Consumers Better Off With Retail Choice in Electricity, Finds Study

by | Jul 15, 2015

Competitive electricity choice markets offer consumers advantages over monopolistic utility markets in three key areas – price, investment, and reliability – according to research findings released on July 13 by Compete, a Washington, DC-based coalition of electricity stakeholders.

The study, Evolution of the Revolution: The Sustained Success of Retail Electricity Competition, was conducted on behalf of COMPETE, using data from the Energy Information Administration (EIA), by Philip O’Connor, president of PROactive Strategies and former chairman of the Illinois Commerce Commission; and Erin O’Connell-Diaz, president of FutureFWD and former commissioner with the Illinois Commerce Commission.

“At the outset, customer choice opponents claimed retail electricity competition would increase prices and price volatility and decrease generation investment and electric reliability,” the authors note in their executive summary. However, they report, “The empirical data demolish those claims, showing instead that, whenever allowed, consumers enthusiastically embrace customer choice.”

Specifically, they say, the following data support their claims:

  • Customer Choice is thriving in 14 states and the District of Columbia, which have full access (referred to as “customer choice jurisdictions” in this research study).
  • From 2003 to 2013, in the customer choice jurisdictions, accounts served with supply from competitive suppliers rather than with power supply from local delivery utilities, grew by 524 percent for commercial and industrial (C&I) customers and by 636 percent for residential – totaling 19 million customer accounts by year-end 2013;
  • From 2003-2014, in the customer choice jurisdictions, electrical load served by competitive suppliers grew dramatically, even in an era of overall flat growth in electricity consumption: 181 percent for C&I and 673 percent for residential – accounting for 20 of every 100 kWh sold in the contiguous United States.;
  • Competition-era price trends in the customer choice jurisdictions have been more favorable to customers than price trends in the 35 traditional monopoly regulation jurisdictions (“monopoly states”), with average electricity prices falling against inflation in customer choice jurisdictions, but far exceeding inflation in monopoly states; and
  • Customer choice jurisdictions, as a group, have outperformed monopoly states in generation, attracting billions of dollars of investment in new, more efficient generation; and resulting in higher capacity factors than in monopoly states and parity in resource adequacy to meet load.

“Given the sustained, demonstrable success of customer choice both in price trends and in generation investment and performance, the terms of the debate should shift to how retail customer choice provides a better platform for addressing innovation, accommodating environmental goals, allocating risk, and responsiveness to fast-changing economic, financial and technology conditions,” said O’Connell-Diaz.

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