Con Edison’s business-friendly three-year rate increase

 

Con Edison customers afflicted with some of the nation’s highest electricity prices will suffer more in the next three years.

State regulators gave Con Edison a business-friendly rate hike at a meeting January 24. Commercial businesses will pay a smaller percentage increase than residential customers. And the rate of return allowed on the value of the company’s assets should please Wall Street.

Con Edison residential billsExpect to pay an extra $1.78 per month if you’re a typical New York City Con Edison residential customer who uses 300 kilowatt hours of electricity every month. That 2.27 percent increase will bring your electric bill to $80.30 per month.

Con Edison gas customers will also pay more. People who use gas to heat their homes will see bills jump by about $2.35 per month. That 1.65 percent increase will bring your bill to about $144.66 per month.If you’re a typical New York City Con Ed gas heating customer. [Con Ed did not provide estimates for gas bills for 2018 and 2019.]

Con Edison residential heating billBusiness customers will get a better deal. Commercial customers will pay about 1.27 percent more for electricity. Even better for the business community — Con Ed expects gas bills will decline by about 0.93 percent. [As with the residential heating bill numbers, Con Edison didn’t provide estimates for commercial electric and gas bills for 2018 and 2019.]

All the above assumes that prices of natural gas and of electricity generation hold steady. Those prices are set in the marketplace, and aren’t regulated by the state. Your energy bill might fluctuate as gas and generation prices fluctuate.

Con Edison commercial electric billYou have to factor out the prices of natural gas and electricity to see just how good a deal Con Edison got. The company doesn’t mark up the price of natural gas and generated electricity it buys for you in the marketplace. Instead, it makes its money delivering gas and electricity to you. That part of your utility bill — called delivery charges — is going up a lot.

When the actual cost of energy is factored out, Con Edison got a three-year deal that will boost its electric delivery prices by 3.9 percent in 2017, 3.7 percent in 2018, and 3.6 percent in 2019. Its gas delivery prices will increase by 3.1 percent in 2017, 7.5 percent in 2018 and 6.7 percent in 2019. Those increases are downright inflationary — the government’s consumer price index recorded an annual inflation rate of 2.1 percent in December.

Delivery accounts for about half of your electric bill. But historically low natural gas prices will hide the impact of high delivery rates from most Con Edison customers. It’s not just that home heating gas is cheap. Natural gas is the predominant fuel for New York’s electric generating plants. When the price of gas is low, the price of electricity drops too.

State officials get that the boost in delivery rates is masked by lower energy prices — and admit they are taking advantage of low energy prices to advance some of their policies.

On the gas side of their decision, they expect Con Edison to spend more money upgrading its pipes and other infrastructure. New York regulators are on a push to improve gas safety statewide after a series of explosions and other disasters, including the March 2014 Harlem gas explosion that killed eight people.

On the electricity side, the state expects Con Ed will use the rate increase money on its advanced metering initiative and on programs to expand use of solar and alternative energy.

Another aspect of utility prices little discussed or understood by the public is the rate of return. We customers are only interested in prices. But a utility’s rate of return is the heart of the state’s decision making in setting gas and electricity prices.

Con Edison will be allowed to make a 9.5 percent annual return on what the Public Service Commission figures is the value of its wires, transformers, gas lines and other equipment. That’s a bit higher than the rate granted other utilities in the state. New York State Electric and Gas and Rochester Electric and Gas, two big upstate utilities, were allowed rates of 9 percent in a decision in June. In May, the state gave National Grid’s upstate gas and electric utilities a 9 percent rate of return. National Grid’s gas utility in Long Island and parts of New York City also got at 9 percent rate of return in a three-year case decided earlier this month.

Some consumer advocates argue that 9 percent is too much. In a Con Ed’s 2013 rate case, a consultant hired by the state Utility Intervention Unit unsuccessfully argued that the rate of return should be lowered to 7.93 percent. But utility returns in New York — which has some of the highest electricity prices in the country — are actually below the national  average utility rate of return of 10.13 percent. From the rate-of-return perspective, the prices allowed for Con Edison and other New York utilities a bit on the low side.

The Public Service Commission’s decision — reached in a 3-0 vote, with one abstention — also advances the state’s effort to ease the way for expansion of solar and other kinds of alternate energy sources. From the state’s news release:

“A number of important energy reforms and policy initiatives will move forward under today’s order,” said Commission Chair Audrey Zibelman. “The new plan furthers our efforts to move utilities toward a cleaner, more distributed, customer-centric model for utility service, along with less-costly and cleaner alternatives to traditional utility infrastructure investments.”

Here’s some of what Con Edison had to say about the ruling:

The plan will fund critical infrastructure investments in our gas and electric delivery systems to enhance safety and maintain reliability. Additionally, the plan will support the advancement of smart meters, energy efficiency programs and new technology that will give customers greater control over their energy usage and bills, and help integrate new clean energy technology into the grid.

 

About Bill Sanderson

I'm a New York-based journalist, and a former reporter at the Concord Monitor in New Hampshire, the Bergen Record in New Jersey, and the New York Post. My work has appeared in The Wall Street Journal, MarketWatch.com and Politico New York. Twitter: @wpsanderson.
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