State regulators, trying to stir up competition for New York State Electric & Gas Corp.'s electric customers, have approved major changes in the way rates are calculated for its customers who buy power from another supplier.
The change, which took effect earlier this month, is designed to breathe new life into a competitive marketplace for NYSEG customers that effectively has been stifled by rising electricity prices.
In essence, the change eliminates the fixed credit granted to NYSEG consumers who buy their electricity from an independent supplier and replaces it with a new, flexible credit that is based on prices in the state's wholesale electric market.
Because the new credit is based on market prices, state regulators said marketers should have an easier time developing offers that could save money for consumers, whose bills essentially are divided into two parts: The cost of electricity and the price of delivering the power and providing other services.
Under the old rate plan, NYSEG customers who signed up to buy electricity from another supplier received a shopping credit of 3.71 cents for energy costs that was deducted from the company's base rate of 12.37 cents per kilowatt.
If a customer could find another supplier willing to sell them electricity for less than 3.71 cents per kilowatt hour, then the consumer would save money by switching. Those consumers still would pay NYSEG a rate of 8.66 cents per kilowatt for delivering the electricity and other expenses.
But rising electricity prices have pushed power costs to a point where they now exceed the shopping credit, leaving consumers in a position where they would pay more if they switched to a new supplier.
And marketers, led by Hamburg-based Advantage Energy, said NYSEG's rate structure gave them little hope of being able to make money by selling electricity to retail customers, including residents.
"We could clearly see that NYSEG's retail access program was rapidly becoming uneconomic for our customers because energy prices were rising," said Kyle Storie, the president of Advantage Energy, which filed a petition with the
state Public Service Commission last May seeking changes in NYSEG's rate structure.
Under the new rats, residential and small commercial customers also will receive a further credit of 0.4 cents per kilowatt hour, while large commercial and industrial customers will receive an additional 0.2 cents per kilowatt credit to reflect other cost savings that NYSEG enjoys when consumers buy their electricity from another supplier.
"The economic viability of retail access in the NYSEG service territory has not only been preserved, but enhanced," Storie said.
All NYSEG customers have been free to choose their own electricity supplier since August 1999. So far, about 30,500 customers in NYSEG's service territory, who use more than 163,000 megawatts of power annually, now are buying their electricity from another supplier. NYSEG still charges consumers to deliver the power to their homes and businesses.
But the lack of significant savings has made customers slow to switch suppliers. Just 3.5 percent of the state's electric customers had agreed to buy electricity from a non-utility supplier by the end of November, according to the PSC's most recent statistics.