Failing to compete

BY Allen Greenberg
Editor-in-chief of EnergyBiz

Hey, did you hear that? It sounds as if the drumbeat might be getting louder for competition in the electric power business.

This time, it was a report from a group calling itself the COMPETE Coalition banging away at its latest analysis of Energy Information Administration data. The numbers over the past 20 years, it says, unequivocally demonstrate that consumers with a choice in their electric power provider see better pricing.

Utilities doing business in competitive markets, it says, also apparently invest more in generation, thus offering greater reliability.


Donald Trump, presidential aspirant, ex-TV show host.

"The data demonstrate that customer choice jurisdictions that steadily adapted and expanded retail choice out-perform, or at least compare favorably with, the states that have so far rejected broad-based customer market access," the group's William Massey said.

U.S. ratepayers, according to the group's report, are at the moment able to select from competing providers in 13 states and the District of Columbia. There are roughly 19 million residential, business and government customers who are served by competitive providers nationwide.

Most critically, the report said that, from 1997 through 2014, prices in customer choice jurisdictions increased 40.9% compared to 59.9% in areas where monopolies still exist. It also said electricity in monopoly states accounted for a larger share of the consumer cost of living in 2014 than in 1997, while electricity's share of the consumer pocketbook in customer choice jurisdictions was less in 2014 than in 1997.

Utilities still doing business as monopolies might want to stop for an antacid before reading some of the other figures in the report.

Among them: from 2003-2013, accounts served by competitive suppliers increased 524% for commercial and industrial (C&I) customers and 636% for residential customers.

Also, from 2003-2014, electricity demand served by competitive suppliers surged 181% for C&I and 673% for residential.

The study's authors sounded nothing less than ecstatic about their findings.

"The empirical data demolish the unsupported claims of market critics in terms of price, investment and reliability," said one, Philip O'Connor, president of PROactive Strategies Inc. and former chairman of the Illinois Commerce Commission.

The current chairman of the same commission, Brien Sheahan, was equally hyperbolic:

"The data on price performance in customer choice jurisdictions are among the most compelling findings of this paper," Sheahan said. "The numbers truly speak for themselves when you take into account the impact of electricity prices on consumer cost of living."

The problem is, the numbers that COMPETE chose to showcase in its report only tell part of the story.

The truth is that in many areas with competition today, rates were capped for a period of time and, in some cases, rolled back. That means customers in those states have been paying below-market rates. Once the caps end, rates will catch up and COMPETE will then have to find some other way to beat its drums.

The jury on competition in electricity is still very much out, and there's not much evidence to convince me it's the panacea some believe it to be.

A lot of Texans would agree. In the winter of 2011, dozens of their state's unregulated power generators failed amid frigid temperatures. Don't tell Donald Trump, but Texas for a time had to rely on Mexico for its power. As others have pointed out, deregulation cost Texans about $22 billion from 2002 to 2012.

By the way, we've repeatedly heard advocates of competition in the electric power industry point to telecommunications as an example of all of the good that can arise when the markets are freed from their regulatory shackles.

Not to sound like a troglodyte, but my cell phone expense today is considerably higher than what I paid a regulated Ma Bell.

I'm all for free markets. But I'm no fan of duplicating limited or expensive resources.

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