When most people open their electricity bill, they assume the rising cost is mainly due to the energy itself. But it’s more complicated: power generation is only one piece of the puzzle—and often not the primary reason they see their bills climbing.
A new breakdown from the New York Independent System Operator (NYISO) details how in New York, wholesale electricity costs—what competitive generators are paid to produce energy—make up less than half of the average residential electricity bill.
So, what makes up the rest?
- Transmission and Distribution: Getting power from the plant to your home involves a massive infrastructure network of poles, wires, substations, and maintenance crews.
- Taxes and State Policy Mandates: Public programs, renewable subsidies, energy efficiency mandates, and social policy charges are layered into bills by policymakers.
- Utility Costs and Authorized Returns: Utilities add fees to cover business risks, infrastructure maintenance, and upgrades. Since they operate as regulated monopolies in most states, they’re also allowed to earn a guaranteed return on capital investment.
In other words, a big portion of your bill comes from non-energy costs, and many of those are set outside of competitive market dynamics.
Why Competitive Power Markets Still Matter
Even though wholesale prices are higher today than they have been over the past several years—due to factors like fuel costs, extreme weather, and policy-driven resource retirements and supply constraints—competitive power markets still deliver more cost-effective outcomes over time.
Here’s why:
- They drive innovation: Generators in competitive markets have to operate efficiently or risk losing money. That pressure fosters new technology, smarter operations, and more cost-effective power.
- They shift risk off consumers: In regulated systems, customers fund new power plants – even when they run over budget and sometimes whether or not they’re needed or used. In markets, independent power producers invest their own capital—and only get paid if their power is needed.
- They ensure transparent pricing: Markets reflect supply and demand, helping signal where new investment is needed and where it’s not.
- They offer choice and flexibility: Competition encourages diverse energy solutions from many developers—from renewables to advanced storage—rather than locking into a single utility-controlled plan.
Incorporating findings from the March 2025 FTI Consulting report, “Competitive Power Benefits for New Yorkers,” provides deeper insights into the factors influencing electricity bills and underscores the advantages of competitive power markets.
Key Findings for New York:
- Cost Savings Through Competition:
- Since restructuring, competitive generation has led to a significant reduction in power supply costs for New York customers, with wholesale electricity prices decreasing by approximately 25% over the past two decades.
- Risks of Utility-Owned Generation:
- Reintroducing utility-owned generation could expose ratepayers to financial risks associated with construction overruns and operational inefficiencies, as these costs would be passed directly to consumers.
- Economic Contributions of Private Developers:
- Private, competitive power developers have invested over $10 billion in New York’s energy infrastructure, creating thousands of jobs and stimulating local economies without shifting financial risks to ratepayers.
The report reinforces that competitive power markets have delivered substantial benefits to New Yorkers, including lower electricity costs, reduced financial risks, and significant economic investments. Maintaining and enhancing these markets is crucial for ensuring affordable, reliable, and sustainable energy for the state.
These benefits are experienced nationwide, as further highlighted in another FTI Consulting report prepared for the Alliance for Competitive Power analyzing competitive electricity markets across the United States.
Key Nationwide Findings:
- Lower Rate Growth:
- From 1996 to 2022, retail electricity rates in restructured states grew more slowly compared to vertically integrated states. Specifically, rates in vertically integrated markets increased by an average of 86 cents more per kilowatt-hour than those in restructured markets.
- Reduced Emissions:
- Restructured states achieved a 10% faster reduction in emissions from electricity generation than regulated states, resulting in 15% fewer emissions today. This improvement is attributed to accelerated coal plant retirements and more efficient nuclear operations.
- Enhanced Reliability:
- Customers in restructured states experienced 5% fewer power outages on average. During severe weather events like Winter Storm Elliott, markets such as PJM, encompassing many restructured states, maintained service without load shedding and even supplied power to neighboring regions in crisis.
Bottom line: Competitive markets help keep the generation part of your bill as low as possible, even as policy and infrastructure costs rise.
When generators compete, customers win.
