Blog entry February 2010

In recent remarks, entrepreneur and philanthropist Bill Gates called for “energy miracles” to meet the threat of global climate change.  But we at COMPETE would submit that with or without divine intervention, organized competitive markets have become incubators of technological innovation and renewable energy that meet rising demand with efficient clean energy generation.

“COMPETE believes a market-based approach to reducing greenhouse gas emissions and producing clean electricity offers the most innovative and economically efficient means of addressing climate change,” said Federico Peña, COMPETE Coalition Co-Chair and former U.S. Secretary of Energy.

Maryland voters overwhelmingly believe that competition is the best way to control the cost of electricity, and they want much more information about the electricity choices they have. That’s according to a poll conducted by Opinion Works and supported by the COMPETE Coalition along with a broader group of energy consumers.

The survey of registered Maryland voters found that the electorate favored competition over a return to monopoly service as a better way to control the cost of electricity by two-to-one.  An astounding 83 percent of voters favor the existing market competition that allows them to choose their electricity provider.

A lively panel discussion dedicated to the question of whether a change in regulatory structure is needed to power a new clean energy economy helped kick off the National Electricity Forum, an annual confab co-sponsored by the U.S. Department of Energy and the National Association of Regulatory Utility Commissioners, an association representing state utility regulators. Regulators, environmentalists, policy influencers and other panelists roundly pointed to market competition as the answer.

To inspire innovation in the electricity industry and jumpstart a clean energy economy, “We need to start turning the conversation around to markets,” declared Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission (FERC).

A recent proposal by California’s Administrative Law Judge (ALJ) would settle a dispute between utilities, competition supporters, and consumer advocates by raising the state’s limit on retail power market shopping by 8,354 megawatts (MW). This compromise follows recent legislation that broadened the scope of retail power competition in California, and is but a step in the right direction.

According to the proposal, the cap on retail power shopping will be raised by 3,946 MW each in the Southern California Edison and Pacific Gas and Electric service territories, but only by 462 MW for San Diego Gas and Electric’s consumers. The proposed increases are equal to 10 million megawatts of annual use across the state.  Compare that number to recent data pegging California’s total retail electrical sales at more than 268 million megawatt hours per year.  The proposed increase in shopping is only equal to 6 percent of the entire load served, and is less than annual demand variations due to weather and economic swings.

Beware of organized competitive electricity market critics who claim to speak for all consumers. They certainly do not speak for the growing contingent of COMPETE customer members who are helping communicate the economic and environmental benefits, and the technological innovation, that competition in electricity is delivering.

During a recent conference sponsored by Citizens for Pennsylvania’s Future (PennFuture), two representatives of COMPETE’s roster of customer members, manufacturer Leggett & Platt and retailer Wal-Mart, discussed how electricity competition saves money for consumers, stimulates renewable energy, and encourages innovation.

The COMPETE Coalition has long advocated competition in electricity as integral to unlocking technology innovation, development and jobs growth - as we all experienced when competition was injected into telecommunications and other formerly monopoly industry sectors. So we are especially enthusiastic when other voices join us in underscoring this important policy point, as when the Environmental Defense Fund joined us in highlighting the link between competition, technology innovation and environmental benefits.

Now NDN, an influential Democratic policy think tank, has released a comprehensive report pointing to competition in our nation's electricity markets as the launching pad for innovation, such as smart grid technologies and greater development of renewable energy. The report, Electricity 2.0, finds that monopoly protections and hybrid competition in a state-by-state patchwork thwart market entry of new clean energy generation and technologies. Instead, NDN advocates an "Open Energy Network" that would allow competition to provide environmental, economic and technological benefits for the entire country.

In a clear demonstration of the widely diverse support for competitive electricity markets across the country, the COMPETE Coalition recently announced it has surpassed 400 total members. COMPETE’s membership roster is one of the most diverse of its kind and reveals broad recognition of the economic and environmental benefits provided by competition in organized regional electricity markets. 

Founded in 2005, COMPETE continues to meet the needs of companies and organizations that understand how competitive markets foster the innovation and technology development necessary to meet 21^st century energy challenges, address climate change, and provide lower-cost power to consumers. The coalition experienced a 43 percent increase in membership in 2009.

Restructured electricity markets in Texas have encouraged competition that has led to lower electricity prices for residential consumers, according to a new study by the Texas Public Policy Foundation’s Center for Economic Freedom. The study, Prices, Reliability, and Consumer Choice in the Texas Electricity Market, shows that past reliance on U.S. Energy Information Administration (EIA) state-level data has significantly understated the reduction of competitive residential electricity prices with retail restructuring.

Using market data, the study finds that residential electricity rates in Texas have fallen well below the national average since competitive markets were established in 2001. Monopoly rates in now-competitive areas of Texas averaged 9.98 cents per kilowatt hour (kWh) in 2001, which were 15.8 percent above the national average. Today, the average competitive electricity rate of 11.01 cents per kWh is 8.71 percent below the national average, and the average of the 15 lowest offers, 9.27 cent per kWh, is 23.13 below the national average.  Adjusted for inflation, the average competitive price is 9.46 percent below the average 2001 monopoly rate, the average of the 15 lowest prices is 24.39 percent lower, and the lowest average price is 30.5 percent lower – staggering evidence that competition has driven electricity prices lower for consumers.