We’re paying price for power deregulation

In New York state and elsewhere, competition to manufacture electricity was introduced a couple of decades ago. Many states took a wait and see approach, and seem to be fairing much better allowing utilities to continue owning power generation and carefully regulating that critical need.

The New York Executive Order approach to deregulation was in part due to a well-intended, but disastrous legislation known as the “six-cent law,” requiring utilities to purchase power from unregulated generators for a minimum of six cents when more often than not, the utility owned generation made power at less than half that cost. Federal Law known at PURPA required that utilities must purchase power from these generators if they could make it cheaper – that made sense; but New York state went further with this minimum price as PURPA laws didn’t seem to stimulate the market as anticipated.

When I began reading meters at Niagara Mohawk in 1983, we had among the cheapest rates in the Northeast; that changed dramatically as many foreign and other investors descended on New York to take advantage of the law and its “license to print money.” Rates soared as utilities passed through the costs of the mandated power purchases to the power parasites that popped up like poisonous mushrooms in their geographically vast service territory.

In an effort to resolve the fatally flawed law through executive order under Gov. Pataki’s electric deregulation, contracts were bought out as the law was rescinded and costs were recovered through fees known as “competitive transition chargess”, aka “stranded costs” with the arm twist that utilities divest of generation assets. Thus, the competitive market was formed in New York.

Today, that competitive market is warped in two major ways:

1. While true that the electric commodity costs have dropped dramatically in the last few years, it’s due to the abundance of cheap natural gas rather than the “competitive marketplace.” Much to the consternation of experts’ warnings about being over dependent on any one fuel source – gas has soared past coal for power generation for the first time ever.

2. The need to rapidly pivot to reduce dependence on fossil fuel – whether for belief in the reems of climate change data, or to cost effectively replace a finite fossil fuel supply with sustainable energy for power and transportation. Absent intervention, zero carbon nuclear generation would have succumbed to the low price of natural gas in New York, if not for the recognition of Gov. Andrew Cuomo that when it comes to carbon emissions, nuclear has the same attributes as wind, solar and hydro. Creation of the first in the nation “zero emission credits” saved thousands of jobs, millions in tax revenues and prevented millions of tons of emissions. And subsidies are the only thing that has renewables able to compete against natural gas.

The final thought on competition and clean energy is the fact that utilities have provided evidence that they can build renewable assets cheaper than the current procurement process, and delivering the most cost-effective outcome for customers is among the core mandates of the state agency that regulates this. When it comes to competition and the need to accelerate the development of carbon free energy, why not re-introduce utilities on a limited basis to the competitive market for developing clean energy for the grid along with transit electrification, if it’s in the best interest of ratepayers?

Phil Wilcox, IBEW member/35 year employee Niagara Mohawk/National Grid; 10 years advocacy for rational energy policy with legislators and regulators on behalf of the IBEW.

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