Success of Retail Competitive Markets Detailed in COMPETE Switching Rates Study

A new study sponsored by COMPETE reveals the volume of electricity sales by competitive non-utility suppliers has doubled since 2003 in the continental United States, and competitive suppliers are increasingly offering innovative products and services allowing competition based on more than just price.
 
The report compiles national statistics and in-depth analysis of several states (New York, Illinois, Pennsylvania, Texas, Connecticut, Maryland, Washington D.C.) that have opened their retail electricity markets to competition.
 
“The growth of the competitive share of national sales volumes from zero to 15% in the past decade understates the case,” concludes study author Philip R. O’Connor, a former utility regulator and chairman of the Illinois Commerce Commission in the early 1980s. In the 17 states that allow electricity competition at retail, competitive providers supply nearly 45% of eligible electricity demand, up from 20% in 2003. A majority, 57 percent, of all eligible non-residential demand is supplied by a competitive provider.
 
“Much of the switching by customers to competitive providers over the past decade has been an unabashed search for energy cost savings,” said O’Connor. “Larger customers led the way as factories, hospitals, schools, government facilities, office buildings and transit systems moved to reduce their operating costs, but more recently residential customers and small businesses have found savings.”
 
Nearly 9 million residential customers and 1.8 million businesses and government entities are currently served by a competitive supplier, and the volume of competitively served demand has doubled since 2003. Currently, more than a hundred competitive suppliers operate across the nation.
 
“COMPETE’s paper does an excellent job explaining what a success customer choice in electricity markets has been, not only in Pennsylvania, but in many states throughout the U.S.,” said Commissioner Robert Powelson, Pennsylvania Public Utilities Commission. “Since 1996, consumers in Pennsylvania have experienced myriad benefits, including savings of at least $7 billion, increased energy efficiency and reliability of generation resources, and the attraction of over 8,500 MW of new generation and over $12 billion in capital investment in the state.”
 
Annualized demand for competitive commercial and industrial (C&I) customers now stands at nearly 460 million megawatt hours (MWh) and over 100 million MWh for residential customers. This aggregate 560 million MWh represents almost 15 percent of electricity consumption in the lower 48 states. 
 
“The concept of choice is a fundamental feature of American life and the robust statistics contained in COMPETE's report show customers are exercising that fundamental right in choosing an electric supplier,” said Commissioner Erin O’Connell-Diaz, Illinois Commerce Commission. “Appropriate legislation, proper regulatory oversight to ensure consumer protection, dedicated market participants and first and foremost customers, have delivered this success story.”
 
Four realities of competitive electric markets are seen through this paper. First, wholesale electricity markets can successfully operate on a competitive basis. Second, market forces will produce efficiencies in the power industry. Third, multiple suppliers of electricity at retail can deliver savings and customized products to customers through bilateral contracts. And fourth, C&I and residential customers will choose among suppliers to satisfy their energy needs.
 
Strong customer demand exists for competitive choice and we encourage policy makers across the country to take note. As competition continues to deliver smart grid and clean energy innovations, policy makers should note the real economic and environmental benefits that electricity markets provide. and