Electricity 101

What is electricity competition?

Making the right electricity policy decisions the next months and years is a critical piece to meeting the broad range of economic and environmental objectives that our nation faces. COMPETE believes that policy decisions should be made with a long-term focus on what will foster innovation, efficiency, reliability and environmental benefits.

What are the benefits of competitive electricity markets?

Unlike outdated monopoly structures, competitive electricity markets are driving innovation, helping us meet bold energy and environmental policy goals, generating significant investment and benefiting consumers with the flexibility to provide competitive pricing. Today open and competitive wholesale electricity markets are bringing crucial benefits to consumers in states like Texas, Pennsylvania and Maryland.

INNOVATION

Innovation is an inherent characteristic of a market-based structure – when companies compete for your business they have to do better. Competition in electricity has resulted in consumer benefits like new pricing options, the development of renewable energy, increases in efficiency and smarter energy management and customization.

ENVIRONMENT

As the nation seeks to protect our environment and mitigate the impacts of climate change, competitive markets are one step ahead, leading the charge in the development of clean and renewable energy. For example, more than 70 percent of wind energy resources are in competitive markets despite the fact that only 44 percent of wind energy potential is found in these areas (American Wind Energy Association).

INVESTMENT

The U.S. utility industry will have to invest between $1.5 and $2 trillion between 2010 and 2030 to maintain current levels of reliable energy service, according to a 2008 study by the Brattle Group, and competition will lead the way to meeting this investment need. Competition in Texas for example has led to the development of more than 41,000 megawatts of new electricity generation, an investment of $36.5 billion in ERCOT and another $5.8 billion spent on transmission infrastructure.

PRICING

While electricity prices in both monopoly structures and competitive markets have escalated in recent years as a result of rising costs of generating fuels, prices have begun dropping in competitive markets – an effect not seen in monopolies. Because competitive markets respond faster to price signals customers in these markets see reductions in their rates much more quickly than in traditional regulated-monopoly markets.