Today's Electricity Marketplace Calls for Smart Buyers
By Steve Kiesner Director of National Accounts, Edison Electric Institute | October 28, 2008
Bumpy start giving way to smoother ride
Since 1998, when California became the first to adopt competition, 23 states, and the District of Columbia-62 percent of the total U. S. population-have now approved or endorsed retail competition.
California's well-publicized problems with competition have raised concerns about the effectiveness of state retail competition programs in general, causing some state regulators and legislators to reject electricity competition altogether. But it's important to note that many of California's problems revolved around a flawed market design, price volatility, and tight supplies that were unique to that state.
Officials in Texas, which opened its retail electricity market to competition in January 2002, are cautiously optimistic about the success of deregulation there. Drawing on lessons learned from California, the state has encouraged the construction of new electricity generation and transmission capabilities, and developed a better market design. Since 1995, 57 new power plants have been completed.
Although only in its first year, and despite some early transitional billing issues, the results to date in Texas show businesses and consumers are excited about competition. According to the Texas Public Utilities Commission, more than 330,000 customers have switched electric providers since the market opened in January, gaining the mandated six percent savings that went into effect. As more providers enter the marketplace, this should spur even more savings for businesses and consumers.
Competition, now that it is a reality, is here to stay. The U.S. Congress initially looked at mandating a specific date for all states to begin competing. Today, however, they are focusing their attention instead on the issues in the country's wholesale electricity markets that effect the success of competition at the state level. These wholesale issues include ensuring that an adequate transmission system is in place to handle the demand for power, and that fair and clear rules govern the selling of power by independent energy producers and traders.