Utility executives face volatile energy markets, skyrocketing fuel prices, and changing federal energy policies. How are utilities benefiting from the turnaround in energy trading?
Electric Restructuring: Before, During and After
all, I was a commissioner from 1983 to 1989. I was, at that time, involved with a lot of the debate with rate-basing and with a lot of the plants that are in place today. I do have, obviously, a regulatory background and I am an economist by training. Not that that's the answer to everybody's dreams, but it does help me.
Is customer switching the measure of success?
Not necessarily, because suppose the incumbent is already an extremely low-price incumbent. Why would you switch and perhaps even pay more to switch? It is entirely possible that no one switches because they are already the lowest price in town and, as a result, we are not going to expect any load shifting. Again, would I conclude that we have been a failure? I think that is absurd. I would conclude that we have had pretty good successes if our incumbents are beating the market.
Price will be the benchmark?
Price will drive the shopping, but if price is equal to or lower than the otherwise prevailing market price, how can you beat that? That is expected [with] Ohio Power and then I can also tell you that a couple of other companies are very low-cost. Northern Ohio is where it gets pricey. We would expect the most opportunities for competition to take place in Northern Ohio.
What is your definition of competition?
A certain level of load shifting. There is headroom, there is a margin and there is the ability for competitors to get in there.
How did you get all the parties to finally agree on competition?
I am not going to say that they did. They could not agree on a legislative solution because that went on for years, but they finally agreed on giving the critical stuff to the commission.
Do the natural gas incumbents offer the lowest prices?
That has happened here in Ohio. I live in Cincinnati and there is choice but the incumbent offers a pretty low price, so I don't switch and neither do most others. You have to realize a significant amount before a switch, at least a 10 percent reduction in your overall bill, I believe, before you switch. Those savings will not be realized in Cincinnati.
In Columbus, they have the most successful choice programs in the country. They have somewhere in the low 30 and high 40 percentile of people that have switched because the gas was fairly high in Ohio and could be marketed for less. [End of Schriber interview]
Pat Wood III, chairman of the Public Utility Commission of Texas. The state passed an electric restructuring law in June.
What have you learned from other states?
It is tough for a Texan to admit, but sometimes it is not necessarily good to be the first one. I think once we sucked up our pride, we thought if we are not going to be first, [then] we will be best.
Our legislature and the commission ¼ fortunately work pretty closely together. We went to California and we went to Pennsylvania.