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NYISO  |   LSE  |   Direct NYISO Customer

NYISO
The New York Independent System Operator was formed in 1998 as part of the restructuring of New York State's electric power industry, to facilitate fair and open competition in the wholesale power market and create an electricity commodity market in which power is purchased and sold on the basis of competitive bidding. To facilitate the competitive commodity market, the New York State Public Service Commission ("PSC") mandated that all of the Distribution Companies in New York institute some form of incentive as an inducement for customers to seek alternative energy suppliers or Load Serving Entities ("LSE").

LSE
The Distribution Company inducements (or incentives), combined with certain Tax savings formed the backbone of a competitive marketplace. Customers would elect to purchase their energy supply from an LSE (while still receiving delivery services from the traditional utility company) and the LSE would charge them for the cost of the power and an additional fee. This fee could be a fixed amount or a percentage of the total available savings to the customer (incentive and tax savings).

In this business model, the LSE purchases power from the NYISO, resells it to the customer, and then collects the money from the customer. Since the LSE is in the "money stream," they have to charge a fee sufficient to cover not only the normal operating expenses and margin, but also the cost of capital, bad debt, and additional margin on the risk.

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Direct NYISO Customer
An alternative approach, which has also been an option since the formation of the NYISO, is for large energy users to become Direct Customers of the NYISO. In this model, the Direct Customer acts in every respect as the LSE, except that the Direct Customer doesn't collect money from customers, since it is the customer. The other benefit of becoming a Direct Customer is that you further reduce your overall cost of power by choosing to purchase from a number of available markets. The real challenge here is to find a way to provide all the Backroom Energy Services required to operate as a Direct Customer and to exploit the opportunities that exist in the New York Energy Market.

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>  History  >  Deregulation of Energy Purchasing