California Electricity: More Competition is Good, Full Competition is Better

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.

The potential benefits are far less impressive as additional proposal details emerge. For instance, the new shopping caps would be phased in over time, with half the new amount introduced in April of 2010, 20 percent each at the start of 2011 and 2012, and the final 10 percent at the start of 2013. In addition, customers who have previously purchased power from a competitive supplier but switch back to their original utility will remain captive to their incumbent utility for three years –  even if their monopoly rates rise unexpectedly.

While this is a positive step, it falls short of the full competition many Golden State residents and businesses have sought in the past.  COMPETE urges California policymakers to go further and open its electricity market to all interested customers.

Competition is working in electricity markets across the country – stimulating technological innovation and renewable energy, providing real-time transparent prices and lower-cost electric rates, and helping to meet growing electricity demand. As our economy rebounds, California’s businesses and homeowners shouldn’t be locked into monopoly utilities that don’t provide the incentives that result in the best possible electricity choices for all consumers.

Joel Malina | February 17, 2010