competitive retail electricity markets are benefitting consumers
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Competitive Retail Electricity Markets Are Benefitting Consumers. William L. Massey Counsel to the COMPETE Coalition Presentation to Public Utilities Commission of Ohio Retail Electric Service Market Workshop Columbus, Ohio D ecember 11, 2013. COMPETE Coalition. - PowerPoint PPT PresentationTRANSCRIPT
Competitive Retail Electricity Markets Are Benefitting
ConsumersWilliam L. Massey
Counsel to the COMPETE Coalition
Presentation to Public Utilities Commission of Ohio
Retail Electric Service Market WorkshopColumbus, Ohio
December 11, 2013
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COMPETE Coalition•More than 740 electricity stakeholders
• Customers • Suppliers• Traditional and clean energy generators • Transmission owners• Trade associations• Technology innovators • Environmental organizations• Economic development corporations
• COMPETE supports well-structured competitive electricity markets for the benefit of consumers
• 57 COMPETE customer members with more than 3,600 facilities are located in Ohio
www.competecoalition.com
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COMPETE Customer Members With Headquarters in Ohio
• The Andersons, Inc. (Maumee)• Big Lots Stores, Inc. (Columbus)
• City Gospel Mission (Cincinnati) • Forest City Enterprises
(Cleveland)• IEU Ohio Administration
Company (Columbus)• Macy’s Inc. (Cincinnati)• National Church Residences
(Columbus)• Nova Machine Products Inc.
(Middleburg Heights)
• Office of Mortimer Dolman, MD (Gahanna)
• Owens Corning (Toledo)• Presidential Plaza and LPK
(Cincinnati)• Sinclair Community College
(Vandalia)• Upper Pizza, Inc. (Upper
Sandusky)• Wendy’s Quality Supply Chain
Coop, Inc. (Columbus)• White Castle System, Inc.
(Columbus)
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COMPETE Customer Members With Facilities in Ohio
• 7-Eleven, Inc. • AT&T • BJ’s Wholesale Club • Boston Market Corp.• Burlington Coat Factory• Cargill, Incorporated • Carrols Corporation • Cinemark USA, Inc.• CKE Restaurants, Inc. • Costco Wholesale • Cushman & Wakefield
• CVS/pharmacy • Dollar General • Dollar Tree Stores, Inc.• Einstein Noah Restaurant
Group • Extra Space Storage • H&R Block • J.C. Penney Corporation• Johnson Controls • Kohl’s Department Store• Kraft Foods• Leggett & Platt
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COMPETE Customer Members With Facilities in Ohio
• Lowe’s Home Centers, Inc.• NBC Universal • Office Depot• Papa John’s International• PETCO • PetSmart, Inc. • Polo Ralph Lauren Corp. • RadioShack Corporation• Red Robin Gourmet Burgers• Rite Aid Corporation
• Save-a-Lot, A SUPERVALU Company
• Saks Fifth Avenue• Sheetz, Inc.• Shoe Carnival, Inc.• Staples Inc.• Target Corporation • TJX Companies • Toys R Us• Wal-Mart Stores, Inc.• Yum! Brands, Inc.
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COMPETE Ohio Customer Members• “Electricity competition delivers lower prices, better service and a variety of pricing
options that are tailored to our specific needs and electricity usage. With 5,798 company and franchise restaurants throughout the nation, our experience is that competition in electricity gives us much needed certainty to plan and manage our budget.” Russell S. Subjinske, Senior Director of Energy, Wendy’s Quality Supply Chain Coop, Inc.
• “As a leader in affordable, senior housing and health care, with 330 living communities under management across the nation, our organization greatly benefits from the energy cost savings we achieve through participation in competitive electricity markets. But competition is more than just lower prices – competitive markets mean better customer service and innovative products and services.” Alan Mileti, Utility & Procurement Specialist, National Church Residences
• “Competitive electricity markets promote greater efficiency and reliability in electricity supply that enables consumers like Lowe’s the ability to better control our energy costs while maintaining a comfortable, well-lit environment for our customers. The COMPETE Coalition has been a leader in supporting and expanding those electricity markets nationwide.” Steve Elsea, Director Energy Management, Lowe’s Companies, Inc.
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Customer Value
• Financial risk is borne by service providers, not customers– Lowers customer’s financial risk– In monopoly markets, risk of cost overruns shifted to consumers
• Providers focus on individual customer needs; not “one size fits all” as in monopoly service– Flexible contract lengths and other terms– Risk management products (fixed prices, flexible or indexed
prices, etc.)– Generation portfolio mix (e.g., renewable energy content)– On-site services (building retro-commissioning, on-site
generation, etc.)
