Blog entry March 2010

The Energy and Technology Committee of the Connecticut General Assembly wrapped up its work last week. And depending on where you sit, it either went out with a bang or a thud.  While the committee has a relatively strong track record of passing productive energy legislation into law, the constant swirl of well-intentioned but troubling bills being passed out of committee and bounced around is an old habit that won’t die.

The committee passed a windfall profits tax on electricity generators earning what is deemed to be an excess profit; a public power authority (by a different name) which would be given broad procurement responsibility and the ability to own generation, and a massive ratepayer-funded investment in solar technology.  Each of these proposals comes with incredible risks to Connecticut consumers and none of them would reduce rates already among the highest electricity in the continental U.S. 

Innovation and competition will play an increasingly larger role in U.S. electricity markets, predicted Chris Weston, CEO of Direct Energy. Weston kicked off KEMA’s 21^st Executive Forum with an energizing keynote address on the future of retail electricity competition in North America.

Weston comes to the U.S. market from the United Kingdom, bringing a fresh perspective to our domestic competition discussion by comparing and contrasting the U.K.’s competitive market system with ours. Personally, I have been active in the U.K.’s competitive market for the past three years and can attest to its development and the sense that the British energy market is five to seven years ahead of U.S. markets.

The case for competitive markets providing tangible economic and environmental benefits gets more compelling with each passing day. The latest data comes from the three organized markets that cover the Northeastern United States – PJM Interconnection, NYISO, and ISO-NE.

Wholesale energy prices fell 45.1 percent across the PJM Interconnection, which covers 13 states and Washington, D.C., PJM Independent Market Monitor says in the 2009 State of the Market Report. This is the lowest annual average price since 2002. In PJM’s most recent capacity auction, 7,050 megawatts (MW) of demand resource offers cleared the auction – equivalent to the capacity of six to eight base load power plants. While the news across PJM is positive, two states in particular stand out for the strength of their markets.

Competitive electricity markets are making innovation possible, reports Forbes Magazine in an article that highlights Vornado Realty Trust, a large owner and manager of real estate in the United States.

Using an innovative load response program offered by COMPETE member Constellation NewEnergy, Vornado is able to modulate the power it uses in its properties based on the real-time pricing available in open competitive markets.  As a result, Vornado is using less energy and, in turn, lowering its costs.

Competitive electricity markets unlock the innovative solutions required to meet America’s energy needs and environmental objectives, said experts at a COMPETE Coalition panel discussion event. Unless markets are opened up to competition, the nation’s energy system cannot reach its full potential.

Competitive markets promote competition among power suppliers to deliver the best possible service to attract and retain customers. Comparatively, in monopoly-protected states, incumbent power providers have no incentive to innovate because ratepayers are captive to their monopoly utility and power suppliers are guaranteed recovery of their costs plus a profit.

Organized competitive markets create an effective mechanism to stimulate technological innovations and achieve federal emissions reductions goals. Promoting innovative solutions and market approaches delivers economic and environmental benefits to consumers.

A proposal being developed in the U.S. Senate would use a market-based approach to limiting carbon dioxide emissions from the electricity sector. While drumming up support for the tri-partisan bill, Senator John Kerry (D-MA) said that markets unleash “ingenuity” and send the proper price signals for investment. COMPETE couldn’t agree more, as outlined in a joint statement with the Environmental Defense Fund (EDF).

Less than three months after the highly publicized removal of artificial rate caps in PPL Electric Utilities’ territory, consumers enjoy multiple power supplier options and clean energy is thriving in competitive electricity markets across the state.

Consumers have saved money under the competitive model when compared to the traditional monopoly model,” James Cawley, Pennsylvania Public Utility Commission (PAPUC) Chairman, testified at a recent State Senate hearing. “It’s been a great success.” More than 550,000 customers have switched power suppliers statewide, reports the PAPUC’s PAPowerSwitch Web site, which provides consumers with advice on how to find the right competitive power supplier.

The amount of customers who have switched within the PPL Electric Utilities’ service territory is “astounding,” said Chairman Cawley. 320,000 residential customers – and 380,000 total customers – are purchasing electricity from competing providers. Fourty-six percent of total electricity demand is being met by competitive suppliers. There are 28 competing suppliers serving customers in PPL Electric Utilities’ service area, including nine suppliers for residential customers.

KEMA – a leading global energy and utility industry consultancy – will examine key business and policy issues facing retail energy markets at a two-day forum on March 30-31 near Dallas, Texas. The forum will convene key stakeholders in the U.S. retail energy industry and feature industry executives, state and federal regulators, investors and energy buyers - including several COMPETE members.

The conference – KEMA’s 21^st Executive Forum: Change through choice – will focus on the current state of retail energy competition and where it is headed in the future. Industry leaders will discuss the strategic issues facing evolving energy markets and the impact on retail customers. Participants will also explore technological innovations and advancements in renewable energy.

Markets unleash “ingenuity” and send the proper price signals for investment.  So says Senator John Kerry, D-MA, on the stump to drum up support for a tri-partisan climate change bill he is developing with Senators Lindsey Graham, R-SC, and Joseph Lieberman, I-CT.  Kerry is a strong advocate of creating a market-based program to limit emissions of carbon dioxide from the burning of fossil fuels.  He pointed to the 1990 Clean Air Act amendments, which created a similar market-based program to cost-effectively limit acid rain-producing emissions of sulfur dioxide from power plants. “It works,” Kerry said succinctly of such market-based environmental programs.

The COMPETE Coalition welcomes Senator Kerry’s pro-market commentary, and invites him and his staff to review a joint statement by COMPETE and the Environmental Defense Fund underscoring the importance of competitive electricity markets for electricity as a complement to any market-based program to reduce greenhouse gas emissions. 

The benefits keep accruing for Texas as the state’s competitive electricity market continues to develop. Fast on the heels of a recent study that found Texas energy rates have fallen, news about the abundance of power suppliers and spread of solar energy underscore the fact that competition is having a positive impact on consumers.