Few Opting To Switch Energy Providers Under Deregulation

ALBANY, N.Y. -- New Yorkers may be quick to complain about electric and natural gas bills, but few have taken advantage of deregulation of the industry that was supposed to let them shop around for a better rate.

 

State Public Service Commission Chairman William Flynn this week said just 6 percent of residential consumers have opted to switch companies since deregulation began in the late 1990s.

 

Some lawmakers and consumer groups say that's because residential consumers have no easy way to compare costs or services with the commission leaving it up to consumers to investigate all their options. And critics of deregulation say those customers who have switched have not seen the promised savings.

 

"It's impossible to know what your saving and there is no easy way to compare prices," said Democrat Paul Tonko, chairman of the state Assembly's Energy Committee. "The promise of deregulation is not really a promise kept. There isn't that robust market that was promised, so we have had a poor outcome for consumers in the state."

 

Participation nationwide also appears to be low. Twenty-three states are currently in some stage of deregulating their electricity markets, according to the National Energy Marketers Association. Participation rates vary from state to state, from low single digits to as much as 34 percent of natural gas customers in Ohio in 2004.

 

Gerald Norlander of the Public Utility Law Project said energy service companies in New York have used short-term promotional rates to get a few consumers to change providers. But once the promotions run out, the customers see the same rates they were paying with their old utilities.

 

"People are not seeing the savings," Norlander said. "It's not a value proposition for the consumer at this point."

 

Still, industry representatives and regulators say the system is saving energy users money.

 

Flynn said 55 percent of industrial and large commercial customers have taken advantage of New York's deregulated market and switched energy providers. He noted that more than 60 energy service companies are now vying for business in New York, compared with just four before deregulation began in 1996.

 

"Progress in the residential market has been a little slower than what we had anticipated a few years ago," PSC spokesman David Flanagan said. "It does take time, but we are going to continue to promote choices that are available to consumers. Having those choices out there will drive innovation, drive efficiency and in the long run deliver better value to customers."

 

New York's electric rates are the second highest in the nation, trailing only Hawaii, according to federal Energy Information Administration data. That's due to a number of factors, including taxes, according to the Business Council of New York State.

 

Flanagan said prices would be even higher under the regulated utility system.

 

Power company officials this week said energy suppliers have invested around $5 billion in New York power plants since 1999 and New York consumers have saved more than $7 billion since deregulation began.

 

Gavin Donohue, chief executive of the Independent Power Producers of New York, said the state could "put more of an emphasis behind education." He notes that in New York consumers can choose to pay a premium for power that comes from renewable sources like solar and wind.

 

Tonko has introduced legislation he said will boost competition and bring down residential rates. His bill would require utilities or the PSC to keep a complete list of all companies offering gas or electric services to residential customers and the prices and terms offered by each provider.