Deregulation in New York

In the mid-1990s deregulation in New York began when the state government began to implement policies to restructure the electricity industry. It was believed that this deregulation could help businesses and consumers save money on electricity in the State of New York in light of a flagging economy and increasing power costs at the hands of the monopolies granted to electrical utilities when power regulations were first enacted.

Even though the deregulation process has been ongoing in the natural gas industry for years as a result of oil embargos in the 1970s, little has been done with deregulation in New York concerning electric utility operations and rates until much later, since they are much more complex in terms of operations, rate policies and distribution among various power consortiums. As a result of this, experts believe that electric utility restructuring will have a far greater impact on electricity costs charged to consumers and the manner in which operations are handled in the coming years. To understand deregulation in New York, there are a few concepts that we need to understand better.

A utility provides a tangible commodity or service that is considered to be something vital to the well being of the general public in the state. These commodities are things like electrical power, water, or natural gas. The utility has the responsibility for producing the commodity, transporting it (in the case of electricity through the power lines they have erected and must maintain), and ultimately, distributing it on the retail level to the individual consumer through a meter and connections to the power grid owned by the utility.

It was ultimately determined by both state and federal lawmakers that it is in the public's interest to regulate how electricity is provided. To keep utilities from practicing price gouging like often happened in the early years the utilities were being built and to encourage widespread access by individual consumers, the government originally allowed individual utilities certain monopolistic rights to sell energy unchallenged within a specific territorial area, known in the industry as the "service area" or "franchise territory." In the times when the utility was first being set up, this monopoly allowed the utility to regulate prices any way they saw fit as well as enacting service terms and conditions that the consumer had no choice but to abide by if they wanted power.

Despite the safeguards set up at the state level that were supposed to be in place in the form of the state Public Service Commission, up until recently the consumer has had very little to say about the prices and rates charged by the utilities. The PSC was perceived as acting rarely in the interest of the individual consumer, and the consumer had very little recourse open since they had no other choice except to go with the one utility that was operating in their area.

Deregulation in New York was designed to allow the consumer to choose a power company which has a more competitive rate charged for Kilowatt hours (KWh). This offers a potential savings to the individual energy consumer because outside concerns can charge rates less than those set by the original territorial power provider. This also helps theoretically because a consumer is free to choose an electricity provider which produces electricity utilizing a more environmentally friendly renewable generation source like solar or wind compared to the burning of coal which accounts for over a third of all electrical power generated. New York is one of only 19 states which is implementing restructuring to a competitive market.

Despite deregulation in New York, the one wild card in the power equation is the cost the consumer is charged for the delivery of power. This delivery price is still determined by the local utility since they are mandated to maintain and effect repairs on the power lines in their service area should storm damage and outages occur. With this point in mind, the power consumer should be aware that it is possible to see delivery charges that actually exceed the cost of power used, thus affecting the actual savings that choosing a cheaper provider might afford, despite the fact that the laws enacted prohibit the local utility from adopting stranded costs or other surcharges.

This is one aspect that is not being made clear when consumers are being offered the choice of an electrical power provider. To be properly informed, consumers should carefully research delivery charges to get a better idea of what savings could be actually realized, making the choice of a power provider more realistic when it comes to optimizing deregulation in New York.