New York needs more power, not less competition
By: Marguerite Wells, Alliance for Clean Energy New York
In a recent Times Union commentary by Justin Wilcox, the idea of allowing utility-owned generation was touted as a solution to New York’s energy crisis. However, the opinion piece fails to discuss New York’s long history with utility-owned generation and the reason it is prohibited in the first place: higher prices on the backs of ratepayers. While we agree that the status quo of how the state procures energy generation is failing, the solution is procurement reform for independent power producers, not lining utility companies’ pockets with ratepayer dollars.
Importantly, our state’s utilities are currently allowed to build unlimited renewable projects through their unregulated affiliates; they just need to operate under the same market rules as all other energy developers in New York. This competitive market ensures that energy customers see the lowest price feasible to build out generation and are not subject to the utilities’ guaranteed high rate of return. If the state allowed utilities to own generation outright, as Wilcox’s opinion piece suggests, ratepayers would be paying gold-plated price tags for the same energy that private developers are building today.
For example, if regulated utilities own generation, they can charge their customers for construction overruns and operation costs that ensure they receive a guaranteed rate of return. Currently, utility companies that build generation assume the economic risks, similar to private developers. When utilities own the generation, transmission, distribution, and delivery systems, they can manipulate the market to maximize their profits and surprise customers with higher costs. Lack of cost control measures means ratepayers will foot the full bill for utility renewable energy projects along with the utility grid upgrades they are already passing down in electric bills.
Notably, utilities currently control the interconnection costs and timelines for renewable projects. If they owned or developed projects in their own service territory, they would be incentivized to connect their own projects to the electric grid faster and delay connecting competing private renewable energy projects, leading to fewer private developers being interested in constructing in the state. If we allow utilities to have a monopoly again, electric customers will face even higher energy prices and much less development competition.
Something glaringly missing from Mr. Wilcox’s opinion piece is that utilities used to own generation in New York, not that long ago. New York began regulating that ownership almost 30 years ago because allowing utilities to have a monopoly in the energy market cost ratepayers even more. When the New York State Public Service Commission deregulated its energy markets, the state saw immediate improvements in power plant efficiency and lower energy prices.
If the state re-authorized utilities to own generation now, it would drastically hinder competition and increase energy prices even further. The private market takes on the costs and risks for renewable project development and the competitive procurement process ensures that lowest-cost projects move forward.
We do have a major problem in New York with electricity generation plant retirements outpacing new generation coming online. However, utility-owned generation is a red herring, not a solution. Renewable energy projects owned by utilities would face the same permitting delays and community challenges that hamper private developers and that their unregulated affiliates already experience. New York must reform how it procures energy and de-risk project development to drive down costs and avoid project attrition. New Yorkers are already paying sky high utility bills – Utility Ownership of Renewable Generation will only raise them.
