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Retail Aggregation: A Guaranteed Right for Small Customers?

Fortnightly Magazine - April 15 1996

Although savings appear small because of maturing competition in the gas market, Spangler says the complicated process was a stepping stone to electric restructuring. The Bay Area utility, Pacific Gas & Electric Co. (PG&E), clearly opposes the idea of municipalities pooling needs for gas and power, notes Spangler: "I think their number one fear is loss of business. They initially asked the local governments to defer any decision on electricity. I think that's still their position, even though we have preliminary rulings saying this is the way the market is going."

Because utilities will be paid a competitive transition charge (CTC) to cover the debt on investments like nuclear power plants, ABAG's job will be to find electricity cheap enough to cover distribution and CTC costs, but still provide savings.

Tony Ledwell, PG&E spokesman, says there's too much up in the air on aggregation for cities to consider it: "We think it's a real possibility in some areas, but we think there are many unanswered questions or issues to be resolved."

Those questions include: What happens if the energy supplier a community buys from suddenly can't serve the community, or has service interruptions, or goes bankrupt? "PG&E still has the responsibility of providing the power to the community . . . so it might as well be our customer," Ledwell argues.

PG&E doesn't think a substantial number of users will flee the system. Surveys show that the company can retain customers, and it constantly examines how to provide cheaper power. "There's concern," Ledwell says of aggregation, "but it's not a significant concern at this time. We just don't think it's going to happen anytime soon."

Across the country, in Long Island, NY, Al Benincasa, vice president of Wheeled Electric Power Co., says the biggest obstacle to advancing aggregation comes from rhetoric on reliability: "That's the ultimate scare tactic. You don't know who you're buying from."

But unlike their peers elsewhere, utilities in the Northeast haven't built good relationships with their customers, Benincasa points out. He also claims his company's proprietary surveys prove that electricity supplied by power marketers is more reliable.

Wheeled Electric Power is active in New York, Massachusetts, and New Hampshire. Its most ambitious aggregation project targets Long Island, NY, where it hopes to pool 127 school districts. A petition has been pending with the New York Public Service Commission (PSC) since 1993.

Benincasa says his company has made progress convincing the PSC to pilot retail-level programs before opening up the market. The market, he says, will dictate the price of power: "We don't believe that prices ever, really, on the wholesale basis, get above 4 cents [per kilowatt-hour]. Then look at the line charges, which range from 3 to 4 cents, then what programs the PSC decides to continue with. ... We still feel you're looking at a dime or less." Long Island Lighting Co. (LILCO), meanwhile, charges 13 to 15 cents per kilowatt-hour (¢/Kwh).

And Hand-to-Hand Combat?

And the lost utility business?

"Yeah, so what," Benincasa says. "That's what competition is all about. ... That's what business is