Gas rates for New York State Electric & Gas Corp. customers in Niagara and Orleans counties are expected to rise by about 8 percent this winter under a new 6-year rate plan approved Wednesday by the state Public Service Commission.
But the company's Western New York customers, who have enjoyed flat natural gas prices since 1995, will be in line for even bigger rate hikes, totaling 23 percent, as the entire increase is phased in over the five to 10 months.
With the first phase of the rate increase in place, a typical NYSEG customer can expect to pay about $76 more this year for their natural gas, said David Flanagan, a PSC spokesman.
The new rate plan freezes the price that NYSEG charges to deliver natural gas to its customers' homes and businesses in the eastern half of Niagara County, much of Orleans County and in the Olean area.
But those consumers will end up paying 8 percent more bills beginning on Dec. 1 because the agreement allows the company to start charging customers for most of its actual gas costs, which fluctuate based on changes in the wholesale market.
The rate plan then allows the company to phase in the rest of the increase over the next five to 10 months, based on a schedule that will depend on the price of gas on the nation's wholesale markets, Flanagan said.
The commission rejected an earlier settlement in June that would have hit customers with the entire increase at once, indicating that they prefered a rate plan that phased in the price hike resulting from the company's switch to a new rate structure featuring fixed delivery rates and gas costs that are based on the actual cost of obtaining the gas.
"This is much flatter and better," said Jon Sorenson, a spokesman for the state Consumer Protection Board, which had opposed the original rate agreement. By phasing in the increase, the Consumer Protection Board estimates that NYSEG customers will save about $22 million this year.
The new rate plan is a significant departure from NYSEG's previous rate plan, which expired in September and included an overall rate freeze - covering both gas costs and delivery charges.
That old rate plan turned out to be a bonanza for the Binghamton-based utility's customers, who never had to deal with the price spikes that drove up heating costs to record highs for National Fuel Gas Co. customers two winters ago.
But NYSEG sought to change its rate structure to one similar to that used by National Fuel and all other New York utilities because it lost tens of millions when gas prices spiked in 2000 and it couldn't raise rates.
Company officials have estimated that NYSEG's upstate New York customers saved almost $90 million during 2000 because of its fixed rates - costs that had to be absorbed by the utility.
Under the new rate plan, NYSEG's residential customers will start receiving bills that show their gas costs and delivery charges as separate items, which will make it easier for them to compare prices with other natural gas suppliers. NYSEG's current bill combines supply and delivery charges as a single item.