Electricity Deregulation

Electricity Deregulation New York

New Yorkers have had the opportunity to shop for their electricity provider since the late 1990s. The New York Public Service Commission (PSC) started by ‘unbundling’ your energy bill, separating charges for delivering energy to your home or business from charges for the energy itself.

It’s in the energy, or commodity, charges that you can choose an alternate provider. Alternate electric providers, known as Energy Service Companies, or ESCOs, in New York, compete for you business in most utility areas, including Consolidated Edison, National Grid (Niagara Mohawk), New York State Electric & Gas (NYSEG), Rochester Gas & Electric, Central Hudson, Orange and Rockland, and even the Long Island Power Authority.

In New York, each utility continues to offer what is called ‘default service,’ or service to customers who have never shopped for an energy provider. This default service serves as a benchmark for pricing in the market.

Each utility sets its default service price differently, based on where it is in the transition to full competition. However, for smaller customers, most charge a rate that varies by month, and includes a mix of supply bought on long-term hedges and short-term market purchases. This means the utility price fluctuates throughout the year, and does not provide price certainty or stability.

For very large customers (those above 500 kW or so), the utilities charge ‘hourly’ pricing, or prices that vary with real-time changes in prices in the wholesale market. These prices can be extremely high and volatile. The cutoff for ‘Mandatory Hourly Pricing’ (MHP) varies by utility, but at ConEd, hourly pricing is currently being implemented for customers 500 kW and above. However, customers can avoid these volatile hourly prices by signing up with an alternative electric provider, or ESCO.

In New York, the two major charges for energy supply from the utility are the Market Supply Charge (MSC) and the Merchant Function Charge (MFC). The Market Supply Charge is the price the utility pays for the pure electricity you consume. The Merchant Function Charge covers other costs involved with serving you on default service, such as billing and collection charges. Combined, the MSC and MFC dictate what you pay for energy supply, and are what should be used as a reference when shopping for an alternate electric provider. Typically, your utility bill may indicate a ‘total electricity supply charge’ which combines the MSC and MFC so you can compare prices from competitors.

No matter who you choose to buy energy from, your local utility (ConEd, Central Hudson, National Grid, NYSEG, RG&E, Orange and Rockland and LIPA) will continue to deliver your electricity and respond to service interruptions and outages. You will still pay your utility for these services. In New York, depending on your area, you can choose to receive a single bill from your utility listing your utility delivery charges and alternate energy provider charges, or separate bills from the utility and alternate energy provider.

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