Restructured markets cut costs, improve efficiency, NEMA says

States with restructured electric markets have managed to cut costs and improve efficiency in recent years, and along the way some have fended off efforts to “re-regulate” power markets, speakers said during an April 24 conference on competition in Washington, D.C.

National Energy Marketers Association President Craig Goodman hopes to eventually see the old regulated utility “obligation to serve” principle replaced with an “opportunity to serve” electric customers.

NEMA is holding its 15th annual conference April 24-25. Goodman also said many competitive energy companies face the unenviable task of having to compete with what are basically regulated monopolies.

About fifteen states and Washington, D.C., have restructured their markets for electricity. Even more states have opened their natural gas markets to competition, Goodman said. Officials from states with deregulated electric markets said that restructuring has proven itself as a viable alternative to the “old-school utility way.”

Pennsylvania Public Utility Commission Chairman Robert Powelson said his state had withstood hard times and a call for re-regulation when natural gas prices hit double-digits.

Powelson said the Pennsylvania market has proven wrong the naysayers that predicted dire times for old-line coal and nuclear plants under deregulation. The same aging coal and nuclear plants became very efficient under deregulation when more of the risks had to be shouldered by shareholders rather than ratepayers, he said.

Likewise, thousands of megawatts of new power generation has been built in Pennsylvania since the market has been restructured. Also Pennsylvania has more attractive electric rates, when compared to the national average, since it was deregulated, Powelson said.

Public Utilities Commission of Ohio Chairman Todd Snitchler said his state is now moving aggressively into restructuring after going “at a snail’s pace” in the early years. Ohio is seeing a big increase in customer “shopping” for electric providers.

Some incumbent electric companies have reacted to the Ohio changes more positively than others, Snitchler said. This was in response to a conference participant’s question regarding American Electric Power (NYSE: AEP). During a recent earnings call, AEP executives expressed concerns with the evolving Ohio system.

The market in Illinois has proven attractive to certain “one-off” energy projects, said Illinois Commerce Commission Chairman Doug Scott. These include the revamped FutureGen coal project, which is still backed by the U.S. Department of Energy, along with an advanced coal gasification power project proposed by Tenaska, Scott said.

Michigan Public Service Commission Chairman John Quackenbush described his state as having a “hybrid” market with only limited competition allowed. There are legislative bills to expand competition but Quackenbush didn’t know if they will succeed this time around.

Various state commissioners cited the need to educate customers about competition. Surveys indicate that many people believe that they just don’t have the time to comparison shop for a replacement electric provider. Ten percent cost savings seems to be the magic figure where people get much more interested in switching, said Pennsylvania’s Powelson.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.