The Power of Choice

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New York City residents may not know they can pick their provider

By Aline Reynolds

When New Yorkers think of energy, they generally think . But there are actually more energy suppliers to choose from than there are cable, Internet and cell phone providers—combined. The trick is making sense of the promotions that arrive via mail and figuring out which one works best for any one household.

Energy choice stems from the state Public Service Commission’s 1996 deregulation of the energy sector. This allowed third-party suppliers, known as energy service companies, or ESCOs, to sell electricity and natural gas to commercial and residential consumers. Previously, state-regulated utilities like Con Edison had the corner on the energy market, acting as both the owners and distributors of energy supply for a specific geographic territory.

Much of the wind power purchased by local energy users through ConEdison Solutions originates on wind farms upstate in Madison County.

“It used to be a one-size-fits-all system,” said Lisa Dornan, director of public relations at Direct Energy, an energy company that entered the New York market in 2006. “Now, people have choice. They can find something that best fits their household needs.”

Proponents say the free-market system fosters competition and choice, allowing consumers to pick a plan that supports green energy, or has stable monthly bills. And though energy providers are largely deregulated, federal and state governments still shield consumers from unfair rates.

“The government’s concern is how to protect consumers from wild price fluctuations in an unregulated industry,” such as the reshuffling of rates that followed the breakup of AT&T in the 1980s, said John Holtz, director of Green Mountain Energy’s Eastern U.S. markets.

Green Mountain Energy recently entered the New York City residential market, offering various combinations of renewable wind and water energy, from both state and national sources. It is one of about 50 different energy service providers for electricity or natural gas, with Con Edison serving as the mediator. Currently, nearly 20 percent—or 1.1 million New York City residents—now purchase their energy supply from these types of providers. People who select a different energy provider still receive one monthly statement. Con Edison continues to deliver the energy to city consumers and still handles all billing.

Though Con Edison still competes with these energy providers on a retail level, the utility is mandated by the Public Service Commission to let customers know about the various options, assuring them that service will not be interrupted if they switch to another energy provider. Since 1998, Con Edison has offered New York City residents who switch to another energy provider a 7 percent reduction in their natural gas and electricity bill for the first two months of their new service with the provider.

Ambit Energy, another natural gas and electricity supplier, sets its price after Con Edison publishes its own price, apparently making up for low rates with volume (although a spokesperson could not confirm this business strategy). Ambit says that its customers typically save an average of 3 to 5 percent on natural gas and electricity bills compared with Con Edison utility customers.

Ambit also has a loyalty program, enabling households to earn travel points every month toward a partially subsidized vacation. Travel packages range from a five-day discount Carnival cruise to the Bahamas to a three-night stay at a Ritz Carlton.

Ambit, like several other energy companies, is “Green-e Certified,” meaning that a part of the money received from billing funds renewable energy sources elsewhere in the state or country. That may appeal to more eco-minded customers.

“People are becoming aware that this is one easy way that they can make a difference,” said Christopher Chambless, Ambit’s co-founder and CFO.

Another Green-e Certified company is ConEdison Solutions, a sister company of Con Edison. The company puts funds toward locally generated wind power, which “has the added benefit of affecting the immediate region,” said Lauren Kenny, director of ConEdison Solutions’ electric supply in New York.

ConEdison Solutions also advertises a fixed, one-year plan, offering residential customers budget certainty and allowing them to switch back to Con Ed utility during the 12-month contract without a cancellation fee. For those who don’t mind fluctuating monthly bills, ConEd Solution offers a second option: a variable rate that the company determines on a monthly basis, depending on consumers’ usage and the wholesale market price of electricity. The company’s monthly wind power, a third option, costs “the equivalent of a single cup of designer coffee more than our standard power,” Kenny said.

Direct Energy also markets fixed monthly energy rates—a sign, it says, of the company’s financial stability. Owning natural gas and power generation assets and pre-purchasing energy allows the company to manage volatile electricity and natural gas prices.

“Some companies have priced more aggressively than they were financially able to follow through on,” said Chris Kallaher, Direct Energy’s director of government and regulatory affairs. “Our customers can rest assured that we’re actually going to be there to back up our commitment.”

For more information on the various energy providers available in New York City, visit PowerYourWay.com.

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