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Innovation
• Innovation may transform the industry– Distributed generation (e.g., rooftop solar), storage, prices to
devices, electric vehicles, smart grid, DR and micro-grids– Consumers get more alternatives to meet their energy needs
• Fosters more competition and reliance on markets– Innovation is best facilitated by opportunities and pressures of
competitive markets– For competitive services, consumers should get to choose
products and suppliers, and providers should have pricing freedom
• Regulatory policies – Keep entry barriers low– Ensure fair market rules and a level playing field
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Innovation
• Competitive markets facilitate innovative demand response (DR) providers– DR providers have introduced product and service innovations
allowing consumers to reduce or modify electricity consumption and keep costs down
• Competitive markets provide a superior platform for emerging Smart Grid technologies– Enables customers to take advantage of market’s transparent
price signals to make smart consumption and investment decisions
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Environmental Goals
• COMPETE and the Environmental Defense Fund recommended "market-based mechanisms both to encourage the efficient operation and use of existing and new resources and to achieve environmental improvements through conservation and biddable demand response.“ (Joint Statement of General Principles)
• Retail competition is an efficient way to attain renewable energy goals.– Competing retail suppliers each have an incentive to procure renewable
energy efficiently. – Market will determine which renewable energy resources meet
renewable energy goals at the least cost.
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Environmental Goals
• In Pennsylvania, the American Lung Association is advocating that customers switch to competitive electricity suppliers offering clean wind energy.
• In New Hampshire, EmpowerNH, a coalition promoting
retail electricity shopping, advocates for customers to switch to competitive supply because it helps support cleaner generating resources, “creating a virtuous circle: more competition leads to cheaper electric bills leads to less energy coming from polluting coal plants.”
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Consumers Favor Retail Markets
• Competitive providers supply 68% of eligible non-residential demand and 31% of residential demand in the 17 states and DC that allow retail competition
• Between 2008 and 2011 (a time of flat electricity demand growth):– Electricity load served competitively grew 40% – Customer accounts served under retail choice grew over 53%
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Consumers Favor Retail Markets
• For the second year running, a J.D. Power and Associates survey has found a higher level of satisfaction among customers in Texas with a choice of competing electricity providers than among those who remain tethered to monopoly service. – In Texas, electric choice "opened the doors to healthy price competition
and also focused residential customers on finding the cost savings and service programs that match their needs.”
• A recent survey by the New England Energy Alliance found continued strong support for competitive electricity markets, with 76% favoring the region’s restructured competitive electricity market system where companies compete on price and service.
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RTOs Support Retail Markets
• Ohio is served by the PJM RTO.
• RTOs provide the best wholesale market platform for competitive retail markets– Timely price signals that reflect market fundamentals– Independent administration level playing field – Large regional scope a wide array of sellers and aligns planning
and operations with physics– Independent monitoring
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COMPETE Competitive Market Principles
• Electricity markets must have accurate and transparent price signals to guide investment and consumption decisions.
• Competitive markets must be open to all market participants without arbitrary restrictions on market participation.
• Market rules and practices must be non-discriminatory so that all resources participate on a level playing field.
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COMPETE Competitive Market Principles
• Non-bypassable charges that retail customers are forced to pay must not be used to recover the costs of generation and other supply services.
• Subsidized resources distort the market and harm customers, and should not be allowed to interfere in competitive markets.
• Competitive procurements must be open to all qualifying resources, and not restricted to specific technologies, locations or vintages.
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COMPETE Competitive Market Principles
• To ensure long-term resource adequacy, electricity markets must have clear and transparent standards that rely on market-based mechanisms, which can include a capacity construct where needed.
• Independently administered organized wholesale markets, such as those operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), are needed for competitive electricity markets.
• Competitive markets must have clear and transparent rules and effective independent oversight to ensure compliance with the rules and accountability to customers and regulators.
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“Restructured” Not “Deregulated” Markets
• Prices charged must be in accordance with regulatory policies that ensure against market power.
• Wholesale markets administered by ISOs and RTOs are overseen by independent market monitors and FERC’s enforcement office.
• Substantial penalties are assessed for violations.• Regulators ensure adequate resources are in place, regardless of
financial conditions.• Bulk power system is subject to comprehensive reliability
regulation.• Utilities may not merge or acquire or dispose of assets without
prior regulatory approval.• Financial transparency is required.
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Conclusions• COMPETE’s customer members’ experience: competitive retail
markets provide reliable, environmentally sound electricity at the lowest available cost.
• Being served by the PJM RTO, Ohio is well positioned to realize the full benefits of a retail electricity market.
• PUCO has taken bold steps toward a competitive retail market but some technical issues must be resolved.
• PUCO should continue its progress toward a well-structured retail electricity market to assure long-term value for its customers and a robust economy for Ohio.