Key Findings

Competitive Generation in New York: 5 Key Findings for Policymakers

In the 1990s, rising electricity costs and compromised reliability standards led New York to adopt a competitive market approach to electric generation—removing generation assets from the control of monopoly utilities and allowing competition between independent power producers. The recent pace of renewable energy development in the state has led some parties to propose an expanded role for utilities in the development of new power generation.

FTI Consulting conducted an analysis, using public data to assess what a potential return of utility-owned generation would mean for consumers and the future – and what competitive power markets have done for New York. FTI’s analysis found that competitive markets have produced electricity at lower cost and lower emissions for New York consumers. The study concluded that a return to utility-owned generation could lead to higher costs for New Yorkers and slow progress towards achieving the state’s clean energy goals.

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The Takeaways:

1. New York’s competitive market for electric generation has consistently reduced costs for families while helping to protect consumers from the consequences of project cost overruns, inflation, and bad investments. A full or partial return to utility-owned generation would likely expose customers to higher costs and risks.
   • Consumers in New York are paying over 35% less for power supply today compared to what they were paying for the power generated by monopolistic utilities.
   • Independent power producers have a natural financial incentive to complete projects on time and at the lowest cost. Utilities do not have such incentives and can pass on cost overruns to customers and even earn profits on additional costs.
2. Utilities would not be able to supply new generation in New York at a lower cost or on a faster timeline than independent power producers.
   • Even as independent power producers have driven down the cost of electricity supply in New York, utilities have continued increasing the rates charged for monopoly services and yet still have not kept pace with the infrastructure investments needed to support the state’s clean energy goals.
   • Utilities face the same barriers and timelines that independent power producers do in developing projects.
3. Competitive markets have integrated cleaner technologies more efficiently and delivered emissions reductions faster. Allowing the re-emergence of utility-owned generation could slow progress towards meeting the state’s clean energy targets.
   • Since 2000, emissions rates in competitive regions have declined faster than in non-competitive areas. Additionally, emissions rates in New York have declined faster than most across competitive regions served by wholesale markets.
   • As a result, electricity produced in New York emits less than half the CO₂ compared to electricity in regions where utilities own power plants.
4. Independent power producers have been long-term partners supporting the state’s economy. On average, the construction of new competitive generation projects has supported nearly 1,000 jobs across the state each year since 2001.
   • These facilities support an estimated 18,749 long-term jobs across the state and generate over $1.5 billion in annual state and local tax revenues.
5. Meeting New York’s clean energy goals affordably will require unprecedented investments in the electric grid. Diverting resources from their transmission and distribution duties to generation development may overextend utilities, delay critical transmission projects, and increase costs for ratepayers.
   • According to the New York State Comptroller, the state will need to invest at least $26 billion in transmission and expand distribution capacity by 1,970 MW to reach the Climate Leadership and Community Protection Act’s targets.
   • Adding generation asset investments onto their plate will only further stress utilities’ strained financial situations and increase project financing costs and, in turn, costs for ratepayers.

The Bottom Line:

The transition from utility-owned generation assets to a competitive power market in New York has cut costs for New York families and businesses while advancing the state’s clean energy goals, creating thousands of jobs, and efficiently integrating new technologies. Returning to a flawed utility-owned model would create new challenges without addressing the real issues that New York faces.

Methodology and Disclaimer

This study evaluates publicly available information from state and federal agencies such as New York Independent System Operator, the New York Public Service Commission, and the Federal Energy Regulatory Commission to show the economic and environmental benefits that competitive generation has delivered for New York. The study also examines the challenges that New York utilities already face in supporting the clean energy transition by developing transmission and distribution infrastructure. Finally, the study weighs the potential risks of utility-owned generation in the state and assesses the validity of arguments in favor of a return to utility-owned generation assets, concluding that it will likely be more costly for ratepayers.

This report was commissioned by New York’s Affordable Clean Power Alliance. The analysis and findings expressed herein are those of the author(s) and not necessarily the views of New York’s Affordable Clean Power Alliance or FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals. FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.

The findings support the views of New York’s Affordable Clean Power Alliance as an organization and not necessarily those of any individual member. Learn more atwww.nyacpa.org