSC says it really doesn't know whether the options created by deregulation are saving New Yorkers any money.

Consumers can now purchase electricity from a new breed of suppliers that have emerged. Commonly known as energy service companies, or ESCOs, their goal is to provide an array of electricity service choices, and lower prices.

Many ESCOs do not disclose their pricing to the PSC. They are not required to. Many have also refused to do so for a Web site run by the agency called Power to Choose (http://www.powertochooseny.com). The site compares pricing among the utilities and the ESCOs and posts it for the public to see.

Although the majority of large businesses in New York are now getting their electricity through ESCOs, most residential consumers have stayed with their... more [truncated due to possible copyright]  
When New York began deregulating the state's electricity market in the late 1990s, the presumption was consumers would benefit from more choices and lower prices, just like they did in the airline and telephone industries.

So, at the urging of the state Public Service Commission, the utilities sold off their power plants and focused on delivering electricity to customers rather than producing it.

But a decade later, the PSC says it really doesn't know whether the options created by deregulation are saving New Yorkers any money.

Consumers can now purchase electricity from a new breed of suppliers that have emerged. Commonly known as energy service companies, or ESCOs, their goal is to provide an array of electricity service choices, and lower prices.

Many ESCOs do not disclose their pricing to the PSC. They are not required to. Many have also refused to do so for a Web site run by the agency called Power to Choose (http://www.powertochooseny.com). The site compares pricing among the utilities and the ESCOs and posts it for the public to see.

Although the majority of large businesses in New York are now getting their electricity through ESCOs, most residential consumers have stayed with their utility as if deregulation never happened.

As of February, the latest data available, only 7.1 percent of New York's residential electric customers -- about 403,000 homes -- had switched to an ESCO, compared to 54.9 percent of large commercial customers.

When adjusted for inflation, residential electric prices have dropped during deregulation, according to the PSC. A report it published in March found that on an inflation-adjusted basis, residential prices fell nearly 16 percent. But that analysis only calculated for those who remained with their utility company, not those who chose an ESCO.

Pushing the switch

The PSC and utilities including National Grid are encouraging residential customers to switch to an ESCO, providing small incentives -- including sales tax breaks and credits from the utilities.

But research by the Times Union found that while switching to an ESCO might be relatively easy -- the process begins with a simple phone call -- getting clear and definitive pricing information from the ESCOs is extremely difficult.

Using a National Grid electric bill from a typical residential customer, the Times Union called most of the ESCOs available to Capital Region residents for a price quote. The ESCOs selling "green power," electricity made from clean sources such as hydroelectric generators or wind farms, were not contacted because they don't claim they can save consumers money.

Because most ESCOs offer only variable-rate pricing -- meaning the price of the electricity varies by the day -- most contacted by the Times Union were wary of offering exact quotes over the phone. None wanted to provide historical prices so a comparison could be made to National Grid's historic prices, which the utility makes public. Many of the companies, though, were willing to offer a rough estimate of current prices, but that makes comparison inexact at best.

Also, many of the companies provided confusing or conflicting information about the incentives available to residential customers, making comparison-shopping even more difficult.

These incentives are important to consumers because in many cases they may provide the only cost benefit to switching.

Choosing an ESCO may provide a small monthly financial benefit to consumers, especially if they live in a school district that assesses a sales tax on the delivery of electricity. But total savings are usually impossible to calculate because the ESCOs can't, or won't, provide specific information on their rates.

"It's as invisible as the electricity, and that ought to be straightened out," said Gerald Norlander, executive director of the Public Utility Law Project of New York, an Albany-based consumer advocacy group.

Still, the PSC is trying to get ESCOs to reveal more information. Behind the scenes, the agency has been urging ESCOs to detail their pricing on a monthly basis, and the commission's executive staff has even told the ESCOs that it might ask the PSC board -- five political appointees that approve all commission decisions -- to take formal action to force disclosure.

David Flanagan, a PSC spokesman, said formal action is one possibility the staff has discussed, but he said the preferred route is that the ESCOs provide the information themselves.

"At this point, we're doing all we can to try to get the ESCOs to voluntarily provide that stuff," Flanagan said. "As time goes on, the ESCOs will recognize that it's really in their benefit to provide this information."

Flanagan stressed that the PSC's Web site, no matter how much information it provides, is no substitute for a consumer's own due diligence. "It's like shopping for any product," he said. "At some point as a consumer, you're going to want to talk to that provider."

Choices remains obscure

Some consumers just don't know about ESCOs or that they can switch to an alternative electric provider.

Colleen Diotte of Cambridge, a school secretary, rents her modest home. She has a wood stove, but uses electricity for both power and heating. She says her typical electric bill from National Grid is about $130 a month. But this winter, her bills doubled. Knowing what she knows now, Diotte says she would like to shop for her own electric supplier.

"I didn't even know I had that choice," she said. "You either pay, or they shut you off."

