Electricity choice in New York allows energy users to shop for competitive electricity and natural gas rates among a variety of companies offering innovating rate product options. Prior to the electricity market deregulating, residential customers were forced to accept the rate structure offered by their local utility company. With New York electricity choice these same customers can elect how they purchase their power through different term options and ways the power is generated. For example, New York electricity consumers who think energy prices will be rising might decide to lock in a fixed electric rate for 36 months. If they think prices will go down after the current season they might decide to lock in a six month fixed rate so that they are not bound to a contract for too long.

Customers of NYSEG, the third largest electric utility company in the state, pay an electricity supply rate through NYSEG that is variable. The variable rate changes monthly in response to the wholesale electricity market. Electricity prices like this can be very volatile as they are somewhat tied to other global energy markets such as natural gas and coal. World events and abnormal weather patterns can have huge effects on energy prices. It would not be uncommon for a variable rate structure to rise by 20% or more in one month.

However with choice, NYSEG electricity customers can mitigate the volatility by locking in low fixed electric rates through competitive energy companies called Electricity Service Companies (ESCOs). When a NYSEG customer chooses an ESCO to supply their power, the customer continues to be charged for delivery service by NYSEG. Since the NYSEG supply rate changes on a monthly basis, competitive ESCOs are usually unable to guarantee savings to customers, however by offering a fixed rate they are able to offer price stability for consumers who may not be able to afford a large rise in energy prices resulting in a higher than expected NYSEG electric bill.

Choosing a competitive electricity company that offers a low fixed electric rate has been the strategy for about 25% of NYSEG electricity customers.

Energy choice is becoming more attractive to residential customers of Orange and Rockland Electric in New York.  The New York utility company charges a default supply rate to its customers which changes on a monthly basis.  The default rate has been above 10 cents per KWh six out of the last nine months, causing electricity customers to look into competitive offers.

The Orange and Rockland price to compare average over the last 12 months is 9.858 cents as of March 2011.  From March 2010 to February 2011 this changing average had been above 10 cents.  Currently, a six month fixed competitive offer of 8.5 cents is available which also includes a promotional $75 visa gift card.  The 8.5 cent offer is a 14% savings versus the 12 month default average.  The idea of saving 14 percent on the electric bill is having a positive effect on electricity shopping in New York.

Unlike other deregulated electricity markets where price to compare default rates are fixed for several months, New York Orange & Rockland price to compare rates are variable and change monthly.  This has caused a slow transition for customers to shop and compare electric rates.  However, with recent data showing that electric default rates in New York have been significantly higher than competitive fixed electric market rates, customers are starting to warm up and welcome the idea of electricity choice.

This article pertains to commercial and industrial electricity customers in deregulated markets where Integrys Energy is active, including but not limited to Maryland, New Jersey, Pennsylvania, Connecticut, Delaware, and New York.

Integrys Energy has offered electricity contracts with misleading rate quotes to commercial and industrial customers.  If you are deciding to use Integrys Energy as your supplier it is extremely important that you either review the contract thoroughly, or work with a consultant or energy broker who is equipped to do so.

As a business electricity customer, here is what you need to know:

Every deregulated electricity state divides their bill into two basic parts, the regulated delivery part and the competitive supply part.  Depending on who is your local regulated utility will depend on how these charges are viewed on your bill.  Sometimes, like in the case of PSEG in New Jersey, the two parts are clearly divided.  Other times, like in the case of PPL in Pennsylvania, the charges are not so clearly separated.

The competitive supply portion of the bill can further be separated into several components (energy charge, transmission, capacity, line losses, etc.).  When you receive a competitive rate offer from an energy supplier, the rate should include every component of the competitive supply portion.  However, what some suppliers do is give a quote that only includes a portion, and then passes on the rest of the charges in a subsection on the bill.

So for example, you might get an offer from Electric Supplier (A) for a rate of 8 cents that includes every aspect of the competitive supply part.  Then Electric Supplier (B) might offer you a rate of 7 cents that only includes part, say the energy charge, of the competitive supply part.  The remaining part of the competitive supply part (transmission, capacity, line losses) will show up on the bill in a different section, and all of a sudden 7 cents is really 9.5 cents.

Integrys Energy practices the method of Electric Supplier (B) from the example above.  Recently I reviewed a contract that they presented to a customer.  After reviewing the contract I found that the customer would have paid exactly double to what they thought they would have paid.  This is because Integrys divided the competive supply part into two sections, and gave both sections the same exact rate.  This was extremely misleading as the implementation of the exact rate for two different sections was designed to make it appear as if everything would be charged the single rate once.  But after taking a closer look, I was able to see that there would in fact be two separate charges.

To summarize the above paragraph, had the customer signed they would have paid:

6 cents per KWh for (energy commodity)

6 cents per KWH for (capacity, transmission, line losses)

12 cents total

The sales person representing Integrys presented the rate as 6 cents.  The customer thought that the 6 cents was a great offer compared to the 8 cents offer they were getting from another legitimate supplier (the 8 cents offer was found to include the entire portion of the competitive supply part).  In reality the 8 cents should have been compared to 12 cents, and not 6 cents.

People making electricity decisions for businesses need to be aware of these deceitful practices.

A simple way to do this is to email the sales person and ask them:  Does the rate include energy, capacity, transmission, line losses, and all other components of the utility price to compare?

Anything less than a “yes” means that there will be some surprises.

The National Weather Service’s Climate Prediction Center is expecting a rough Hurricane season in 2010 that may have a negative effect on retail electricity prices.  Electric rates in the majority of competitive electric markets have a direct correlation with natural gas prices.  Bad hurricane seasons result in a decline in natural gas production that eventually pushes electric prices up for consumers.

The Climate Prediction Center estimates an 85% chance for an above normal hurricane season with only a 10% of a near normal season, and a 5% of a below normal season.  They are estimating 166 (Bcf) of natural gas shut in production which may cause electric prices to increase across the country.

The hurricane season is between June 1 and November 30.  Most utilities have default rate structures that cause their default customers to pay higher rates in the summer as oppposed to the rest of the year.  With those two factors added to the fact that at the moment fixed electric rate contracts have been low (10-30% lower than default rates depending on your location and energy consumption patterns), now is an idea time to look into locking in a low fixed electric rate. 

If you are currently on a floating rate you would also want to think about locking into a fixed rate as the floating rate will be affected by a bad hurricane season.  Customers in Pennsylvania, Connecticut, New York, New Jersey, Delaware, Maryland, and Texas should get off of default rates on lock into a competitive fixed electric rate.