New York lawmakers seek relief for energy ratepayers amid affordability crisis

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New York is facing an "energy affordability crisis," as lawmakers put it.

Elected representatives across the state have sent letters to Governor Hochul this winter calling for ratepayer relief and policy changes to mitigate rising energy bills.

In February, nearly three dozen assembly members called on the governor to declare a State of Emergency for the state as residents face "historic and unsustainable increases in electricity costs."

As of December, more than 1.28 million households in New York were behind on their energy bills by 60 days or more. Utility debt has reached $1.84 billion, more than double the amount owed prior to the pandemic in December 2019, according to energy utility monthly collections reports.

And for New Yorkers, electricity costs are 50 percent higher than the national average.

Splitting the bill

The energy bill you open from National Grid or NYSEG every month is split between the market side of the bill and the retail side. Both recently approved rate increases on the retail side and the volatility in supply on the market side are driving up your bill this year.

The retail side of your bill includes everything the utility company needs to run the business and everything utility companies make a profit on, through "delivery" charges.

Utility companies are fully rate-regulated, which means they can't charge whatever they want.

Delivery charges go towards the maintenance of the entire delivery system. Essentially, a fee you pay for National Grid and NYSEG and others to operate.

Energy "is being delivered through pipes and wires, and the pipes and wires need to be maintained. Electricity and natural gas are being delivered through that system 24-7, 365 days a year, and we need to have crews that can go out and maintain it," National Grid spokesperson Patrick Stella told The Daily Gazette.

Delivery charges encompass a litany of all that is required to maintain, operate, and repair the energy distribution system, including power lines, poles, transformers, substations, gas pipelines, meter reading, billing, storm response crews and safety inspections.

Utility companies generally maintain that those delivery fees are based on usage, but you'd still be charged a delivery fee even if you didn't use any gas or electricity.

"There is a minimum delivery connection fee even if there is no use," said Stella. "Even if you use zero energy, the utility still must maintain the system that serves your home -- so delivery charges remain."

Part of the reason "delivery" costs are up this year is that those costs were raised as part of a three-year rate plan approved by the New York Public Service Commission in August.

According to National Grid, the rate hike was approved to cover material and equipment price increases and "storm-response readiness needs."

That rate hike in September was the culmination of a comprehensive review process of a joint proposal submitted by National Grid, the PSC, and "parties representing a broad perspective of interests" back in May of 2024.

Those parties who proposed the rate increase include the New York Power Authority, Independent Power Producers of New York, the New York Solar Energy Industries Association, the Empire Natural Gas Corporation, Alliance for a Green Economy, Walmart, and Turning Stone Enterprises, among others.

The settlement was agreed upon, and the price is set to rise every year through 2027.

For its customers, National Grid estimated a total monthly bill increase of $14.32 in the first year, $6.44 in the second year and $4.34 in the third year. That's a total of $25.10 that National Grid split up over three years to prevent a large upfront rate hike, Stella said.

The plan includes $1.4 billion for National Grid's electricity system and $351 million for the natural gas system just in the first year.

That's one side of the bill.

The supply side of energy costs, or "usage" on your utility bill, is the market side. Like all markets, those prices are based on supply and demand.

"We're not building the generation that the market says is necessary," said Kevin Lanahan, vice president of external affairs and corporate communications at the New York State Independent System Operator, NYISO. "At the same time, we're not building, we're getting rid of generation."

Utility companies sell the supply straight to their customers without markup, and it's their job to get the lowest prices for that supply. Though securing the lowest prices has become increasingly difficult, namely due to market volatility fueled by rising demand and dwindling capacity.

In a January report, NYISO states part of the problem is that policy initiatives to get off natural gas are shutting down sources that aren't being replaced fast enough.

Older and more expensive generators are being relied on more frequently.

At the same time, the rising price of electricity is a direct result of volatility in the natural gas market as New York still powers half of its 450 generating stations with natural gas, according to the report.

