New York regulators reduce NYSEG's rates $205 million

New York State Electric & Gas Corp. called a temporary, $205 million reduction in electricity rates ordered by the New York State Public Service Commission 'unwarranted' and 'unlawful.' The New York PSC Wednesday said the rate cut will reduce customers' bills 13% and will remain in effect until the commission can determine the appropriate level of permanent cuts.

By the OGJ Online Staff

HOUSTON, Dec. 20 -- New York State Electric & Gas Corp. called a temporary, $205 million reduction in electricity rates ordered by the New York State Public Service Commission "unwarranted" and "unlawful."

Ralph Tedesco, NYSEG's president, accused the state of playing politics and reneging on a contract by arbitrarily reducing NYSEG's electric delivery price. "This is an alarming and disturbing signal to current and potential private investors in the state's needed infrastructure of generating plants and transmission facilities," Tedesco said.

NYSEG said in a statement it will study the decision and take "any necessary steps" to appeal the PSC action. The New York PSC Wednesday said the rate cut will reduce customers' bills 13% and will remain in effect until the commission can determine the appropriate level of permanent cuts.

The PSC directed NYSEG, the utility unit of Energy East Corp., Albany, NY, to file tariffs for new temporary rates that will take effect in late January. The commission said it acted after NYSEG filed a revised rate plan that would substitute a 3% residential rate reduction for a previously approved 5% reduction in 2002. The plan would also offer customers a fixed rate option through 2007.

Numerous parties asked the commission to reduce NYSEG's rates until permanent rates could be established, the commission said. As a result, the commission said a significant rate reduction is required in order to preserve its ability to "fairly balance the economic interests of customers and the company."

NYSEG said it fulfilled all the obligations of an Oct. 9, 1997, contract that spelled out in return for selling its power plants, the company would have a 5-year rate agreement with the state, until March 2003, to make the transition to a regulated delivery company, without generation.

NYSEG said it took the risk of buying electricity supplies on the open market through early 2003 to provide its customers with frozen electricity supply prices and protect them from the volatility of the electric supply market.

The approved level of earnings was spelled out in an attachment to a commission order, NYSEG said, and earnings have been consistent with the level specified in the contract. The utility said customers' bills have not risen, compared to other parts of the state where bills have increased up to 40%.

NYSEG said it has "scrupulously" complied with the terms of the current restructuring agreement and customers have received every benefit promised them, including:

-- Provided customers over $725 million in benefits during the agreement.

-- Sold our power plants, including our interest in the Nine Mile Point 2 nuclear plant.

-- Protected customers by eliminating stranded costs. Other utilities' customers currently pay a competitive transition charge, but not NYSEG customers.

-- Developed and put in place a successful retail choice program despite the state's failure to establish a viable wholesale electricity market. Over 16.6% of NYSEG's electricity load is now served by other suppliers, higher than most of the state's utilities.

-- Exceeded all service reliability targets.

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