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Central Hudson chief responds in energy deregulation debate
Poughkeepsie Journal, Steven Lant, December 6, 2009
You recently published two opinion pieces ("Letter: Utility deregulation benefits New York," Nov. 23, "Valley Views: Energy-market competition aids consumers," Nov. 24), both commenting on an article that appeared following a presentation I made regarding a decade of electric industry deregulation here in New York state. Like all of your readers, I appreciated learning more about the writers' perspectives - but it bears noting that both represent statewide business groups, while I and my associates at Central Hudson are focused on the Hudson Valley and its long-term best interest.
It's not surprising, then, that we have differing perspectives on what I still believe to be the unmet promises of deregulation.
Here are the facts:
- Our commercial and industrial customers paid the lowest electric bills in New York state in July 2009; and our residential customers paid the second-lowest bills. That has resulted from continuous cost control and sound management that would have existed no matter what the market structure.
- Despite a decade of promotion, only about 6 percent of our customers buy their electricity from an alternate supplier.
Because that number includes 26 industrial customers, it represents about 39 percent of the electricity that we deliver.
So, large users have seemingly reaped some benefit, but not necessarily the residential customer.
- No new services have resulted from electric deregulation, as was the case with the explosion of cellular technology that followed the telephone industry's restructuring.
- We provided our customers with approximately $160 million worth of customer benefits following the sale of our power plants, in addition to saving customers about $135 million through transitional supply contracts in the four years that followed the divestiture. In all, our contracting has saved customers $225 million in supply costs to date.
- Despite our best efforts, customers' bills have risen, due to a combination of factors including taxes, fuel costs, imperfect market models, inflation and other rising costs. If you believed the promises of deregulation in 1997, however, you would have also believed that a functioning competitive market should have erased the impact of those variables, by bringing down the price for all participants through the laws of supply and demand.
- The private companies that now own generating stations have an obvious and age-old incentive to block the construction of new power plants: it creates shortages and drives up prices. Under the regulated structure, local utilities were required to build plants to meet projected demand and to run them cost effectively.
- The vast majority (80 percent) of the limited new capacity that has been built has been fired by natural gas, contributing to electricity price volatility (i.e., in that an over-reliance on any product drives all market prices). Since the Arab Oil Embargo of the 1970s, we have consistently advocated for a mixed-supply portfolio in order to lessen price volatility based on fuel costs. The new paradigm has only exacerbated that problem.
Would our customers have been better off were we not required to sell our power plants? It's impossible to be sure.
I do know for certain that Central Hudson is a well-run company that has been committed to the best interests of its customers and shareholders alike since its founding more than a century ago.
As a result, we will continue to address issues on their behalf no matter how many special interests take exception with our opinions.
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