In recent years, industrial and residential customers have become increasingly concerned about excessive rates charged by sellers in dysfunctional wholesale spot markets. (See Industrial and Residential Customers Agree: Proposed FERC Rules for Electricity Market Rates are Flawed). To the extent that a utility buys electricity for its retail customers in the wholesale markets (rather than producing it), the wholesale costs are passed through to customers.
Advocates of deregulation, as usual, have proposed a new market solution to correct obvious flaws in the spot markets and “market-based rate” system created by FERC. They argue for passthrough of high (and possibly manipulated) “real-time” wholesale spot market rates, on the theory that when faced with extreme market prices at times of peak usage, some consumers might alter their demand for electricity and their usage patterns in order to avoid the excessive and unreasonable charges. This “demand response,” in theory, will increase elasticity of demand and perhaps tame the excesses of the flawed spot markets. On the other hand, under existing conditions where power producers perceive no obligation to serve at reasonable prices, where meaningful regulatory oversight of wholesale rates is absent, and where energy planning has been abdicated by the state, allowing extreme prices during hours of scarcity may only induce more scarcity. See NYISO “Scarcity Pricing” Events.
Real time pricing is often touted as a “green” solution. See ‘Smart’ Electric Meters Debated over Cost. That may be true to the extent extreme prices deter customers from using electricity without corresponding loss of productivity or loss of other social benefits. But, to the extent real time pricing simply shifts customer usage to off-peak times when the incremental usage is more likely to be produced by coal-fired power plants (instead of cleaner natural gas), it may actually increase greenhouse gas emissions.
Spiking rates, in any event, may not be affordable to residential customers living from check to check on low or modest incomes. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers. After previous experiments with mandatory time of use pricing for high usage residential customers, and consumer opposition to it, a New York statute now permits time of use pricing for residential electricity customers only when they voluntarily consent to it.
In April 2007 Con Edison proposed a tariff modification to expand residential real time pricing experiments, conducted in cooperation with NYSERDA, that will affect electricity consumers living in subsidized housing projects that have been submetered. PULP filed comments expressing concerns regarding voluntariness of consumer participation and the right of submetered consumers to continuation of price capped service with full consumer protection rights.
On July 18, 2007, the New York PSC issued an order approving Con Edison’s new Rider I — Experimental Rate Program for Multiple Dwellings, recognizing validity of PULP’s concerns, stating
NYSERDA should require that a notice of intent to participate in the NYSERDA pilot program be provided (by the building owner or manager) to each existing tenant and include a summary and explanation of the pilot program. In addition, new tenants should be notified when they sign a lease agreement that the building is participating in the NYSERDA pilot program, and the lease agreement should summarize the NYSERDA pilot program. The building owner or manager should certify that the method of tenant rate calculation, rate caps, complaint procedures, tenant protections, and the enforcement mechanisms will be incorporated in plain language in all current and future lease agreements. The NYSERDA pilot program participant should also notify each tenant that, at any time, the tenant can file a complaint pursuant to the Home Energy Fair Practices Act (HEFPA) with the Department of Public Service together with contact information for the Department’s Office of Consumer Services.
For further information, see PULP’s Help Center web page on Submetering.