Blog entry December 2009

Following the Senate’s confirmation last week of former Iowa utility regulator John Norris to a seat on the Federal Energy Regulatory Commission (FERC), we were encouraged to hear him say he would “work toward ensuring open and fair energy markets in which consumers, retailers and wholesalers can have confidence.” His prepared statement further noted challenges ahead including “minimizing the impact changes will have on consumers, ensuring adequate investment in upgrading and building new infrastructure and meeting our nation’s goals for reducing CO2 emissions.”

Thursday’s Hartford Courant brought good news for electricity consumers: “Many CL&P Customers To See Lower Rates Starting Jan.1” Electric rates will decrease 5.2 percent in January for most of Connecticut Light & Power’s 1.2 million customers, continuing a trend of declining electricity prices in competitive electricity markets as reflected in the state’s declining costs.

The rate reduction is a result of Connecticut’s participation in New England’s wholesale competitive market managed by ISO New England, a regional transmission organization. Consumers who shop for competitive energy suppliers in Connecticut have benefited directly from falling electricity prices in the past year – a trend recently noted by the Federal Energy Regulatory Commission.

Two groups this week underscored the need for consumer access to real-time dynamic electricity pricing to reduce greenhouse gas emissions and save money on their bills. On Monday, the Association of Home Appliance Manufacturers (AHAM) released a white paper strongly advocating that “residential electricity prices must be based on time of use” to fully enable smart grid technology. Yesterday, multiple high-tech companies and advocacy groups issued a statement at the United Nations-sponsored climate change negotiations in Copenhagen (COP15) urging world governments to ensure consumers see real-time energy use data to improve energy efficiency and cut greenhouse gas emissions.

The state of Texas scored an “excellent” in an independent assessment of restructured electric markets — proving to be one of the most successful states in providing the benefits of retail choice to customers. The report, issued by the Energy Retailer Research Consortium this month, highlights how Texas has made outstanding progress by adopting rules to encourage numerous power producers and retailers to compete for customers and provide a variety of electricity services.  In addition, a recent op-ed in the Arizona Republic by Andrew Kleit, a professor of energy and environmental economics at Pennsylvania State University, further underscored the “remarkable” results in Texas.

However, a Fort Worth Star-Telegram article this week downplays this significant progress and instead focuses on a simplistic comparison of electricity costs in Texas versus neighboring states.  This narrow view undervalues the significant economic and environmental benefits the Texas market is providing the state’s consumers. 

As of yesterday, Michigan consumers in DTE Energy's service territory no longer can choose a competitive electricity supplier to serve their energy needs.  As a result of a state law passed a year ago that limits choice for electricity users to 10 percent of each utility’s demand, many customers are now denied the opportunity to achieve more competitive pricing and run their operations more efficiently.  With the cap having been reached in August for Consumers Energy's territory, the door is now closed for approximately 90 percent of the eligible electric load.  Consumers who want more options and lower-priced electricity than their monopoly utility will provide no longer have the option to shop around.

As a state struggling with its economy and seeking job growth, Michigan has made a grave mistake in making businesses, schools, religious institutions, local governments, manufacturers, office buildings, retail stores, etc. captive customers of monopoly utility providers.  Absent legislative change, these companies and organizations cannot lower their electric rates by exercising their options to explore the market and choose a competitive supplier.

Open Arizona's electricity market to competition.  That’s the message from Andrew Kleit, a professor of energy and environmental economics at Pennsylvania State University, in an op-ed he authored this week for the Arizona Republic.

Like many states, Arizona is facing a demand crisis.  Some experts indicate that the state will need 3,000 megawatts of additional generating capacity by 2019, nearly a 50 percent increase in just 10 years.  In addition, Kleit notes that Arizona "has ambitious plans to make its electricity grid 'greener,' which will require significant investment in solar and wind power."

We have long made the point that competition in electricity is not “deregulation.”  This is because of the facts, not spin.  Despite the removal of monopoly price controls, organized competitive electricity markets are closely overseen by governmental regulators and independent market monitors to ensure against market manipulation and the exercise of market power.

But don’t take our word for it.  Hear what John Hanger, Secretary of the Pennsylvania Department of Environmental Protection, said at a conference last week in Harrisburg on the economic and environmental benefits of competitive markets.  It was hosted by Citizens for Pennsylvania’s Future, a Pennsylvania environmental group he used to lead.  Prior to that, he was a Pennsylvania utility commissioner who helped implement the state’s 1996 restructuring law.  Here’s what he said about why electricity restructuring is not deregulation:

It’s a human trait to look back on the past as a time when things were better, John Hanger, Secretary of Pennsylvania’s Department of Environmental Protection, told a gathering in Harrisburg last week.  But when it comes to monopoly regulation of the state’s electric utilities, “I don’t look back with fondness to how that system was working,” said Hanger, a keynote speaker at an event sponsored by Citizens for Pennsylvania’s Future that highlighted the economic and environmental benefits for consumers from electricity competition. Hanger headed the environmental group, also known as PennFuture, before becoming the state’s top environmental regulator, and was a member of the Pennsylvania Public Utility Commission in the 1990s.

Competitive electricity markets create jobs and promote energy efficiency and renewable energy development, concludes a study released today by the Energy Retailer Research Consortium, an independent research group that supports retail energy choice.  The Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS) found that customer choice is thriving in many U.S. states and Canadian provinces because well-structured electricity markets are fostering the introduction of numerous product offerings and services that are not available in monopoly electricity markets.

Two interesting news items today out of Illinois again demonstrating how electricity competition is benefitting consumers in that state.

First, an op-ed in today’s State Journal-Register by Kevin Wright, president of the Illinois Competitive Energy Association highlights the progress made since competition was adopted ten years ago by the Illinois General Assembly.  He notes, “the electricity market in Illinois is among the most robust nationwide. There are now 37 alternative retail electric suppliers licensed to serve business consumers and eight suppliers eligible to serve residential consumers.”