Utility Choice Isn't Working Out For Consumers

By DAVID ROBINSON

Dick Nolte was all set to pick a new electricity supplier, leaving New York State Electric & Gas Corp. to venture into the brave new world of energy deregulation.

Nolte had done everything a good consumer is supposed to do. He did his homework about the four energy marketers that were offering to sell electricity to NYSEG's customers and weighed their offers to figure out which one was best for him.

There was just one problem: By the time Nolte settled on an offer from Econnergy Energy Co., it already had signed up its fill of new customers and had stopped taking on any new residential consumers in NYSEG's territory.

And there's the rub in NYSEG's Voice Your Choice plan, which gives the utility's 800,000 residential customers through the end of the year to pick an electricity supplier: The choices, which were never especially eye-popping to begin with, are going out like a bad string of Christmas lights.

While four energy marketers signed on to NYSEG's program when it kicked off in October, the list is now down to two as the program enters the homestretch.

"That two of the four alternate suppliers have dropped out of the program is my major disappointment," says Nolte, who nevertheless thinks those two remaining options, plus the fixed- and variable-price offers available from the utility are adequate.

With time running short, only about an
eighth of NYSEG's customers have taken the time to pick a supplier. (Customers who do nothing will be enrolled in NYSEG's fixed-rate plan.)

"We are very pleased with this response," says Clay Ellis, a NYSEG spokesman. "Our customers still have four choices."

Of course, this isn't just a NYSEG problem. Deregulation has been slow to take hold in New York and even across the country, as the collapse of Enron, coupled with the stock market's plunge and a dearth of financing have sent the energy marketing business into a tailspin. Power plants that would have put downward pressure on electricity prices aren't being built because of financial constraints. Most marketers are operating on tight budgets.

In NYSEG's case, a recent spike in wholesale electricity prices hasn't helped. Neither has the confusing way NYSEG's program was structured. Above all, marketers say it's an even bigger challenge to serve residential customers and make money doing it, while customers wonder whether it's worth all the effort to save, maybe, two or three bucks a month.

Add it together, and deregulation hasn't been the panacea for high energy prices that some supporters thought.

"It's very tough for a new retailer to be able to go out and buy ahead and then go out and convince someone to shift to them," says Gerald A. Norlander, the executive director of the Public Utility Law Project, an Albany-based advocacy group for elderly and low-income customers.

Ontario last month backed away from its fledgling electricity deregulation plan by reinstituting price caps on power prices through 2006.

In Pennsylvania, where National Fuel Gas Co. serves more than 200,000 customers, just 85 consumers are buying their natural gas from a marketer, down from nearly 18,000 in October 1997, when a pilot program forced residents in several communities to buy from a non-utility supplier.

That experience, coupled with the Iroquois Energy bankruptcy and the withdrawal of another major marketer, North American Energy, from its Western New York territory nearly three years ago, makes National Fuel chief executive Philip Ackerman skeptical that deregulation will work for residential customers.

"Marketing to residential customers . . . has been an experiment that has run its course and is going to fail," Ackerman told analysts recently. "How great a deal can it be if you have to pay people to get off their system?"

State regulators, for their part, are preaching patience. "Our view is that we have a very solid foundation in place," says David Flanagan, a state Public Service Commission spokesman.

"We always knew it was going to take time," he says. "We feel we're making steady progress."