U.S. FTC Staff Urges Arizona Regulators to Open Retail Electricity Market to Competition

Staff with the federal government’s lead consumer-protection agency has weighed in before the Arizona Corporation Commission (ACC) in support of the state moving forward with its decade-long suspended move to retail electricity competition.
 
“[R]etail competition can lead to major system efficiencies by moving away from flat retail electricity rates and toward individually tailored electricity services, which can yield numerous consumer benefits that include rate savings, environmental improvements, innovative services not previously available, and enhanced service reliability,” staff with the U.S. Federal Trade Commission (FTC) told the ACC.
 
The FTC comments were in response to a proceeding the ACC initiated in May that contemplates opening the state’s retail electricity market to competition.
 
“Several significant technical developments, including advanced (“smart”) meters, have made it timely to consider retail electric competition as a path to gaining substantial power system efficiencies and facilitating customized electric services that benefit consumers,” the FTC staff said.
 
“Competition has been an effective organizing principle for the United States economy since the founding of the Republic. For more than a century, the promotion of competition has been embedded in federal and state statutes that apply to most sectors of the economy,” the FTC staff said. “The competitive process creates strong incentives for firms to minimize the costs associated with existing production techniques, to innovate, to erode market power, and to provide the variety of products that customers are interested in buying.”
 
The FTC’s comments hit on several themes highlighted in COMPETE’s comments to the ACC.
 
“The extensive, long-term experience of COMPETE's customer members with retail choice markets, as well as published data, demonstrate convincingly that robust customer choice and retail electric competition are the best ways to ensure that Arizona's residents and businesses have access to reliable, lowest-possible-cost, environmentally-sound electricity,” COMPETE told the ACC. 
 
“Competition has been the driving economic engine of our Nation for more than 200 years, and COMPETE has found that electricity competition disciplines investment and operational decisions, drives innovative products and services, and keeps prices as low as possible while ensuring a reliable supply of electricity, all without requiring customers to bear the financial risks of utility investments,” COMPETE said.
 
COMPETE cited an analysis of data from the U.S. Energy Information Administration and the Bureau of Labor Statistics showing that, between 1997 and 2012, inflation­adjusted retail rates in states with restructured competitive retail markets decreased by 4% while those in states that rely on monopolies increased 7%. 
 
And those decreases benefited retail customers in all classes in restructured states. Specifically, inflation-adjusted rates for residential, commercial and industrial customers in retail choice states decreased by 6.5%, 12.1%, and 1.7%, respectively, over this period while rates in these same customer classes in monopoly utility states increased by 3.9%, 1.2% and 10.1%, respectively. 
 
“COMPETE believes there is clear and convincing evidence that competitive retail electric markets provide residents and businesses with reliable, environmentally sound electricity at the lowest available cost,” COMPETE’s comments concluded. “Accordingly, COMPETE urges the Commission to take the steps needed to advance well-structured competitive retail electric markets in Arizona.”
 
COMPETE commended the Commission for initiating its evaluation of retail competition and offered its assistance and support to the effort.

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