Change could save ratepayers $2.2 billion a year, he claims

by Jay Gallagher

ALBANY – Electric rates could be cut by 10 percent across the state with “a stroke of the pen,” a Westchester County lawmaker said Tuesday.

Assemblyman Richard Brodsky, D-Greenburgh, Tuesday introduced a bill that would abolish the way the price of electricity is currently set – known as “pay as bid” – and replace it with one where producers would be paid what they were willing to take.

The current system, Brodsky said, is “insane … It is absurd, destructive and needs to be changed.” He estimated changing it would save ratepayers about $2.2 billion a year.

But the head of an organization of independent power producers said the current system provides incentives to produce power as cheaply as possible and is best for consumers.

“It promotes efficiencies in the marketplace as well as investments in renewable energy,” said Gavin Donohue of the Independent Power Producers.

A hearing on the electric market issue is set for Thursday in Albany.

The state electric market was deregulated a decade ago, with utilities required to sell their power plants and concentrate instead on transporting and delivering power, while independent companies were created to generate the power and sell it to the utilities.

The cost savings from the new arrangements have so far failed to materialize, however.

“When the Public Service Commission began this de-regulation experiment over a decade ago, New Yorkers were paying among the most expensive utility bills in the country,” said Assembly Energy Committee Chairman Kevin Cahill, D-Kingston. “It is now 2009, and virtually nothing has changed when comparing New York to the rest of the 50 states.”

Donohue said that high property and other taxes as well as other costs mandated by the state contribute to the relatively high cost of electricity here. He said the widespread use of natural gas to generate electricity, which is cleaner but more expensive than coal, which is more widely used in other states, is also a factor.

The Independent System Operator, the organization that runs the state’s electric market, issued a statement late Tuesday blasting the report Brodsky relied on for his figures, saying it is based on “unwarranted assumptions and unsupported assertions.”

Spokesman Ken Klapp said that the cost of power has actually declined in New York by about 10 percent since the market was deregulated, if the increased cost of fuel is discounted.