Thursday, September 1, 2011

The real story behind your power bill

By Bob Confer

As long as the Public Service Commission allows a pending rate change from National Grid - and there’s no reason they wouldn’t - the electric company’s customers will see significant savings come January 1st. The bill for the typical household/apartment will be nearly $9.50 lower per month, while homeowners with families (who use more power) drop by almost $16. That’s $114 and $192 in extra spending money per year. Not too shabby.

Commercial and industrial users will see even bigger savings. A warehouse or department store could save a few thousand dollars per month. Manufacturers will be faced with a windfall. Confer Plastics, for example, will save $24,000 each month. Over a quarter million in annual benefit is incredibly good news. Think of how many other plants are in the same boat.

When folks read news of the rate cut’s passage you might hear a collective, “it’s about time!” accompanied by some accusatory fingers pointed in National Grid’s direction. A lot of people might assume the high rates existed only for the financial benefit of the power company; after all, corporations are widely reviled for being “greedy”.

It should be known, though, that these long-held higher rates had been in place for the financial preservation of National Grid. If the rates hadn’t existed, National Grid wouldn’t exist, either. You see, the government intervened in the electrical markets over 30 years ago and what it did has haunted power companies and their customers ever since.

Thanks to federal grants and 1978’s Public Utility Regulatory Policies Act (PURPA), cogeneration facilities became wildly popular across the United States. A co-gen plant creates electricity (typically with gas) and shares its waste (steam) with a nearby industrial firm or farm that can put it to use. PURPA mandated that the utilities buy co-gen electricity. That’s bad enough. Then, the federal government left implementation and enforcement of PURPA to the states. What New York State did was insane, far rivaling what other states had committed. It required companies like Niagara Mohawk (since purchased by National Grid) to buy co-gen power at 6 cents per kilowatt-hour (even though it was touted by Washington as being cheaper, more efficient energy). At the time, Niagara Mohawk was producing and/or buying power at 3 cents. So, just like that, a private company was forced into a financially imprudent situation, one where it was destined to lose.

After seeing some utilities suffer, New York rescinded the 6-cent rule. But, the pre-existing contracts with the co-gen plants were grandfathered. So, the bleeding continued; it just wasn’t allowed to get any worse. Facing potential bankruptcy, Niagara Mohawk in 1997 used billions in junk bonds to buy-out those government-mandated contracts. That investment in its preservation had to be passed onto its customers. Here we are now, 14 years later, and they’ve finally recouped the expenditure.

In theory, that government intervention into the markets had the same effect as tax. Putting aside the higher electrical costs from 1980 to 1996, think about what that pseudo-tax has meant over the past 14 years alone as Niagara Mohawk/National Grid tried to right itself. A couple in small home or apartment wasted almost $1,600 on it. A family of four blew $2,700. But, realize that’s just your cost for your home. What about the hidden costs in the economy? You paid more for goods and services at every company in New York because their electrical bills were higher. Worse yet, you probably knew someone (or maybe it was you yourself) who lost a job when a manufacturer closed shop and moved to greener pastures because of higher power bills. Look at the plight of Confer Plastics because of it. Over those 14 years we threw $4 million at it, a huge sum that could have been spent on personnel or equipment or any other part of our business. Think about the big boys who use far more power than we: with such high costs is it any wonder local employment in the automotive industry is but a fraction of what it was just 20 years ago?

This should send a clear message about how disastrous government intervention can be. Everything done by Washington and Albany has a domino effect. So, before you go thinking Health Care Reform, the EPA’s greenhouse gas rules and any myriad regulations recently instituted or proposed won’t affect you, remember this: Regulations can be just as dangerous as taxes and have the same effect on your pocketbook. Your power bill, what it has been and what it will be, proves this succinctly.

Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. E-mail him at


This column originally ran in the 05 September 2011 Greater Niagara Newspapers

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