Electricity Markets Are Working Fine

Letter to the Editor: Electricity Markets Are Working Fine
By Don Nickles, Chairman and Chief Executive, The Nickles Group
The Washington Post
February 22, 2009

The Post got it half right in examining prices for electricity in our area ["A Winter of Discontent Over Utility Bills," Metro, Feb. 13].

Falling prices for natural gas and other power generation fuels have about halved the wholesale cost of electricity in our region, and there is a lag in passing on these cost decreases to residential retail rates. But it is simply wrong to assert, without any attribution, that restructured electricity markets are to blame.

The cost of electricity has risen in recent years in the face of unprecedented increases in the cost of the fuel used to generate it. Now that the global market forces driving fuel costs have eased, bringing down the cost of electricity at the wholesale level, consumers have an opportunity for relief in their monthly bills. But keep in mind that the wholesale cost of electricity is only one portion of the electric bill we pay every month and that lower wholesale costs won't be reflected in those bills until the expiration of long-term arrangements entered into when fuel costs were high.

When electricity costs went up, restructured electricity markets were unfairly blamed. Now that market forces are driving electricity costs down, restructured electricity markets get the blame because there is a lag in the impact at the retail level. The bottom line is that competitive markets for electricity are working well. Costs go up and come down in response to fundamental market forces, particularly global economic pressures that affect fuel costs.

Don Nickles, Chairman and Chief Executive, The Nickles Group, Washington

The Nickles Group is a government relations and consulting firm whose clients include a coalition of companies involved in the electric power industry

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/21/AR2009022101368.html