The Energy Retailer Research Consortium (ERRC), an independent research consortium that supports retail energy choice, issued a report today on the status of retail electricity competition in residential and commercial/industrial markets. The report identifies the successful markets in North America and explains the policy choices that led to those successes.
“Well-structured, competitive electricity markets are critical to meeting our country’s future electric power needs,” said Nat Treadway, the ERRC Projects Manager. “These competitive electricity markets deliver the innovation, new investments and customer choice required for future success.”
According to the ABACCUS report, commercial and industrial customer choice is thriving in many U.S. states and Canadian provinces because well-structured and implemented electric markets foster the introduction of numerous product offerings and services that were not available in traditional electric markets. A significant variety of products and services is available today, including: locking in energy prices for a year or more, indexed energy prices, hourly energy pricing, green or renewable products, the bundling of maintenance services with electricity purchases, the development of on-site power generation, premium power quality services, backup power and reliability services, energy efficiency services and opportunities for customers to participate in bulk power markets.
Additionally, residential consumers benefit from customer choice in several areas and are poised to reap additional benefits as new technology is implemented. New infrastructure investments – such as advanced meters, communications and control devices – allow entrepreneurial retailers to develop innovative pricing and service choices. In the future, consumers will have more choices and control to lower their total energy bills, reduce their impact on the environment, and increase the value of electric service in their lives.
The ABACCUS report identifies Texas and New York as leaders in the U.S. Appropriate policies in these states helped create vibrant competitive electricity markets with numerous retailers and service choices for customers of all sizes. The report also identifies the Canadian province of Alberta as a leader where its policies have fostered choice for residential electricity customers.
The ABACCUS report highlights that retail choice meets social and economic goals related to customer assistance, energy efficiency, renewable energy development, the environment, and job creation.
Mr. Treadway explained that social and economic goals are well suited to competitive electricity markets. “A well designed market platform delivers clean energy options and consumer choice. Choice, combined with appropriate public policies, is transforming the electric industry,” he said.
Market forces delivered lower retail power prices as input fuel prices fell in 2009 – of great societal value against the backdrop of an economic slump. Additionally, new mechanisms have resulted in protections for all customers, programs to assist low-income consumers with payment assistance, robust energy efficiency and demand-response programs based on solid economics and verification standards, and dramatic investments in renewable energy resources. For example, there is more wind power production and associated capital investment in Texas than in any other state. Texas also adopted rules for new transmission investments to bring more wind power to the market.
2009 ABACCUS Rankings, Assessments and Recommendations
A hallmark of the ABACCUS analysis and report is the breadth of issues explored. The ABACCUS rankings and recommendations address design issues that are directly related to the ABACCUS methodology topics: 1) retail market status, 2) wholesale market competition, 3) default or standard service design, and 4) facilitation of the choice of retailer.
This comprehensive assessment methodology was developed over several years through a collaborative effort among retailers and representatives from eight state regulatory commissions. The ABACCUS methodology applies data related to market structure and performance to score each state or province, which results in a ranking. This year’s rankings for the top areas are:
2009 ABACCUS Rankings and Assessments Residential Commercial/IndustrialJurisdiction2009 Rank2009 AssessmentJurisdiction2009 Rank2009 Assessment Texas 1 Excellent Texas 1Excellent New York 2 Excellent New York 2 Good Alberta 3 Good Maryland 3 Good Maryland 4 Marginal Illinois 4 Good Massachusetts 5 Good Maine 5 Good Maine 6 Marginal Massachusetts 6 Good Connecticutt 7 Good DIstrict of Columbia 7 Good Illinois 8 Good Alberta 8 Good Pennsylvania 9 Good Connecticut 9 Good New Jersey 10 Marginal New Jersey 10 Good District of Columbia 11 Marginal Pennsylvania 11 Good Delaware 12 Marginal Delaware 12 Good New Hampshire 12 Marginal New Hampshire 13 Marginal Ontario 14 Marginal Rhode Island 14 Marginal Rhode Island 15 Marginal California 15 Marginal Ohio 16 Marginal Ohio 16 Marginal California 17 Unsatisfactory Ontario 17 Marginal
The reports also present recommendations based on public policy choices that support the application of competitive forces. Chief among these is the design of default service. A poorly designed default service program can undermine retail competition because it attempts to provide services that a market can best provide, and therefore creates greater barriers to entry for competitive entities that are better suited to meet unique customer needs.
There are a number of actions that policymakers can take to reduce the impediments of default service to competitive retail markets. Key among these is the movement of default service to a more market-reflective rate in the near term. Short-term prices are more efficient, exclude the premiums associated with long-term fixed prices, and allow consumers to better respond to price changes. For consumers who desire a longer-term, fixed-price product, competitive retailers offer these products.
ABACCUS provides a baseline for building a properly functioning competitive energy market. Copies of the full report are available at www.defgllc.com.
Editor’s note: A media conference call will be hosted by Mr. Treadway, Mr. Pat Wood III of Wood3 Resources, and William Massey of COMPETE on Monday, December 7 at 12:00 p.m. EST. Please dial (888) 387-8686 and use code 5678677.
