Should Arkansas
open its large-customer market to choice?
Yes, says Wal-Mart, largest merchandiser in the
world.
Wal-Mart is a big citizen in Bentonville, Ark.
The situation's changed since regulators urged
dropping plans to open its market -- a decision lawmakers acted on last year,
commented Brett Perlman, formerly a member of the Texas PUC threesome that
opened Arkansas' neighbor.
Perlman, now consulting for Vector Advisors in
Houston, filed comments for Wal-Mart in response to the Arkansas PSC's query
about re-opening the markets debate.
If Arkansas does it right -- easier to do now that
several states have successfully opened -- large users could cut their power
bills and all ratepayers would benefit from more efficient utility generation
fleets and improvements in the economy as businesses become more competitive and
productive.
Wal-Mart cares about utility rates. It spent more
than $1 billion last year on power nationwide -- $21 million of that in Arkansas
where it used 500
million kwh, Perlman wrote.
Power is one of its biggest expenses -- beaten
only by labor costs.
Its Arkansas operations include the
17,500-employee headquarters, 29 Wal-Mart stores, six neighborhood markets, 50
Supercenters, five Sam's Clubs and 11 distribution centers with another 44,000
employees.
Back in 2001 when the state spurned competition,
the PSC staff couldn't find a successful competitive state and worried that
RTO's were far away.
The capacity reserve margin in Arkansas was 25%
and consultants who looked into the benefits to consumers of open retail
predicted electricity prices would rise 5-13% if the state opened up.
That's all changed, Perlman noted.
C&I customers in the "competitive power
corridor" in the Midwest, Northeast and Texas are saving money now and
Wal-Mart is among them, Perlman pointed out.
More than 160 gw of load mostly in PJM and the
Midwest has the option to shop, Perlman noted, and about 30% of it has moved to
marketers.
"Competitive suppliers are expected to own
almost 40% of the market by 2005," Perlman explained.
The 54 gw served by marketers last year mostly was
C&Is (47 gw).
Since 2001 the Texas market opened successfully
with 61% of industrial load and 55% of industrial customers shopping today along
with 47% of commercial load and 18% of commercial customers.
Wal-Mart buys from marketers in 14 states and has
saved 20% over utility rates in California, 15-25% in Texas, 10% in Michigan and
an expected 5% in Maryland.
New products and pricing structures too are
available in open markets that Wal-Mart can't get in regulated states, Perlman
pointed out, along with
incentives for voluntary demand response.
Arkansas regulators' concerns about an immature
wholesale market need review because SPP could gain FERC recognition as an RTO
this summer and the PSC should certainly encourage Entergy to join SPP rather
than set up its own independent transmission system administrator.
Even the state's reserve margins have grown with
the addition of about 3,380 mw of generation. SPP's margin is a generous 37%,
Perlman noted.
Allowing large customers to shop would benefit all
utility customers because utilities could retire some of their least-efficient
plants thus driving
costs down for ratepayers by millions of dollars, Perlman pointed out.
A Louisiana State University study pegged the
figure at $926 million, in fact.
Even California, where the energy crisis was a
factor of poor market design and probable market manipulation and not
competition per se, is looking
again at opening its non-core market to competition, Perlman pointed out.
A good C&I open-access program would require
statewide participation with uniform rules, Perlman advised, and would limit
shoppers to those using at least 250 kw or part of aggregations of at least 500
kw.
Since AEP and Entergy already have invested in
systems for retail operations in other states, costs should be low, Perlman
noted, and a program
could begin as early as next June.
Published in Restructuring Today on 6/2/04.