Blog entry April 2010

COMPETE today joined scores of businesses in encouraging Michigan’s elected officials to pass legislation restoring the state’s competitive electricity market. The combined signatories represent 877 facilities, more than $278 million in annual electricity costs, 74,634 employees, and thousands of customers who visit their businesses each week. This action would roll back legislation enacted in 2008 that limited competitive retail electricity options to 10 percent of otherwise monopoly utilities’ electricity consumer demand.

Clean energy generation has grown at a phenomenal pace in the PJM Interconnection market.  Data from PJM’s Environmental Information Services’ (EIS) tracking system shows that over the past five years, wind generation has increased almost 1,300 percent, from 500,000 megawatt-hours (MWh) in 2005 to 6,500,000 MWh in 2009. Solar power, which accounted for only 100 MWh in 2005, produced more than 81,000 MWh – a 3,000 percent increase.

This infusion of clean energy has reduced PJM’s carbon dioxide emissions per MWh of generation by 12 percent since 2005, created green jobs, and provided customers with low-carbon energy alternatives, according to the EIS data.

Regional electricity markets are well-structured and well-regulated, and by delivering competitive results are providing real economic and environmental benefits to consumers, the Independent Market Monitors for the majority of regional transmission operator/independent system operator (RTO/ISO) markets said at a COMPETE-sponsored Capitol Hill policy briefing. These markets are creating innovation, new investment and competitive electricity rates – all the while ensuring system reliability, the monitors said.

During last week’s regular open meeting, staff with the Federal Energy Regulatory Commission presented their 2009 State of the Markets Report, and the outcome for energy consumers was profound.  Prices for natural gas were down by 50 percent across the country, and as a result electricity rates declined proportionately in the organized competitive markets, where gas is a key generation fuel. Costs for both natural gas and electricity were at the lowest levels seen since at least 2002 – even earlier in some regions, FERC staff reported.

Retail competition in Pennsylvania is benefitting consumers, said several members of the Pennsylvania Public Utility Commission this week at a public hearing. Chairman Jim Cawley, Commissioner Wayne Gardner, and Commissioner Robert Powelson made their supportive comments before the PA Senate Consumer Protection and Professional Licensure Committee.

 

Commissioner Powelson dispelled tired arguments made by critics that consumers can’t make informed decisions and won’t respond to market signals, by submitting the PJM independent market monitor’s 2009 State of the Market Report into the hearing record. The report found PJM electricity markets competitive for the ninth year in a row, with wholesale electricity prices dropping over 40 percent from 2008.

 

Competitive markets in Maryland and Connecticut are yielding innovation, savings and environmental benefits, as demonstrated by media coverage compiled by Restructuring Today (subscription required).

In Maryland, the Baltimore Examiner spotlighted COMPETE member Clean Currents, a company providing over 5,000 homes and businesses with wind or solar power. The article detailed how customers are able to choose their energy supplier because of the competitive nature of Maryland’s electricity market.  By shopping for their power source and opting for programs offered by Clean Currents and other similar companies, customers can reduce their electric bills while becoming more environmentally conscious. With benefits like these, it’s no surprise recent polling showed Maryland consumers prefer competitive markets.

Consumers need access to new, transformative technologies to manage their energy use, and monopoly barriers don’t make that easy, Reid Detchon, executive director of the Energy Future Coalition lamented at a Brookings Institution forum last week on climate change and the smart grid.

“Where does competition occur?” Detchon asked, citing the “structural impediments” for monopoly regulated utilities to promote reduced energy use by their customers.  Once the market signals are right, consumers’ energy use will be mitigated by price, Detchon said.

“We do need more competition,” said David Owens, executive vice president of business operations at the Edison Electric Institute, the trade group representing investor-owned utilities.  Pilot programs by utilities have shown that consumers respond to price signals, Owens noted.  These pilot programs showed there was a “tremendous shift” in energy use by low-income customers motivated to save on their electricity bill, he said.

The benefits of competition were a key topic at a recent Federal Energy Regulatory Commission (FERC) oversight hearing by the House Energy and Commerce Committee’s Energy and Environment Subcommittee.

“Organized wholesale electric markets create opportunities and encourage innovations that benefit consumers,” FERC Chairman Jon Wellinghoff said.

Wellinghoff noted that one of the largest benefits of these markets is the ability to level the playing field between traditional generation resources and a wide range of resources including renewable energy, demand response, energy efficiency and distributed generation. “Removing barriers that keep renewable energy resources from competing in wholesale markets must be part of our strategy to move toward energy independence.”

At a Google policy discussion this week focused on “unleashing innovation in home energy use,” several speakers touted competition as a key ingredient to enabling consumer benefits through smart meters and energy management.  Others cited the barriers to technology innovation posed by continued monopoly protections for incumbent utilities.

Innovation is a “key component” of competition, said Reliant Energy President Jason Few. The Texas electricity market that Reliant competes in is “extremely competitive,” Few noted, citing more than 60 different retail service providers offering a variety of products.

“The reason things are moving so fast in Texas is because of the competitive market,” said Adrian Tuck, Tendril Networks CEO.  Tendril finds market entry for its smart grid and energy management products is much easier in Texas and other competitive markets outside of traditional monopoly-protected utility regions, Tuck said.  Without a solution to the barriers posed by monopoly protections, “then the technology will founder,” he warned.

Electricity prices are falling dramatically in organized competitive markets, particularly when compared with states that stayed with a monopoly-protected utility industry. But these facts are ignored in the most recent attack on electricity competition from the American Public Power Association (APPA).

APPA’s report groups competitive states in the same category as states with monopoly regulation, so it’s a murky picture if comparing competitive states with monopoly states is the goal. Besides, comparing retail rates on a state-by-state basis is a flawed way to assess the benefits of multi-state regional competitive wholesale power markets.

Price differentials in electricity have always existed – one reason why competitive states opted to restructure in the first place. For example, Illinois and Pennsylvania, two highly competitive states APPA mischaracterizes as regulated, had rates well above the national average prior to restructuring.  But consumers in those states now enjoy rates well below the national average.