Clearly one of the recurring challenges with using Con Edison Steam is its cost. The cost of steam is driven by many factors in addition to the cost of the natural gas and fuel oil used to generate the steam. Other costs include the cost of the steam system’s massive infrastructure, the cost of utility taxes imposed through City property taxes and a broad range of state and federal taxes, and the labor necessary to convert fossil fuels into end-use steam. The steam system’s load factor adds another dimension to cost, as most of the time the system is under utilized. The system must maintain adequate capacity to meet a peak demand that it may experience only once in a decade, and it must have adequate capacity to meet that load even if the largest steam source is unavailable at that time. As a result of this annual load shape, summer steam rates are already significantly less than winter steam rates

Rates must be designed to ensure equitable allocation of the costs of meeting peak demands as well as the costs of total fuel requirements. Higher demand rates shift emphasis toward recovery from infrastructure investment. Higher energy rates shift emphasis toward recovery from overall consumption. Cost allocation is further complicated by system elements, such as the relatively new plant on the East River near 14th Street, that produce both steam and electricity. Allocating costs from that plant to steam customers drives steam prices skyward. Allocating costs toward electric customers drives electric prices skyward.

No one wants to bear responsibility for subsidizing another’s energy consumption. There is naturally strong opposition to steam rates that would require electric customers who don’t use steam to subsidize the cost of steam production.

David F. Bomke
Executive Director
New York Energy Consumers Council, Inc. (NYECC)