When price caps are lifted for the majority of Arizona consumers, what assurances do we have that volatility in the market (for both natural gas and electricity) will not result in unstable or inflated rates? Will the generation price of electricity fluctuate with the price of natural gas?
Until such time as a well-functioning bulk power market structure is established, there can be no assurance of price stability or supply reliability. Such a market structure would include an effective RTO (with authority over a large region) which is able to deal with congestion problems and peak period pricing, and assure adequacy of generation and transmission capacity. The RTO would have to have sufficient authority to coordinate planning and/or pricing of generation and transmission to avoid supply disruptions in the future.
Yes, the generation price is likely to fluctuate with the price of natural gas. An orderly, competitive gas market would contribute to electricity price stability. So would fuel diversification by electricity generators.
Price volatility and inflation are significant risks associated with a competitive electricity market--even a market that is well-designed and sufficiently competitive. The Commission should ensure that the alleged advantages of competition are worth the disadvantages associated with these risks.