New York Senator Charles E. Schumer yesterday urged the Federal Trade Commission (FTC) to immediately investigate the budget-busting increase in electric prices that residents across New York City have been forced to pay over the course of this winter – and that they will continue to pay for several more months. Schumer called for an investigation by the FTC, which works to promote consumer protection and eliminate anti-competitive business practices, in light of the fact that electric bills have risen to extremely high rates this winter, and will also urge the FTC to closely monitor those prices to ensure they drop quickly alongside natural gas prices. Schumer pointed to examples like a Brooklyn Con Ed customer who was charged 13.82 cents/kWh in February 2013 and 20.52 cents/kWh in February 2014. Likewise, the same customer was charged 7.31 cents/kWh in March 2013 and 14.74 cents/kWh in March 2014.
Utilities throughout the state have attributed the increase to record-low temperatures and high demand for natural gas, but Schumer said that the size of the rate increases were so high that he is concerned it outpaced the actual increase in wholesale energy costs for utilities. Therefore, he is asking the FTC, in conjunction with the Federal Energy Regulatory Commission (FERC) and the Department of Justice (DOJ), should it become necessary, to investigate the entire wholesale electric and natural gas markets to ensure that these markets were on the level, and that customers were not being improperly overcharged. He also wants to ensure that as natural gas prices inevitably fall, that electricity rates also fall accordingly. Schumer explained that there are multiple ways utilities or natural gas providers could artificially inflate electric bills – including withholding natural gas from the market or overcharging ratepayers – and asked the FTC to look into all possible angles as part of its investigation. The NYS Public Service Commission (PSC) has similar concerns, and also petitioned FERC to investigate.
“As the thermostat went down this winter, electric bills shot up. It is typical for electric bills to go up during the winter months, but this year’s sky-high increases are more than what would be expected,” said Schumer. “These bills have gone up so much that we need to take a good, hard look at what is really going on here; and that is why I am calling on the Federal Trade Commission – the authority when it comes to consumer protection and anticompetitive business practices – to launch an investigation into these exorbitant price hikes. We need to make sure that customers are not being overcharged, and we need to ensure that the prices fall as quickly as they shot up.”
Over the course of this winter, electric bills across New York City and the entire state have skyrocketed to rates that are substantially higher than what customers have paid in past years and that do not necessarily correlate with usage. In addition, rates have climbed exponentially from month-to-month over the course of this winter, and consumers could still be paying sky-high bills into the spring due to the fact that bills reflect consumption from months earlier.
According to an AARP Report “David v. Goliath; Why consumers are losing New York’s utility game,” New York’s investor-owned utilities and the Long Island Power Authority charge some of the highest rates in the country. In September 2013, New York’s residential customers paid 19.57 cents/kwh, which is 56% higher than the national average and the second most expensive after Hawaii. And, prices rose from September 2012.
According to media reports, data collected from actual customers for each utility, and other sources, electric rates at New York City’s major utility, Con Ed, has increased, on average, about 20-25% this winter. The average bill for a New Yorker has increased from $97 in January 2013 to $118 in January 2014. On average, a customer with a billing period of December 30 to January 30th was charged 23.1 cents per kWh. The average charge during that same period last year was 12.6 cents per kWh.
In addition, these numbers are only averages and many individual ratepayers have faced even higher rate increases. Schumer provided several examples of real electricity bills in New York City. A Brooklyn Con-Ed customer used 360 kWh and was charged 9 cents/kWh in January 2013. The same customer used 360 kWh a year later in January 2014 and was charged 12.67 cents/kWh. The Brooklyn customer’s supply charge for February 2013 was 13.82 cents/kWh and for February 2014, 20.52 cents/kWh. In March 2013, the Brooklyn customer’s supply charge was 7.31 cents/kWh and in March 2014, 14.74 cents/kWh. In Queens, a Con Ed customer’s costs per unit went from 7 cents/kWh in March 2013 to 19 cents in February 2014. Schumer said that this trend has been seen statewide, and noted the example of a Syracuse-area National Grid customer who was charged $67.68 in February 2013 and $65.02 in March 2013, and then charged $84.58 in February 2014 and $106.80 in March 2014 – despite using substantially less electricity than last year over the same period
According to major utilities that service New York State, these rate increases are due to record-low temperatures that have driven up demand across the country for natural gas – a key component in providing electricity and heating homes. Schumer argued, however, that even given the increased demand for natural gas, the prices that consumers are paying far outpace what would be expected. This concern has prompted him to ask the FTC for an in-depth investigation into the electric market to determine whether utilities and natural gas providers are playing by the rules and charging consumers what they should be. The FTC has done similar investigations in the past, and is the leading authority regarding concerns of anticompetitive business practices.
Schumer explained that electric rates are based on the price to have electricity delivered – a rate that is capped by the PSC – and the cost of producing that electricity, which utilities have to pay and is then passed on to the consumer. In New York, many of the power plants that produce electricity are powered by natural gas, which, given the high demand and high prices for natural gas this winter, has led to increased costs for utilities. According to utilities, this increase in costs is the main reason that rates are going up. Schumer mentioned, however, that there are a number of other potential factors for the increases that should be investigated, including the possibility that utilities are passing on more of the cost of natural gas to consumers than they should be, or that natural gas providers are withholding some of their supply in order to drive prices through the roof and create more profit for themselves down the road.
Schumer also called attention to the disturbing fact that utility companies have been using ratepayer money to push the PSC to allow them to charge higher rates, a trend that could get even worse as rates climb. The aforementioned AARP report also details that utilities charge their ratepayers more than $10 million a year to cover the cost of experts who argue for higher rates before the PSC. National Grid, National Fuel Gas and New York State Electric & Gas (NYSEG) are three utilities that engage in this practice, passing $4.5 million, $1 million and $370,000 respectively on to consumers each year in order to employ lawyers to push for higher rates. According to the PSC, electric utilities pay an average of $310 million per year for these regulatory expenses, compared to $145 million by gas utilities, the second highest.
In addition to Schumer’s call for an FTC investigation into the sky-high electric bills, the New York State Public Service Commission (PSC) – a state utility regulator – and the New York Independent System Operator (NYISO) – the state’s high-voltage transmission network operator – have both written to Federal Energy Regulatory Commission (FERC) Chair Cheryl LaFleur asking FERC to investigate whether there were any uncompetitive practices in natural gas and electricity wholesale markets this winter. NYISO also encouraged FERC to coordinate any such review with other federal agencies responsible for regulatory oversight of natural gas markets, and Schumer is urging the FTC to conduct its investigation in conjunction with FERC’s to specifically inspect consumer protections. Schumer is also asking the FTC to coordinate with DOJ, which oversees rate manipulation issues.