Lela Katzman, a public relations consultant who lives in Loudonville, buys her electric supply from Green Mountain Energy Co. of Austin, Texas. She says that adds about $9 per month to her average electric bill of $120. One of Katzman's largest clients is a hydroelectric power company, so she has a business interest in green power. But she is also personally interested in preserving the environment.

"It's worth it to me because I feel like each of us has to do our part with global climate change and global warming," Katzman said.

Businesses benefit

Businesses are a whole different story. Philip Van Horne, president of New York Energy Inc., an ESCO located in Syracuse that services only businesses, said ESCOs provide custom rate plans for commercial customers -- something that can't be done with residential customers because it would be impossible to make money. That customization is why businesses have moved to ESCOs in greater numbers, he said.

Mr. Subb, the Cohoes-based sandwich retailer, gets its electricity through NYSEG Solutions, an ESCO based in Binghamton. President William Pompa says his company's two dozen stores each save $50 to $70 per month on electricity compared to getting their supply from the utility. An average monthly gas and electric bill combined is about $1,500 per store, he said.

Pompa participates in a program offered by the Albany-Colonie Regional Chamber of Commerce that allows businesses to tap into ESCO pricing negotiated by Energy Next Inc., an energy consultant based in Saratoga Springs.

Fixed rates appeal

Some ESCOs say choosing an alternative energy supplier is mainly about being able to budget for electricity.

"Saving money is not the only goal," said Jeffrey Mayer, president of MXenergy Inc., an ESCO based in Stamford, Conn., that serves customers in New York.

Both businesses and residential consumers can benefit from fixed-price contracts, much as homeowners benefit from fixed-rate mortgages, he said. That's important because electricity prices are much more volatile than interest rates or even natural gas prices. MXenergy, which serves mostly residential customers, offers a fixed-rate option in Massachusetts and parts of New York, but not in the Capital Region.

Direct Energy, also Connecticut-based, offers a fixed-rate option to residential consumers in the Capital Region. It advertises a 12-month fixed-rate plan to National Grid customers that offers electric supply for 7.5 cents per kilowatt hour for the first two months and then for 10 cents per kilowatt hour for the following 10 months.

National Grid does not offer a fixed-rate option, but as of early May its residential electric rate hovered slightly above 7 cents per kilowatt hour. Last year, though, it rose above 12 cents per kilowatt hour during the summer and fall.

After less than three months in theNew York market, Direct Energy has signed up 4,000 customers in the state.

"Right now, we believe customers are looking for a fixed rate," said Badar Khan, senior vice president of U.S. growth markets for Direct Energy.

Orange & Rockland Utilities, a subsidiary of Consolidated Edison, has a program called PowerSwitch that gives customers a 7 percent discount on their electric bills if they agree to switch to an ESCO. After two months, the price must be negotiated between the customer and the ESCO.

The results have been very good for Orange & Rockland. The PSC reports more than 30 percent of the utility's residential customers have switched to ESCOs, a larger percentage than any other state utility.

National Grid, which is the dominant electric supplier in the Capital Region, is adopting a similar plan, and Central Hudson Gas & Electric, which serves nearly 36,000 electric customers in Albany, Greene and Columbia counties, adopted its own ESCO referral program called EnergySwitch last month. That plan also allows for a 7 percent savings on electric bills for the first two months in exchange for switching.

"As each utility moves to that model, you will see the switch rates rise," Khan said.

Seeking transparency

Assemblyman Paul Tonko, D-Amsterdam, chairman of the Assembly's energy committee, wants to do something about price transparency. He has pushed a bill through the Assembly that would require ESCOs to file their electric prices, as well as their gas prices, with the PSC once a month.

Tonko, an outspoken critic of the PSC's handling of the deregulation process, said incentive programs that provide lower introductory rates but no promises on future prices are merely a "bait-and-switch game" designed to get people to migrate to ESCOs.

"They need to have transparency," he said. "The best consumer is an informed consumer."

Tonko is also sponsor of a bill passed by the Assembly that requires the PSC to study the effects of ESCO competition on retail markets, including pricing.

Another solution may be the creation of groups such as the Municipal Electric and Gas Alliance in Ithaca. MEGA negotiates electricity contracts for commercial and residential customers in bulk so they don't have to seek pricing on their own.

Stu Stein, vice president of MEGA's board, said its most recent power contract is through Advantage Energy Inc. of Buffalo and involves about 900 residential customers. Although people who participate in the program realize "very small" savings, he said the benefit is still there. And it's easier than trying to shop for prices with individual ESCOs.

"It's just the psychology of the situation," Stein said. "Because we're a nonprofit, people trust us."

Larry Rulison can be reached at 454-5504 or by e-mail at lrulison@timesunion.com.


Source: http://timesunion.com/AspSt...

MAY 7 2006
https://www.windaction.org/posts/2493-slim-odds-for-energy-savings
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