Excelsior! NY Achieves Highest Electric Rates in the Continental United States

Its official. According to the October 28 U.S. Energy Information Administration (EIA) Electric Power Monthly, which provides the official government energy statistics, as of July 2008 New York State’s residential and commercial customers paid the highest electric rates in the continental United States (including Alaska). Residential rates were 19.75 cents/kwh, and commercial rates hit 19.52 cents/kwh.

The usual excuse for New York’s high and spiking electric rates is rising fuel prices, particularly the price of natural gas. But how can this be in a state bestowed with the bounty of cheap hydropower from Niagara and the Robert Moses St. Lawrence project, and with a fleet of nuclear power plants which, combined, make up a 44% share of the state’s power that is produced from sources that are not linked to the cost of natural gas?

The answer is the “restructuring” of New York’s electric industry which had the result of turning state-regulated power plants over to new owners who could sell power in the FERC-regulated wholesale markets where inordinate quantities of energy are sold at NYISO spot market prices (or at prices indexed closely to the NYISO price). The NYISO market design pays the same price for all electricity at any given hour, regardless of the cost of production, with the price demanded by the market clearing bidder (who is often a natural gas burning producer) paid to all. See It was the [NYISO] Market; New York Restructuring: It Was About Price.

Rates for New York’s industrial customers are not the nation’s highest, perhaps reflecting the impact of low cost hydropower allocations for industry, state Power for Jobs rate subsidies, and discounted delivery rates negotiated by companies who threaten not to stay or grow jobs in the state. These breaks help dilute the impact of the NYISO spot markets.

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