Twenty years after New York allowed residential customers to begin shopping for electricity and natural gas, the groundbreaking program appears on the verge of being scrapped or broadly overhauled.
Rather than save consumers money, those who signed up under the state Public Service Commissions program paid nearly $820 million more for electricity and gas than if they had stayed with their local company, according to a PSC analysis of the 30 months ended in June 2016.
Since the deregulation program began, the consumer loss could be in the billions, based on study estimates.
These stunning admissions come in reams of documents and testimony surfacing in months of hearings before a PSC administrative law judge.
The program lauded in 1996 when New York was one of the first states to deregulate the utility industry now is under review by the PSC. The commission already has halted marketing free choice to senior citizen and low-income customers.
"Allowing customers to select alternative energy providers should not come at the expense of exposing customers to higher energy prices when that is not what the customer has bargained for or had been led to believe will occur," New York's AARP and the Albany-based Public Utility Law Project said in a submission to New York regulators.
Electricity and natural gas marketers seized on the publics confusion to sell overpriced supply. Deals offered by so-called energy supply companys ESCOs for short were rife with abuses.
Despite efforts to realign the retail market, customer abuses and overcharging persist, the Public Service Commission said in initiating a study of the retail market . If ESCOs were truly living up to the promise of their function as innovators, it is expected that there would be much greater variety and transparency.
Indeed, the PSC acknowledged deregulation of the commodity markets in New York lacked the openness necessary to allow retail customers to make wise decisions on their energy choice.
High-pressure sales tactics and misrepresentations by door-to-door salespersons and telemarketers were common as competition rolled out. Promised savings never materialized as marketers used teaser rates to lure in customers, only to raise the price a few months into the contract.
Many opting for an independent supply ended up paying more than if they had remained with their full-service utility.
Independent supplier overcharges over the 30-month period ended June 2016 for New York State Electric & Gas Corp. customers were estimated at $86 million and $46 million at Rochester Gas & Electric , more than 15 percent higher than they would have paid by remaining with the resident utility.
"There is little evidence that retail choice has yielded any significant benefits," concluded a 2016 study of electric deregulation impacts nationwide prepared for the Electric Markets Research Foundation by Christensen Associates Energy Consulting of Madison, Wisconsin.
When New York in 1996 became one of the first states in the nation to deregulate the utility industry, the transmission of electricity and natural gas remained with traditional utilities such as New York State Electric & Gas Corp and Rochester Gas & Electric, both now subsidiaries of Iberdrola based in Spain.
New York's utilities were encouraged to sell their generation plants, which NYSEG did at the time, collecting $1.8 billion for the assets. And customers were freed to shop for their energy suppliers.
