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PSC Votes to Approve NYSEG Electric Rate Plan, Merger with RG&E
The New York State Public Service Commission voted Wednesday to approve, with conditions, a five-year plan designed to reduce electric rates by $205 million annually for customers of New York State Electric and Gas (NYSEG). The commission also voted to approve the merger of Energy East Corp., NYSEG’s parent, with RGS Energy Group, parent of Rochester Gas & Electric (RG&E). If NYSEG accepts the Commission’s conditions, the plan will take effect March 1.
The merger is expected to generate $164 million in net cost savings that will accrue to both electric and gas customers of NYSEG and RG&E through 2006. For NYSEG electric customers, the merger savings are reflected in the rate reductions of the plan approved Wednesday. The savings designated for NYSEG gas and RG&E electric and gas customers will be reflected in future rate cases.
“The NYSEG rate plan is very positive news not only for residential customers but also for small business customers who play a pivotal role in our economy,” stated Commissioner Thomas J. Dunleavy, who chaired Wednesday’s meeting. “These rate reductions will allow residents throughout NYSEG’s different service regions to keep more of their hard-earned money and help reduce business costs for NYSEG’s commercial customers, creating an improved economic environment and employment opportunities.”
Under the rate plan, the monthly bill for an average residential customer will decrease by 13% beginning in March 2002. Other customers, including small businesses, will see similar reductions. In an effort to encourage more competition in NYSEG’s service regions, the 13% reduction will be applied fully to the delivery portion of a customer’s bill starting in January 2003. As a result, customers who wish to shop for additional electricity supply savings from NYSEG’s competitors will not lose any of the savings approved today.
Assigning the full 13% rate reduction to the delivery portion of a bill is part of the plan’s design to require NYSEG to unbundle monthly bills beginning in January 2003. Prior to the unbundling, NYSEG will provide customers the opportunity this fall to decide among three rate options for their electricity supply beginning January 2003: an ESCO-rate option, a fixed-rate option or a variable-rate option. Under an ESCO-rate option, a customer who shops for electricity supply and contracts with an energy services company will pay the ESCO for that supply.
Customers who choose NYSEG to provide their electricity supplies will have two billing rate options next year: a fixed-rate option or a variable-rate option that fluctuates with the market price of electricity. In the fixed-rate supply option, NYSEG is permitted to include costs associated with securing contracts for, and assuming the risks of, a two-year term of electricity supplies for its customers. As a result, customers choosing to lock in their electricity supply rate for two years should expect to pay about 5% more than the variable-rate option.
The rate plan requires NYSEG to continue its commitments to economic development programs. Further, NYSEG has agreed to implement an intensive educational campaign to inform its customers of their opportunities to shop for electricity. The company will also designate a liaison to work both with ESCOs on competitive matters and with interested parties to create opportunities for customers with similar supply interests to aggregate by forming energy purchasing groups. The Commission voted to reserve the right to take appropriate action if the Commission determines NYSEG has engaged in anti-competitive activity.
The rate plan includes service quality mechanisms covering customer service and the reliability of electric delivery service. Each of the measurement mechanisms carries a potential maximum penalty of $3.5 million should NYSEG fail to meet the service targets. The rate plan was supported by the Commission’s staff, the New York State Consumer Protection Board, Multiple Intervenors (an industry group of commercial and industrial users of electricity), the New York State Department of Law, and Strategic Power Management, as well as NYSEG and RG&E.
NYSEG serves 808,000 electric customers and 250,000 gas customers in a 17,000 square mile non-contiguous territory covering parts of the Southern Tier of New York, and central, southeastern and northeastern New York. RG&E serves 350,000 electric and 280,000 natural gas customers in Allegany, Cayuga, Genesee, Livingston, Monroe, Ontario, Orleans, Wayne and Wyoming counties in upstate New York.
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