Texas transition to competitive power markets successful

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Susan Tierney,
Managing Principal,
Analysis Group
 
Boston, MA, U.S.A. — (METERING.COM) — November 19, 2008 – Texas has experienced a successful transition to competitive power markets, according to a new study from the Analysis Group.

In “ERCOT Texas’s Competitive Power Experience: A View from the Outside Looking In,” the Analysis Group team led by managing principal Susan Tierney examines through two lenses the question of whether Texas has succeeded in its electric restructuring.

First, the structural attributes associated with a successful competitive market are examined for Texas. Among these are many buyers and many sellers, low barriers to entry, non-discriminatory access of market participants, means to mitigate market power, informed consumers, transparency of prices and options, and stable and transparent market rules.

Second, various retail and wholesale market metrics are quantitatively evaluated. These include trends in real prices compared to input costs, diversity of retail products and suppliers, market share of incumbent companies, customers’ options and choices, retail consumer protections, entry of generation and transmission, and entry of renewable resources.

Measured against all these metrics, Texas has had an overall successful competitive power market experience, having met the various qualitative and quantitative criteria for strong competitive market performance and conditions, says the report. Specific factors that have contributed to this success include customer focus and education, design of the retail default service, and a stable regulatory environment.

However, Texas’s success to date does not mean that improvements should not continue to be made, the report continues. In particular, recent events demonstrate a need to improve ERCOT’s (the Electricity Reliability Council of Texas) management of congestion and the market design for the pricing of congestion. Also, technological advances on the customer side of the meter, in combination with broad deployment of advanced metering systems and other demand management technologies, provide the Texas market a great opportunity to allow residential customers to manage their consumption (and household electricity bills) and to reduce the need for new power plants.

To make this a reality, ERCOT will need to charge customers based on their actual electric usage, rather than based on profiles. In combination with its competitive market, this advanced technology will position Texas well for future success, the report comments.

The study was commissioned by Reliant Energy, Inc. The Analysis Group is a national economic consulting firm.