Podcast Ep. 42: Least-Cost Reliability: Even When Fuel Prices Run High
Electricity prices are rising across New York, and understanding what drives those costs has never been more important. In this Power Trends podcast, NYISO Vice President of Market Structures Shaun Johnson breaks down the factors shaping today’s electricity supply charges and explains how wholesale markets produce the most cost-efficient solutions to meet consumer demand.
Wholesale electricity supply costs have been climbing as natural gas prices — New York’s primary fuel for electricity — have nearly doubled in the past year. Most of what customers pay goes toward utility delivery charges, taxes, and other non-supply components.
Electricity bills can be confusing, but Johnson breaks down the two primary charges:
- The supply cost makes up approximately one third of your bill.
- The other two thirds are the retail rates your utility company charges plus taxes and fees.
The physical composition of the gas pipeline infrastructure factors into retail delivery costs as well. Because New York and New England sit at the tail end of a pipeline network that originates in the Colorado Rockies and the Gulf Coast, delivery costs to northeastern states are among the highest in the nation.
As the state moves toward greater electrification and new large loads emerge, demand is expected to keep growing. At the same time, aging generation and long lead times for new resources are tightening supply. These realities put upward pressure on prices too.
“Our market philosophy has always been sort of simple,” Johnson notes, “how do we keep the lights on at the lowest cost via competition.”
Check out the complete podcast to explore how wholesale markets function, what’s driving today’s costs, and how NYISO works to maintain grid reliability at the lowest cost — even when fuel prices surge.
More resources
Please visit our new winter pricing resource page to explain what's behind rising costs.