New York Electric Choice Gives Price Stability to NYSEG Customers

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.