Tuesday, March 9, 2010

Commentary: National Grid Gouges Adirondackers

What would happen if a pizzeria tacked on a $50 delivery charge to a $15 pizza? It would go out of business faster than you can snap your fingers. That’s because pizzerias are subject to competition. National Grid power company can get away with such outrageous billing practices because it has no competition in the energy delivery business.

While New York state has legalized competition in the energy supply market, National Grid remains the monopoly energy deliverer in the areas it serves, which includes much of the Adirondacks.

You can buy energy from another provider but it’s still delivered via National Grid power lines, and the British-based conglomerate milks this distinction for all it’s worth.

National Grid’s bill includes two major charges: supply cost and delivery cost. The supply costs (the part the ordinary consumer can control) are typically reasonable. The delivery costs (the part the consumer can’t control) are invariably outrageous.

Last December, I used $41.14 worth of electricity, but they charged me $84.76 to deliver it.

Last September, I used a mere $9.45 worth of electricity. My reward for such energy efficiency was a whopping $33.08 delivery charge.

In what world is the delivery charge for a product three and a half times more than the actual value of the product?

National Grid is nominally regulated by the state’s Public Service Commission– though gouging like this makes you wonder how much regulation is actually going on.

National Grid has claimed that sky-high delivery charges are designed to ‘stabilize’ rates. Yet even in February, invariably my highest energy usage month, delivery charges were still higher than supply charges.

These dubious billing practices have no doubt padded the conglomerate’s bottom line: National Grid made profits of $1.43 Billion in its most recent fiscal year.

But gouging New Yorkers’ wallets was not enough to prevent the company from outsourcing jobs from central New York.

A Syracuse Post-Standard article noted that:

National Grid’s electric prices consistently rank among the handful of highest-priced major utilities in the country. In 2008, the company’s residential rates were 37 percent above the national average and its commercial rates were more than 60 percent higher, according to the latest statistics available from the U.S. Department of Energy.

This was primarily because of the expense National Grid incurred when it bought Niagara Mohawk. Once that expense was paid off, New Yorkers were told, rates would go down.

Wrong!

The company now wants to raise rates another 20 percent… that’s delivery rates, where the real gouging occurs. This would generate the monopoly another $390 million a year. Would this go to infrastructure upgrades? Improved service?

According to the Post Standard: Tom King, president of National Grid in the United States, said the company needs to make higher profits in order to attract money from shareholders and lenders to invest in the Upstate electric grid. Shareholders earned a 5 percent return on their Upstate electric investment last year, down from 10 percent in 2005.

Quite clearly, New Yorkers were duped.

In the mid-1990s, officials in the city of Glens Falls pushed for the creation of a municipal power company, like the one run successfully by the similarly-sized town of Massena. Nearby localities like Queensbury and Lake George could also have hooked up to the system.

Not surprisingly, the then-Niagara Mohawk saw this a threat to their lucrative business and waged a massively expensive and somewhat deceptive PR campaign which succeeded in defeating the project in a referendum.

I suspect Glens Falls residents regret the vote each time they open up their National Grid bill.

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A nearly-lifelong resident of Glens Falls, Brian Farenell has been involved in writing and journalism since his high school days. After receiving a bachelor's degree from Clarkson University, he spent two years in the Peace Corps in the Republic of Guinea, West Africa. Although his traditional focuses have been international affairs (he's been published in Foreign Policy magazine) and media criticism, Brian maintains his own blog at Musings of a (Fairly) Young Contrarian, where he also offers insights and ideas about national and local issues.




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