The cost of living in New York is extremely high, but it goes beyond just the price of housing. In fact, despite New York households using about 40% less electricity than the average US household, we pay about the same as everyone else. What gives? There are a lot of factors that contribute to it. We’ll explain.

The Bottlenecks of New York City

New York and Long Island use about 60% of the state’s electricity in a small, very densely populated area. The high demand can’t be supplied by the power plants in the city, so energy has to be brought in from plants upstate, like the hydroelectric plant at Niagara Falls. This creates bottlenecks for electricity. Grid operators are constantly working to ensure that the city’s electricity needs are being met. If the demand ever gets too high, generators called “peakers” are switched on to supply the power the city needs, but these cost much more than typical power generators. Even though they are only used for a few days a year, consumers have to cover the cost needed for “peakers” in their everyday rates, so they can be ready when peak demands hits.

The Complexity of New York City

Infrastructure work in a huge city is a huge undertaking. Consolidated Edison, the largest electric utility company in the state, has a vast web of powerlines and networks. Every year they need to make upgrades to their system and with 80% of their power lines being 40 or more years old, they’ll need to make a lot more upgrades in the near future and offsetting that cost to consumers.

Will it get better?

It remains to be seen. Indian Point, the nuclear power plant that supplies a quarter of the city’s electricity is set to close completely in 2021. The state wants to invest in wind and solar, but it’s unclear how quickly those can get online and supply power effectively. Hopefully, this won’t affect prices too much. While we will most likely see a drop in average demand due to energy-efficient appliances, peak demand could still be quite high and even grow in the coming years.