Electricity Study Touts Market Deregulation: Trade Group Finds Average Prices Lower in State Since 1994

By Eric Anderson, Albany Times Union, N.Y.

May 30–ALBANY — Statewide deregulation of the electricity market has succeeded at keeping prices down, concludes a study released Tuesday.

The study, funded by a trade organization of energy supply companies, or ESCOs, found that the average retail price statewide paid by residential customers was 16.69 cents per kilowatt hour in 2006, down from a peak of 18.44 cents in late 1994.

“What really is remarkable is the prices in real dollar terms have remained stable or gone down” even as the prices of oil and natural gas used by power plants has increased, said James Watson, director of the Albany-based Capitol Hill Research Center, which conducted the study.

But the study didn’t look at delivery costs or at taxes and fees. And it found that, even in states that haven’t undergone the kind of market restructuring intended to boost competition that New York has, electricity prices went down over the period.

“The overall trend in real prices has been down,” Watson said. “But they go down slightly more … in restructured states.”

And the trend may be at an end. Watson said the recent sharp increases in petroleum and natural gas prices are starting to push electricity prices higher as well.

In fact, they’ve been rising slowly since 2002.

Jason Babbie, senior environmental policy analyst at the New York Public Interest Research Group, said a study of residential electric rates, adjusted for inflation, found them 10 percent higher in 2006 than they were in 2002.

Another benefit touted by the study, that environmentally conscious consumers could now choose their own “green energy” suppliers, has so far had only limited impact, Babbie said.

“It’s true there have been more choices for renewable energy in the past few years,” he said. But the real impact has been the state’s own effort to ensure that 25 percent of all electricity by 2013 comes from renewable sources, he said.

“You’re guaranteeing demand” to the producers so they can finance new installations, Babbie said.

And the study found that many residential customers — 88 percent — still don’t take advantage of the ability to choose their own electric companies, something Babbie attributes to limited choices.

But with large commercial and industrial customers choosing their own suppliers, ESCOs nevertheless are supplying 42 percent of all electricity now used in the state, up from 19 percent in 2001.

“The restructuring process is not yet complete,” Watson said. But “competition has done its job” in encouraging customers to shop among ESCOs for cheaper power, and to use power more efficiently.

Still, there’s room for improvement.

“New York should seek ways to address existing problems that incorporates retail competition and the many irrefutable benefits it provides,” the study concludes. Anderson can be reached at 454-5323 or by e-mail at eanderson@timesunion.com.

—–

To see more of the Albany Times Union, or to subscribe to the newspaper, go to http://www.timesunion.com.

Copyright (c) 2007, Albany Times Union, N.Y.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.