Utilities are a necessity, not a luxury. We need electricity, gas, telephone and even cable to go about our daily lives. And it has become increasingly expensive to maintain a household with all of these necessities. With that in mind do you ever wonder where your money is going when you send in your payment to a utility provider? Who sets the rates? And, what are those taxes, surcharges and hidden fees that appear on your monthly statements?
BBN turned to energy service provider Consolidated Edison of New York (Con Edison) for answers to at least one monthly bill we have to pay in order to go about our daily lives. Con Edison is a distributor of electricity and steam to all five boroughs in New York City. The company often endures public criticism for high rates and power outages.
(Editor’s Note: BBN selected Con Edison as the utility company to contact because they were the most accessible and wiling to offer up an executive to go on record. To no avail we also attempted to reach New York Governor David Paterson’s Office.)
BBN interviewed John Banks, Vice President for Government Relations for Con Edison. Mr. Banks is responsible for Con Edison’s city, state and federal government affairs activities (lobbyist). He is the go-to person for all things Con Edison as it relates to rate hikes and how legislation impacts consumers.
This interview offers a perspective on the complicated system of utilities that consumers like you don’t often get to hear. We encourage you to read the interview and educate yourself on who and what determines the cost you pay for basic necessities in your life no matter where you live in the United States or which company is your service provider.
BBN: How many customers are covered by Con Edison and what areas in New York are covered by the company? What exact service does the company provide?
JB: Con Edison has 3.2 million customers. We provide electricity to the five boroughs (Brooklyn, Bronx, Queens, Staten Island and Manhattan) and Westchester County. We are responsible for the transportation and distribution of natural gas in Manhattan, the Bronx, Westchester County and a portion of Queens. The company operates a steam system in Manhattan.
BBN: What percentage of a customer's electric bill goes to Con Edison?
JB: Con Edison is responsible for an average of 20-23% of an average bill; depending on the cost of fuel, the percentage falls and rises slightly.
BBN: How is the rest of the bill distributed? Who gets the remaining 80%?
JB: Twenty percent (20%) is directed toward taxes, fees and special surcharges imposed (voted on) by the New York State Legislature. The remaining 60%, again depending on the fluctuation of fuel cost, goes to companies that generate the electricity. Just recently the New York State Legislature and the Governor increased taxes in electric bills by increasing one of the many hidden fees, the 18a Assessment, by over 500 percent. What was once a $33 million consumer cost is now $198 million. What's worse is that most of the money the state receives from this levy goes toward closing the state's budget shortfall, not for implementing essential electric and gas infrastructure investments or meaningful environment programs.
BBN: New Yorkers have come to expect power outages somewhere in the city every summer. What does Con Edison do with its 20 percent? Is that money reinvested to improve infrastructure?
JB: People tend to think there are a lot of blackouts, but there really isn’t. There are fewer outages and for shorter periods of time. We reinvest in the infrastructure. There are 21 miles of cable in Manhattan alone. Our system is huge and we reinvest and spend on the replacement of cables and transformers throughout the city.
BBN: Which controlling body under New York State regulates Con Edison? Who ultimately decides if rates can be increased?
JB: Con Edison is regulated by the New York State Public Service Commission and has been since 1996. We don't raise rates at will. The Public Service Commission regulates the rate of return on a costumer bill. Con Edison does not.
BBN: Are the generating companies that get approximately 60% of an electric bill also regulated by the New York State Public Service Commission?
JB: No. Generating companies are not regulated.
BBN: Nationwide, where does New York rank in terms of cost of electricity?
JB: New York has the second highest electric rates in the country. We are second to Hawaii.
BBN: What can consumers do to lower their electric bill? Is it true that unused, plugged-in appliances use electricity?
JB: Consumers can conserve electricity by turning off unused appliances and items that use electricity. Turn off lights, computers and those appliances that don’t need to be plugged in (cell phone chargers, coffee pots) when they are not in use.
BBN: Anything else consumers should know?
JB: This (energy supply, distribution and regulation) is a complicated industry and consumers should spend a little time educating themselves about it. Con Edison is very good at what it does, and we are only a small portion of a customer's overall bill. When people are angry they should remember that 80% of their bill does not go to Con Edison.
100 ways to save
-- www.powerofgreen.com
-- www.coned.com
Additional Information BBN thinks our readers should be aware of:
The New York State Department of Public Service
According to its website: The New York State Department of Public Service has a broad mandate to ensure that all New Yorkers have access to reliable and low-cost utility services. The Department of Public Service is the staff arm of the Public Service Commission which regulates the state's electric, gas, steam, telecommunications and water utilities. The Commission also oversees the cable industry. The Commission is charged, by law, with the responsibility for setting rates and ensuring that adequate service is provided by New York's utilities. In addition, the Commission exercises jurisdiction over the sitting of major gas and electric transmission facilities and has responsibility for ensuring the safety of natural gas and liquid petroleum pipelines.
Bipartisan by law since 1970, the Commission consists of up to five members, each appointed by the Governor and confirmed by the State Senate for a term of six years or to complete an unexpired term of a former Commissioner.
See and read about the five panel New York State Department of Public Service Commissioners.
Final Tidbits…
-- Businessweek: Just how dependent we've become on electrical power was made plain Aug. 14, 2003, when a software bug contributed to the blackout affecting 50 million people in the U.S. and Canada. The grid covering the biggest swath of North America is the Midwest Independent Transmission System Operator, or ISO. Computers in its control centers constitute the nerve center that keeps power flowing in 15 states and one Canadian province. The computers monitor conditions over 920,000 square miles, and they're so powerful they can predict 7,000 different ways the grid might react to constantly changing conditions.
-- National Public Radio’s special visual on electric power grids and the public’s increased consumption of energy.
Generating Companies
These are some of the companies that generate electricity. Approximately 60% of your electricity bill goes to companies like these. They are not regulated by the New York State Public Service Commission. They are regulated by the federal Environmental Protection Agency (EPA) and local environmental agencies like state Department of Environmental Conservation (DEC) and NYC Department of Environmental Protection (DEP). Here are a few generating companies:
-- TransCanada
-- NRG Energy, Inc.
-- U.S. Power Generating Company, LLC
-- Astoria Energy
Con Edison – Causes of Brownouts and Blackouts
Brownouts are usually caused by Con Edison equipment failure, usually during the hottest summer days. Brownouts are a result of excessive use and wear and tear on equipment, and typically result in customers having partial power. They usually are isolated to one or two communities and rarely are widespread.
Blackouts are when a number of customers lose all of their power caused by Con Edison equipment failure; weather (lightning, storms, sleet, ice) or transmission issues beyond Con Edison's control as in August 2003 when New York was out of power from Thursday night to Saturday. The 2003 Blackout was caused by a series of issues that rippled from Ohio to New York. Drivers slamming into Con Edison poles also cause blackouts, in areas like Staten Island and Westchester, which have overhead electrical systems.
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