NYISO provides the state with energy by running the statewide transmission system and selling energy on an open market. It was established in 2000 to de-integrate the former system in which utilities owned and operated all of the state's energy and its sources.

Now, energy is purchased through NYISO's market. But Lanahan says NYISO's mandate to keep prices as low as possible is becoming increasingly difficult to meet.

"We're razor thin on the supply," Lanahan said.

Utilities attempt to purchase enough energy in advance to meet market demand, but if demand rises above a certain level, they have to purchase energy the same day it is used at higher prices.

During peaks in demand, energy is also sourced from "peaker plants," which is significantly more expensive.

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Lanahan says demand for energy used to be flat. That simply isn't the case anymore.

Peaker plants are older and costly generators that are being fired up more frequently to meet demand. Many peaker plants burn oil, and over three-quarters are at least 30 years old and generate more polution.

Meanwhile, the state's Nine Mile Point 1 and Ginna nuclear facilities are also the two oldest operational nuclear units in the country.

"State subsidies are driving investments in infrastructure and plants based on public policy desires," said Lanahan. He says that if markets are allowed to do their thing, they signal where investment is needed, which wouldn't always lign up with where policy is trying to focus investment, namely green energy.

"We're trying to coexist with policies, but reliability is suffering."

Lanahan says this has been the case for at least the last five years.

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Increasing demand is also aggravating prices, augmenting the effects of dwindling energy sources.

Data centers

Electricity generation is projected to grow by 1.7 percent in 2026, fueled by rising demand from data centers and large industrial loads, according to NYISO.

In New York, over the next ten years, the NYISO expects more than 2,500 MW of new demand associated with large-load customers, including data centers and chip manufacturers, plus demand from building and transportation electrification efforts, which is forecasted to add more than 6,500 MW of new demand by winter 2034-35.

That's 9,000 megawatts put towards industrial use, which is approximately double the electricity use of all New York households combined, according to proposed legislation.

Assemblymember Carrie Woerner (D-Round Lake) said data centers and energy-intensive industries are generating more demand than ever, reducing supply.

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"And it's not just data centers," Woerner said. "It's also the semiconductor industry, a very energy-intensive industry, hospitals are very intensive. So there's just, there's a growth in energy use, from an industrial perspective, and we need to fix that."

"We need to either give [industries] their own rate that is reflective of how much supply they use up that, or we need to put a requirement that they have to generate their own energy that they can't draw from the grid. We have to do something to fix that," said Woerner.

Curbing costs

Lessening the blow of rising utility costs is a short-term solution lawmakers aren't writing off.

As of December, $770.6 million of the money collected from customers for the Clean Energy Fund is still being held in escrow by utility companies, according to a letter to the governor signed by Woerner and 16 colleagues in the state Assembly, including DiDi Barrett, the Chair of the Committee on Energy.

Those funds are collected through the System Benefit Charge on your bill, or the SBC charge.

But that $770.6 million is not currently allocated to any particular program or project, according to Woerner. She says they should be returned to ratepayers in the form of bill credits.

The letter to the governor also calls for a pause on state taxes on utility bills.

"We need to be looking at longer-term solutions that systemically fix the imbalance between supply and demand," said Woerner.

In NYISO's January report, the group calls for investing in existing gas infrastructure and replacing aging gas with newer technology to source a more reliable grid. It supports what they refer to as an "all of the above" approach that implements gas energy sources in tandem with renewable sources.

But not everyone agrees with that strategy.

Justin Balik of Evergreen Action, a 501(c)(4) climate-change-advocacy group, says there should be central, coordinated energy planning outside of what the NYISO does, namely for capital investment for infrastructure.

"Everybody's using costs as an argument to invest more in gas infrastructure," said Balik. "And we're missing the whole plot here, which is that the price of gas is going up and skyrocketing, and the availability and cost of it and reliability is extremely volatile. So if we're actually looking to lower costs for people, we think the facts and politics bear this out, that clean energy is the way to go."