NYS FOCUS: Soaring ConEd Bills Add Fuel to Push for Public Power

Originally published in NYS Focus on February 07, 2022.

Auren Freeman opened his January Con Edison bill to an unpleasant surprise. His electric bill the month before had been $203. The number now facing him was three times higher: $627.

Freeman was one of the many Con Edison customers who saw a sharp rise in bills, including about a dozen New York Focus spoke to for this story. A resident in Westchester County says he saw his bill nearly double. A Brooklyn woman saw her bill double. Even this reporter, a Brooklyn resident, saw a jump from a little more than $200 to $915 in a month. 

Outraged residents have flooded the company’s phone lines, as well as those of elected officials at all levels of government.

“We’ve heard from dozens who have said they got their utility bills, and it was astronomically higher than it typically is,” State Senate Deputy Leader Michael Gianaris (D-Queens) told New York Focus, adding that some of the callers said their bills had increased more than 300% since last month.

Con Edison and state regulators attribute the price hikes to economic conditions. “The changes in customer bills are mainly due to the supply cost of energy, and principally by the increased cost of natural gas,” Philip O’Brien, a company spokesperson, said in a statement.

But politicians like Gianaris have called for Con Edison to take steps to keep prices low, even if it cuts into the company’s substantial profits. In 2021, the company’s net income was $1.3 billion, according to an earnings report released earlier today. That’s up from $1.1 billion in 2020.

“No one on the company or regulatory side seems to give a shit about the people they’re supposed to be serving,” Gianaris said.

That perception has led some legislators to call for transitioning the ownership of New York’s grid from private companies like Con Edison into public hands, and the recent price hikes could add momentum to the push for a bill to expand the role of New York’s largest public utility.

Natural Gas

Con Edison’s defense of the price hike is simple: it’s not making a profit on it.

As a utility company, Con Edison buys power on a wholesale market directly from the source, like wind turbines and power generation stations. It then passes that exact price onto the consumer, without making a profit. (Instead, it makes its profit largely from delivery charges.) Right now, the cost of natural gas is skyrocketing. In October of last year, the U.S. Energy Information Administration forecasted that the price of natural gas would surge 30% this winter. 

“Con Edison is dependent on what the price of natural gas is, and the price of natural gas has been very erratic. The natural gas futures market has been acting in a very strange manner,” said Michael Greenberger, the former director of the Division of Trading and Markets at the Commodity Futures Trading Commission.

The price is up after years of relative lows, largely due to global supply demands. Last year, demand was down amid the COVID-19 pandemic. But demand is now up, and not just in the United States. Power providers in Europe and Asia are engaging in bidding wars for liquid natural gas, some of which comes from the United States. That can drive up the cost of electricity for domestic power providers like Con Edison.

Con Edison says the price hikes are inevitable, given the turbulence in the market.

“Energy prices are volatile and can be affected by factors such as weather, demand and economic trends. Con Edison buys energy on the wholesale market and provides it to customers at the same price we paid, without making a profit on the commodity,” the Con Edison spokesperson said.

The New York Department of Public Service, which regulates utilities like Con Edison, echoed that argument.

“It is important to note that utilities do not set supply costs and do not make a profit on the supply,” James Denn, a department spokesperson, said in a statement. “This winter the cost of natural gas has increased as the demand for the commodity has increased, exports have increased, and severe weather has hindered production in the Gulf area.”

But critics are not satisfied with this explanation.

Just because Con Edison’s supply costs rose, Gianaris argued, does not mean that Con Edison had to pass that cost on to consumers. He believes Con Edison should have eaten the short-term losses, rather than hike up customers’ electricity bills. 

Natural Monopoly

Hypothetically, even when the cost of energy spikes, Con Edison could charge customers normal rates and absorb the difference. But as a private corporation, it has little incentive to do so.

Con Edison’s mandate is not to deliver affordable electricity but to deliver for its shareholders. For those shareholders, things look pretty good; the company’s stock price is up almost 3% in the last six months, significantly outperforming the market.

“This speaks once again to the problem with a for-profit entity like Con Edison providing a public utility service, because they keep proving time and again that they are not primarily concerned about their customers. Their goal is to make profits for their investors and that’s the motivation. They don’t look for solutions to these problems,” Gianaris said. 

Con Edison also does not face much competitive pressure to keep prices low. People cannot choose which utility delivers power to their house; if they live in a Con Edison service area, Con Edison is the only option. (Customers do have the option of buying energy indirectly from an Energy Services Company (ESCO), but the energy would still be delivered through and billed by Con Edison. ESCOs function more as partners to Con Edison than competitors; rather than undercut Con Edison’s prices, ESCOs often boost them.)

“It [Con Edison] has control in the entire area. That’s like physical wires and the distribution. It’s a natural monopoly. There’s no way to make a competition, we can’t decide whether or not my house is gonna be attached to lines by one network,” said Steven Fox, an organizer with Public Power NY, a coalition of groups that supports public ownership of New York’s power system. 

Public Power

The most affordable electricity in New York is produced by publicly-owned utilities. These include the New York Power Authority (NYPA), as well as utilities owned by individual cities, such as Massena Energy.

“[NYPA] provides remarkably cheap electricity. In fact, so much that we use their electricity as an incentive to bring businesses here. If someone promises to provide jobs, NYPA will provide electricity. That electricity is green energy and that is remarkably cheap,” Fox said.

But even NYPA’s power is delivered through the grid operated by Con Edison.

Public power proponents want NYPA to take over the operation of the grid from Con Edison. If a publicly-owned utility delivered electricity, they say, it could prioritize delivering affordable energy to the public over making a profit—and could also help the state decarbonize its energy system.

State legislators supporting this approach are pushing a bill, dubbed the “Build Public Renewables Act,” which would allow NYPA to build renewable energy projects and sell cheap energy to consumers directly.

Rather than trying to reduce energy prices, Con Edison is looking to raise them. While the current price hike was lobbied for and agreed to several years ago, Con Edison recently asked the Department of Public Service to allow it to raise electricity prices by 11.2 percent and gas prices by 18.2 percent, starting next year.

In the meantime, Governor Hochul has called on Con Edison to review its billing practices, and the Department of Public Service has, at Gianaris’ urging, promised to investigate the utility’s recent price hike.

“It will be carefully scrutinized as part of an 11-month formal review process. During the review period we will carefully review the companies’ rate filings and subject them to a rigorous investigation process with ample opportunity for public comment,” Denn, the department spokesperson, said. 

But that regulatory review will come too late to help Con Edison customers like Freeman, who now have a hefty electric bill to deal with on top of their rent