First Decision For Consumers Is Whether They Want Fixed Or Variable Power Rates

By DAVID ROBINSON -  News Business Reporter -  Buffalo News - 10/20/2002

New York State Electric & Gas Corp. customers just might be able save a few bucks on their monthly electric bill. But to get those savings, NYSEG's customers need to do a little homework.

NYSEG's roughly 800,000 residential customers statewide have until the end of the year to pick an electricity supplier - either the utility or an energy marketing company - and decide on a pricing plan for that power.

It won't be a simple decision to make, forcing consumers to compare different rates and different pricing plans, pitting their desire for stable prices against the potential for cutting their electricity costs by going with a riskier plan that is more closely linked with fluctuating wholesale power prices.

"It's asking a lot of consumers. They want a stable, low price for electricity and to get on with their life," said Gerald A. Norlander, the executive director of the Public Utility Law Project, an Albany-based advocacy group for low-income and elderly residents. "If you're going to have this, it should be very easy."

But even energy marketers agree, the choices aren't that simple.

The one thing they do agree on, though, is that consumers who do nothing are likely to end up paying more for their electricity in the long run.

That's because consumers who don't make their own choice by the Dec. 31 deadline automatically will be enrolled in NYSEG's fixed-rate program, which charges higher rates than the stable-price options offered by some of the other electricity suppliers now courting the utility's residential customers.

"It's an effort to drive people into the arms of the energy services companies," Norlander said.

The first decision consumers have to make is whether they want to pay a fixed price for their electricity or are willing to go with a variable-rate plan and ride out the ups and down of the wholesale electricity markets.

Over the last two years, for instance, NYSEG's variable rate plan would have averaged 4.3 cents per kilowatt, while ranging from a low of 2.3 cents to a high of 6.7 cents.

The key characteristic that consumers need to understand with a variable rate plan is that it's unpredictable. During a summer hot spell, when air conditioners are running full blast, prices could spike higher. Or they could stay on the low side because upstate's power generating capacity is more than adequate and the weak economy is dampening demand for electricity. On Friday, NYSEG's variable-rate price was 4.3 cents per kilowatt.

The bottom line is that consumers with a variable rate plan could reap the greatest savings, they could end up paying the highest bills, or they could wind up somewhere in between. "With the variable rate, we're not guaranteeing savings," said Russ Southard, vice president of Mirabito Gas & Electric Corp., an energy marketer based in Sidney, N.Y.

All of the marketers are offering variable-rate plans. Econnergy Energy Co.'s variable-rate offer has an added twist that caps the highest rate a customer would pay at 4.5 cents per kilowatt. "If prices go down, great. If they don't you're still protected by the cap," said Jonathan Gewirtz, a company spokesman.

Agway Energy Services also is offering a variable-rate plan within NYSEG's territory, but the company, which is not included in the bankruptcy filing by Syracuse-based Agway Inc., has not been promoting its offer, said Michael Meath, vice president. Agway Energy Services expects to develop a new offer for NYSEG customers in the coming weeks, he said.

Most marketers also are offering fixed-price packages. The most expensive offering is the one that NYSEG consumers automatically will be enrolled in if they don't respond to the sign-up process - the utility's fixed price offer of 4.86 cents per kilowatt for the next two years.

Other marketers are offering fixed-rate plans with lower prices. NYSEG Solutions, the utility's energy marketing business, is offering a plan that guarantees consumers a savings of at least 5 percent from the utility's fixed rate, setting its price at 4.62 cents per kilowatt for a two-year term.

Mirabito's offer for NYSEG's customers in Western New York is for 4.64 cents per kilowatt for a year. Econnergy does not have a fixed-rate plan, but Gewirtz noted that the 4.5 cent price cap is less than the fixed prices charged by the other marketers.

Consumers who switch to a marketer also will get savings from other sources, including a switching credit that totals 0.04 cents per kilowatt. Some marketers split that credit with consumers, while others pass it along to customers in its entirety.

It's also important that consumers read the fine print to learn about the fees and other service terms that are being imposed by marketers. Mirabito, for instance, imposes a $75 fee on customers who cancel their service before their term is up.

The Public Utility Law Project has prepared a detailed comparison of the offers and terms available from marketers and NYSEG on its Web site at www.pulp.tc.

"It's very tough to get to the bottom of it," Norlander said. "You always have to look at what you sign."