Investigators from the Federal Energy Regulatory Commission are looking into New York’s winter electricity price surge, Sen. Charles Schumer said today as he urged another agency, the Federal Trade Commission, to also start a probe.
Schumer said he wasn’t sure of the nature of the FERC investigation. “They don’t say much other than that they are looking,” the senator said at a news conference.
“They obviously smell something going on. Who knows what?” he added.
In the utility world, asking for a FERC investigation is the equivalent of calling the cops to report a possible crime. Nobody is really sure that anything illegal or untoward happened in the energy markets over the winter, but people in the utility business want FERC to make sure.
When prices surged in February, state Public Service Commission chairwoman Audrey Zibelman wrote to FERC asking for a probe of high natural gas prices. In New York, most electricity is generated with natural gas, so the price of natural gas is an important factor in residential electric bills.
Zibelman’s letter specifically suggested FERC compare what gas pipeline owners had contracted to deliver to their customers with the amount of gas they actually delivered. Such a comparison “would indicate whether any market power concerns exist,” she wrote. In plainer English, Zibelman was worried about the possibility someone was manipulating gas prices.
The New York Independent System Operator — which operates the power grid — asked for a FERC investigation of natural gas prices on the same day as Zibelman.
Schumer says the electric price increases have outpaced natural gas prices. He also noted that though electricity prices rose quickly, they are not falling as fast as they should now that the gas shortage is over. “We are asking that the FTC look at the second half of the chain, from the supplier to the consumer,” he said.
A news release from Schumer’s office says the FTC should be involved because “there are multiple ways utilities or natural gas providers could artificially inflate electric bills, including withholding natural gas from the market or overcharging ratepayers.”
There was no shortage of natural gas last winter — but there is a shortage of pipelines delivering gas to the northeast US. Because there was no way to get enough gas to market, prices rose. But the impact across New York seemed to vary by geography and by utility company.
Con Edison’s rates spiked by 20 to 25 percent, Schumer reported last month. Con Edison customers actually caught a break compared to customers of utility companies elsewhere, Schumer’s data shows: PSEG customers on Long Island saw their bills rise by 25 percent, and Central Hudson customers saw their bills rise by 35 percent. National Grid’s upstate electric customers got walloped, with increases of 60 to 75 percent.
Schumer’s numbers seem very rough — and they don’t show whether people who buy electricity from energy service companies rather than through utility companies’ default plans have paid more or less.
I’ll post a link to the news release about Schumer’s request as soon as it’s available.
Whether or not there was any price collusion, the shortage of natural gas pipelines remains a problem and could cause another power price surge next year. My earlier posts on this topic are here and here.
Don’t be quick to blame Con Edison for this problem — it passes on electricity generating costs to customers on its default plan without markup. Here’s a statement Con Ed issued about Schumer’s news conference:
We support the Senator’s efforts to examine this past winter’s high energy prices. We and other utilities had asked the Federal Energy Regulatory Commission look into market performance, particularly as natural gas pricing impacts electricity costs, and there is an ongoing FERC proceeding to look into this issue. The brutal winter’s high energy demands and resulting high costs impacted consumers all across the Northeast this year.
Update, April 17: National Grid’s prices are reportedly easing in the Albany region.