June 1 , 2002
Electric Restructuring: Before, During and After
I did not go but a group went to the U.K. to talk about retail issues. ¼ We also cross-pollinated with folks from Oklahoma, who had started on it a little bit. New England had moved pretty aggressively in this direction as well. ¼
The main thing was that we weren't in a desperate crisis that required an immediate dramatic solution. We wanted to take a pretty good thing and make it work better and do it right. ¼
Some legislators and we at the commission agree that it is real important to have a genuine, vigorously competitive retail market on the other end of this thing. If we were just going to stop at wholesale competition, we could have stopped at what we had and gone the way of NEPOOL or something like that. But you know, what our folks wanted over here was a broadly open retail market, too, so that we are not just talking about cheaper prices but better service. Those wrinkles came out of Pennsylvania and New England. ¼
What benchmark will you use in five years to judge your success?
Do I generally have the choice? Do I have more than just theoretical choice of providers? The "yellow pages test" is what we call it in telecom. Whether you exercise the choice or not is a function of how well your current provider keeps you happy.
What about affiliates?
The affiliate will be set up on day one. The utility will no longer do any retail business at all, which is a little bit different from other states. We are not keeping any of the billing with the incumbent utility. [It] will be a wires company only. ¼
I think everybody here recognizes we really need [in order to prevent affiliate abuse problems] to get the wires company out of retail operations and force it all to a retail entity. That particular entity will be price-fixed for a three-year period of time. The price will be a fixed percent discount off of today's rates but they cannot further discount that rate to attempt to win back the customer.
Will they lose brand equity when they are allowed back in?
They will have it but it may be known as just the traditional, pedestrian high-cost option. It is assuming that everyone is offering a lower-cost product. This is a price-to-beat concept.
On day one, [TXU] customers that have not opted for Enron, Reliant or PG&E or somebody else, will automatically go to [TXU] retail. That price will be fixed at the plain old, pedestrian 7.5 cents per kilowatt rate. Plain old bill, plain old everything for three years.
Now if all these other companies want to come in and offer a 7-cent rate or 6-cent rate with bundling with telephone or bundling with natural gas, they will be able to come do all that and innovate without the fear that the incumbent is going to come in and undermine their efforts right away. We are going to hold the incumbent back for a couple of years so