Turning On the Lights Deregulation is Making Consumers Think First

Once upon a time, like many cities across the nation, New York City had a government-regulated energy market. There was one number to call to make all the lights come on: Consolidated Edison of New York (or, more familiarly, Con Ed). This streamlined - if limited - way of doing things persisted until the summer of 1998, when the New York State Public Service Commission (PSC) began implementing a deregulation plan the commission had been formulating since 1996.

Looking to improve the safety and dependability of energy delivery, the PSC's move to deregulate made the simple task of switching on the lights a matter of personal choice. The actual delivery of energy remained in the hands of local utilities and continued to be regulated by the PSC, but splitting the suppliers and the delivery companies enabled utilities customers to choose where their energy was purchased. The idea echoed by lobbyists throughout the city and state was that good old-fashioned free-market competition, with energy suppliers vying for consumer dollars, would inspire better service, lower rates, and more available product. Even Con Ed - the people's only choice for so long - was in favor of a competitive market. Natural gas and electricity were deregulated simultaneously. New York residents could now choose an electricity and gas provider just like they picked between cable and telephone companies.

When deregulation was finalized, Con Ed joined the game by selling off all its power plants and becoming one of the initial eight electricity companies New York metro customers could choose from. Con Ed began purchasing its power from the market like all other utility distributors, but still maintained its old lines, provided the bulk of the city's power, and was regulated by the PSC. According to Michael Clendenim, a spokesman for Con Ed, "[Customers could] purchase the supply of electricity from other energy service companies - or "˜ESCOs,' - which sell that electricity for a certain price that comes through our supply."

Let's Do the Numbers

Prior to deregulation, "Long Island [rates] were higher than New York City, and New York City was higher than the rest of the state," says Greg Wortham, chief operating officer of 1st Rochdale Cooperative (FRC) in Rochdale. A cooperative utility, FRC was among the many groups pushing for change back in the "˜90s. "We were actively engaged in all of the debates with the Public Service Commission, Con Ed, and the government," says Wortham.

Wortham points out that had the energy market not split, New York City customers would have shouldered an $87 million increase in fees in 1998 alone, and a $435 million increase over the following five years. Deregulating the market stopped the spiraling prices and was projected to save the city $1.5 billion dollars within the first five years. As the five-year mark approaches, energy consumers have saved money, but whether it's $1.5 billion dollars-worth is a subject of some debate.


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