Pent-Up Demand for Competition Overwhelms California’s Power Market Opening

California recently opened up an additional portion of the state’s retail power market to competitive power supply via a process where interested parties submitted their names for consideration. It was an overwhelming success – the allotted opportunity for competitive power supply was met in less than a minute. The pent-up demand for competition far outstripped available capacity and many consumers were denied the ability to shop for lower-cost electricity.
 
The market reopening was the first in four planned annual increases to the overall cap on competition, which will ultimately raise the state limit on retail power market shopping by 8,354 megawatts. Unfortunately, California’s total retail electricity sales are around 268 million megawatt hours (MWh) per year and the new increases only total 10 million MWh of annual use, or 6 percent of the entire load.
 
Customers considered the increased limit on retail power shopping a good step forward when it was announced, but this market opening shows California isn’t even close to satisfying demand for competitive power supply. Three additional market openings from 2011 to 2013 promise more relief for consumers, but they will be even smaller than the 2010 market opening.
 
Competition is creating economic benefits in electricity markets across the country. Prices have decreased in organized markets and consumers are taking advantage of lower fuel costs by switching suppliers in increasing levels. Competition is also giving consumers the opportunity to shop for innovative energy management solutions that provide savings and greater ability to manage their energy consumption.
 
California will benefit from greater competition in its electricity market. Clearly, consumer demand for the opportunity to shop for lower-cost competitively priced electricity is strong. Greater opportunity to switch power suppliers will empower consumers to take advantage of lower energy prices. Pennsylvania, a state transitioning to full competition, has seen unprecedented switching rates. Michigan, another market with retail market caps, has seen the light and is considering legislation to expand its competitive market.
 
COMPETE urges California lawmakers to further increase its cap on competition to help all interested customers during these tough economic times.

Bill Massey | July 7, 2010