Electric prices

Illinois state lawmakers protected the state’s electricity consumers this week by rejecting legislation that would have subsidized construction of a $3.5 billion power plant.
 
Had it passed, the Taylorville Energy Center (TEC) subsidy bill would have threatened jobs by dramatically increasing consumer prices. TEC sponsors had proposed subsidizing the plant’s construction by requiring electric distribution companies to buy power from the plant for 30 years at above-market prices. These distribution customers would then have had to pass this additional cost along to their customers.
 

Technology innovation driven by market forces has unlocked abundant domestic supplies of natural gas from unconventional geographic formations, resulting in enormous consumer benefits– namely, lower electricity prices and cleaner air. This natural gas success story shows how market forces drive innovation better than regulation, and should serve as an important lesson for policy makers tempted to intervene in the markets in response to transient market price signals.
 

Dozens of alternative energy suppliers have been attracted to Texas’ competitive electricity market, and the competition between suppliers is creating significant economic benefits for consumers. As market participants compete against each other to provide the best possible service at the lowest cost in order to attract and retain customers, market forces are driving consumer costs down while increasing choice and service offerings, and stimulating innovative technologies.
 

A new report by the Center for American Progress (CAP) identifies the top 10 states for energy efficiency and credits market forces for stimulating innovation and investment. According to the report, Connecticut, California, Maryland, Massachusetts, Pennsylvania, New York, Texas, North Carolina, New Jersey, and Ohio are the nation’s top energy efficiency markets – all but North Carolina have competitive retail electricity markets.
 

Thursday’s Hartford Courant brought good news for electricity consumers: “Many CL&P Customers To See Lower Rates Starting Jan.1” Electric rates will decrease 5.2 percent in January for most of Connecticut Light & Power’s 1.2 million customers, continuing a trend of declining electricity prices in competitive electricity markets as reflected in the state’s declining costs.

The rate reduction is a result of Connecticut’s participation in New England’s wholesale competitive market managed by ISO New England, a regional transmission organization. Consumers who shop for competitive energy suppliers in Connecticut have benefited directly from falling electricity prices in the past year – a trend recently noted by the Federal Energy Regulatory Commission.

A key Arizona legislator is pressing to reopen the state’s electric markets to full competition in order to spur job growth, reduce emissions, encourage innovation and reduce costs for consumers. Representative Lucy Mason of Prescott, chair of the House Water and Energy Committee, recently held a legislative forum that cited a report by the Goldwater Institute to urge competition in the state’s electricity market.

The Goldwater Institute report, Opening the Grid: How to Recharge Arizona's Electricity System for the 21st Century, was authored by two respected economists and finds that electricity restructuring has been successful in Britain, Texas and Pennsylvania, and would work in Arizona if the state’s electricity market was open to competition.

Last week’s regular meeting of the Federal Energy Regulatory Commission featured a staff assessment of the outlook for energy markets this winter, including the “exciting” development that natural gas and electricity prices have fallen to their lowest levels since 2001. Forward prices for natural gas this winter are significantly lower than at this time last year, and gas was placed into storage earlier this year for consumption during peak demand winter months at an average price of $3.45, nearly a third of the $9.40 average cost last year, FERC staff reported.

Crediting lower electricity prices in the competitive market, two Mid-Atlantic electric cooperatives, Choptank Electric Cooperative and Delaware Electric Cooperative, announced electric rate reductions this week for their members. The co-ops said the reductions were possible due to a sharp decrease in the cost of electricity provided by their wholesale power supplier, Old Dominion Electric Cooperative.

Prices in PJM Interconnection’s competitive wholesale electricity markets, the regional transmission organization (RTO) in which the co-ops operate, have declined by some 40 percent in the past year, reflecting changes in fuel prices and demand. Other organized competitive markets have seen prices decrease by 50 percent, with some producing the lowest prices seen since 2004 and 2002, according to a Federal Energy Regulatory Commission staff analysis. Competitive electricity markets compel power producers to offer their electricity at prices that reflect their cost savings. These savings are immediately passed on to the cooperatives’ members.