Over the past decade, NYSEG and RG&E stood out among New York’s investor owned utilities by resisting electric industry restructuring dogma in vogue at the PSC, such as divestiture of power plants, reliance on NYISO spot markets to buy electricity for customers at unregulated market rates, and destabilizing residential prices by passing through short term NYISO price spikes, with the goal of “migrating” all retail customers into the arms of unregulated ESCO middlemen. See Disconnected Policymakers.
The largest electric utilities, Niagara Mohawk /dba National Grid and Con Edison, were easily coaxed by their regulator into restructuring, and divesting their power plants, with the candy of holding company structures for which they had yearned for decades, and very favorable multi-year rate deals that allowed the companies to keep savings from cost cutting. The smaller electric utilities were slower to get on board with the PSC program, and some strongly resisted elements of the restructuring, such as the effort to destabilize residential prices and drive customers to ESCOs.
In 2001, before the fall of Enron, NYSEG warned:
Since the inception of the New York Independent System Operator (NYISO) operations in November 1999, wholesale electric prices in New York have risen over 100%. Because there is insufficient supply in the state, consumers who are facing market price pass throughs are almost assured of increased total electric prices – demand is growing, generation reserve margins are tightening, and this summer is expected to be warmer than last year’s, which was one of the coolest on record. High and irrationally volatile wholesale electric prices will be inescapable for years to come. Action must be taken now to ensure long-term, reliable energy supply and to restore stable prices. To do otherwise is to expose the state to the power disruptions and extreme price volatility experienced in California; New York will be faced with economic dislocation. We must insist that the right solutions to protect consumers are pursued and become a priority.
Currently, the New York wholesale electric energy market, like a train without brakes, is on a volatile, high priced track leading toward possible derailment.
NYSEG Policy Paper, April, 2001. For years, NYSEG and RG&E resisted efforts of PSC staff and ESCOs to institute default variable rates that change unpredictably every month, like those of Con Edison. RG&E, which held on to much of its power generation available at the cost of production, rather than at wholesale market rates, wound up with the lowest residential prices of any investor owned electric utility in the state. In contrast, the rates and bills of Con Edison and Orange & Rockland, which embraced the PSC restructuring regimen and relied heavily on wholesale purchases influenced by NYISO spot market prices, soared. See PULP’s Chart of Typical Residential Electric Bills.
NYSEG/RG&E were still providing hedged residential rates and were talking in 2006 -2007 about building new, cleaner or renewable energy power plants, whose output would be available on a state-regulated cost of service basis, rather than on a deregulated market rate basis influenced by flawed NYISO spot markets.
Along came Iberdrola USA.
Iberdrola USA, an affiliate of a Spanish utility, proposed a merger agreement to take over NYSEG and RG&E. Initially Iberdrola USA also proposed to build a cleaner power plant to replace the RG&E Russell Station. But in the course of proceedings at the PSC, Iberdrola USA satisfied demands of the merchant power industry and PSC staff by agreeing to sell power plants still owned by RG&E, and by not building new power plants through the state-regulated NYSEG/RG&E utilities.
The latest shoe to drop is the naming of a former NYISO President and CEO, Mark Lynch, to be President of NYSEG/RG&E. Lynch is a stalwart defendar of the electric deregulation still in favor at the PSC and with power producers and traders, but rejected by every state to consider it since the demise of Enron. See NYSEG Gets New President, Elmira Star Gazette, December 7, 2009.
This does not augur well for residential NYSEG and RG&E consumers who need lower prices, price predictability and stability.
The former President of NYSEG/RG&E, James Laurito, has been named to be CEO of Central Hudson Gas & Electric. Central Hudson is now the last investor owned electric utility still speaking the truth about the results of the New York PSC’s deregulation experiment. See New York Deregulation Failing, Says Central Hudson Executive, PULP Network, November 02, 2009; Central Hudson chief responds in energy deregulation debate, Poughkeepsie Journal, December 6, 2009.