Energy Deregulation in New York: When, Why, and What It Means
Thirty-one states have deregulated electricity or gas markets. New York is one of them. So what?If you live in New York or another of the thirty-one, it means one thing above all: you have options.
The Monopoly and Energy Deregulation
First, let’s backtrack. Energy markets in New York were deregulated in 1998. Before then, Consolidated Edison had a monopoly on the energy market. “Consolidated Edison… that sounds familiar,” you’re saying. I hear you! Familiar because yes, it was originally Thomas Edison’s company when he first rolled out the light bulb. Back in 1892, Thomas Edison’s company, the Edison Illuminating Company supplied electricity to a whopping 59 customers in lower Manhattan. In those early days, Edison’s company (which went through a hundred and one name changes) was one of over 30 energy generators and providers in New York.
So, now for the Consolidated part: after years of buying, merging, and dissolving other competitors, the long-gone Edison Illuminating Company evolved, simplifying the marketplace to include just one giant company. Consolidated Edison, or Con Ed as we know it today, was born. Con Ed is big. Really big. If we unwrapped all the underground wires in their system, we could go around the earth over three times.
That brings us to 1998. Time to deregulate. (It rhymes!). When Con Ed had a monopoly - meaning they controlled generation, storage, supply, and delivery - they did what monopolies tend to: overcharge customers and provide poor service, reminding us why we went through the whole Sherman Antitrust Act back in 1890 (remember high school social studies class? Mr. Johnson said it would be relevant…). It was time for a change, and markets were deregulated. Con Edison was no longer to handle the generation or supply of energy - at least, not necessarily.
Third party companies - today, called Energy Supply Companies (or ESCos) – are now allowed to enter the marketplace and handle energy supply. And that’s the end of story time. That brings us to today, more or less.
Except not really. Not all ESCos are the same. Some will just do energy supply, meaning you (your home or your business) can choose for them to purchase energy on the commodity market on your behalf. They do so, and then pass the energy over to Con Ed, who in turn flows it through their pipes and wires, delivering it to the light bulb above your head now. Remember those millions of miles of underground wires? This is where they come into play.
Energy supply companies don’t handle delivery because they don’t have the infrastructure to do so. Con Edison has all of that in place - they are the utility, after all, even if they are no longer a monopoly - (this is starting to sound like a game of Monopoly, no? I always liked WaterWorks better than Electric Company, anyway).
So, what happens when you choose an ESCo?
Well, if you’re working with a reputable company, an account representative will meet with you either in person or on the phone (in person is always best) to explain to you their company’s policies and offerings. How does one differ from the next? Glad you asked.
The best part about deregulating energy markets is the innovation that comes into the marketplace. Because there are lots of ESCos trying to win your business, they have to come up with new ways to convince you that they’re the best one on the block. Some can offer you great rates, saving you money - but be careful, as contracts often have fine print. Some, like Phoenix Energy Group, offer renewable energy, meaning you can make a choice to support sustainability in New York. Maybe your company offers energy efficiency consulting services, or discounted LED light bulbs as part of your service agreement. These services can be extremely beneficial to you as a consumer.
Your billing doesn’t change when you work with an ESCo. You will still receive one bill from Con Edison and will pay them directly. But wait a minute: everyone’s got to make a buck. So how does your ESCo make money?
Think back to when we mentioned the commodity market. Your ESCo buys from the commodity market at the very same price that Con Edison does. But because ESCos don’t have the same overhead cost as Con Edison (at Phoenix, we’re just 10 people - compared to thousands of Con Ed employees, with entire fleets of trucks and buildings to pay for as well), they can offer you a lower after-market rate, while still taking a small profit. So even though you aren’t paying your ESCo directly, they are still making money based on your Con Ed bill.
Edison invented the light bulb, started supplying electricity to his friends in Manhattan. His company grows and grows, cornering the market and becoming Consolidated Edison. But the company grows too large, and the government jumps in to control things; energy markets are deregulated in the ‘90s. The ESCo is born. You can save money with unique pricing strategies and value-added services, generally having more autonomy over your energy bill. You can choose from several ESCos for your energy supply, but one thing to keep in mind: if something looks too good to be true, it probably is. Read your enrollment agreement! Ask your representative questions. If you don’t know who your representative is, that’s probably a poor reflection of your company. Consider switching to a company that you trust to keep an eye on your account and update you as things change, as well as one that can offer you other valuable services.