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Competition, Confusion, and Chaos: The Metering Muddle

Fortnightly Magazine - November 1 1996

With no system in place to collect data, retail choice brought gridlock to England and Wales in 1994. California, you're next.Consider what happens when one moves from dealing with a few thousand sizable customers that are easily identifiable, to more than 20 million residential customers who suddenly acquire the "power to choose."Congressman Schaefer's bill promises that "by no later than December 15, 2000, all electric utility retail customers shall have the right to purchase retail electric energy services from any person offering to provide those services to such customers." Even more daunting, the California Public Utilities Commission has called for "direct access" open to all sizes of customer, beginning in 1998.

However, as we found out the hard way on the other side of the Atlantic, these promises are easier to make than to deliver. Competition in England and Wales has been introduced in two phases thus far (em 5,000 sites taking over one megawatt were given competitive choice in 1990, then 45,000 sites taking over 100 kilowatts in 1994. We are promised (em or perhaps more accurately, threatened (em with a free-for-all in 1998, which at the moment looks like chaos for many.

1990-94:

A Shambles

Opening the market in 1990 was not without its problems: shortages of meters and modems

connected into the central Pool settlement system, arguments about the price that the distribution companies charged for

metering and data collection and aggregation, disputes over who owned the data. But since there were relatively few sites, and they included the biggest hitters in the market, and many of the customers had energy engineers who were familiar with the electricity industry and metering and communications, the problems were sorted out fairly quickly. That said, it was only possible to implement competition for customers because there was an agreed-upon market structure. That structure provided three key advantages:

s A means of reflecting the time-varying value of electricity in a market-based manner

s An accounting and legal framework to ensure that parties consuming electricity paid for it and that those providing it get paid (the Pooling and Settlement Agreement)

s A mechanism in the Pool to settle discrepancies between power contracted and power consumed. (Such an arrangement avoids penalty payments that distort market behavior by either requiring power retailers to indulge in unnecessary feats of load control or handing an artificial advantage to parties providing a so-called balancing service.)

Simple as these instruments appear, they do not yet appear on the U.S. agenda. Yet, they lie buried like minefields waiting (with attorneys in attendance) for the facile.

Opening access in 1994 was quite another experience: a shambles. Part of the mess was the fault of distribution companies that had not organized themselves properly; part of the mess was due to the electricity regulator's enthusiasm for competition regardless of practicalities. He introduced competitive metering late in the process, without defining the responsibilities of the "meter operator" to ensure that meters were not only on site but connected to a modem that was, in turn, connected to the data aggregation system and the whole setup

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