Competitive electricity markets continue to develop in U.S.


Vermont, U.S.A. — (METERING.COM) — June 5, 2007 –Many states are continuing to make progress in adopting competitive retail electricity markets, with New York and Texas the clear leaders among states that have given customers the ability to choose their electricity supplier, according to a new study from the Alliance for Retail Choice (ARC).

The ARC’s “Baseline Assessment of Choice in the US” (ABACUS) study found that 12 states (Texas, New York, Maryland, Maine, Massachusetts, New Jersey, Illinois, Pennsylvania, Connecticut, District of Columbia, Delaware, Rhode Island) and two Canadian provinces (Alberta, Ontario) had continued to move forward in restructuring their electricity markets. In Texas and New York the market structure has advanced sufficiently for competitive markets to work effectively and residential consumers in the two states have a choice of suppliers and a choice of products and services. In Texas, for example, residential consumers can choose from over 50 distinct products, while in New York 625,000 customers (11%) purchase their electricity from competitive suppliers, a growth of 55% in one year, and in one service area 37 rate offerings are available.

In other states the successes have been more limited and while they offer retail choice to some or all retail consumers, they have had problems with implementation, typically as a result of the severe restrictions placed on retail electricity choice.

The study found that the design of “default service” (also called basic or standard service or provider of last resort) is the most significant factor that determines the success of retail choice, and that a poorly designed default service undermines retail competition. If default service is designed to satisfy all residential consumers’ needs, or if it bundles and spreads risks among all consumers, then it is unlikely that retail electricity providers will enter the market.

Based on the study the ARC has made a number of recommendations to improve the success of retail competition, including that states allow all residential customers to participate in the competitive retail electricity market, and that they should support the introduction of advanced wholesale marketing practices as a key component of the retail market. On default services it is recommended that these should be established as a transitional service with a clear ending date for the majority of consumers and that they are easy to understand and meet only a consumer’s basic needs.

There should also be a flexible approach to customer billing, access to billing data and a program to improve metering infrastructure.

The ABACUS study was conducted with the assistance of representatives from eight state regulatory commissions. The study did not assess retail electricity competition for large customers, although numerous large commercial and industrial consumers have benefited from the introduction of competition and have seen price reductions and the introduction of new products and services that help them to manage risks, increase reliability and manage energy.