Price freeze could well cost electricity consumers
Source: Times Union 
Publication date: 2001-05-19
Arrival time: 2001-05-22

New York State Electric and Gas is working hard to convince consumers and the 
Public Service Commission that its plan to lock in prices for seven years is 
a good thing. 
That campaign includes two recent full-page ads in the Times Union taking 
issue with a story exploring the ramifications of the proposal that NYSEG 
hopes the Public Service Commission will approve by June 27. 
A rate freeze sounds good. Nobody wants to see their electric bill climb, 
especially when stories about California's energy crisis and a potential 
electricity shortage in New York City fill the paper. But as prices fall, as 
they may do within the next seven years, NYSEG customers will be stuck with 
higher costs. 
In fact, NYSEG's freeze request would nullify an existing PSC order directing 
the utility to implement a 5 percent rate decrease on March 3, 2002. An April 
25 PSC paper clarifying NYSEG's price structure found that the company would, 
therefore, get a 5 percent price hike as part of the rate freeze plan. Over 
six years this would result in about $55 million more for the company. At the 
same time, NYSEG customers would be denied the benefits of lower electric 
prices that building new power plants should provide. 
This same PSC study also found that NYSEG's current rates are generating 
earnings of 35 percent, which according to the PSC is in "excess of returns 
authorized for electric, gas or telephone corporations." 
NYSEG vows that customers unhappy with its rates will be able to switch 
suppliers, but that isn't easy, as Kenneth Aaron, the author of the Times 
Union story in question, points out. 
As power plants planned for construction come on line, prices should fall. 
More plants equal more power. The more plentiful a product is, the cheaper it 
becomes. 
The best way for NYSEG to provide low-cost power for its customers is to let 
New York's still-young competitive energy market run without allowing a major 
transmission company to lock in prices for most of a decade. 
Companies that take the financial risk of building New York's required power 
plants need to know they'll be able to get a fair price for the electricity 
they sell. A large chunk of the market must not be shut to them with very 
long-term contracts.