The marriage between Exelon and PSEG would create the largest electric utility in the United States. The policy implications could loom even larger, however. Standing at risk is nothing less than...
- long enough in other states to learn from their experiences; and
- Residential consumers are not well suited to assess or manage the risks of a competitive retail market.
According to the PUC market report, seven electricity service suppliers are certified to provide competitive service in Oregon, but only three-IdaCorp Energy, Sempra Energy, and Strategic Energy-have an agreement with a utility to begin offering service. No provider is actually providing service to large business customers, the report said. In addition, the PUC has also registered several aggregators for electric service to nonresidential customers, but aggregation has not yet developed. The PUC said that aggregation is likely to be most successful where electric rates are highest, citing high costs for customer acquisition and administration. The commission also said some costs, such as advertising, would be higher per person in Oregon than in states that already allow residential customers to choose power suppliers, because the state's total population is smaller and less dense than in other regions.
The PUC acknowledged that residential electric rates have declined in states with competitive power markets, but said the phenomenon is due largely to mandated rate reductions or regulatory requirements that competing offers stay below benchmarks during the transition to competition. The PUC said that it could not determine what might happen when such regulations expire. It concluded, however, that typical monthly savings publicized in states promoting competition have been small-from 2 percent to 10 percent of the generation portion of an average customer's monthly bill. It also said that a recent analysis of competitive energy markets in five states found that residential consumers are likely to be worse off with any price plan that exposes them to short-term volatile rates in an immature market. The same study found that none of the states had sustained a robust market for energy services aimed at residential customers. Marketer offers and customer participation have declined steadily over time, the PUC said.
Ohio Electric Market Update
The Ohio Consumer Counsel (OCC), in its 2002 annual report on the state of electric competition, put a positive spin on the tentative response of providers and consumers to retail access seen in the state. At that time, it reported that electric choice was "off to a reasonably good start," and while competition was slow to develop, consumers were benefiting from rate reductions mandated under the Ohio electric restructuring law. But as Ohio begins its third year of retail electric competition, the OCC now sees continuing cause for concern about the health of the state's electric marketplace and the potential long-term risks for Ohio's residential electric consumers. [Tables shown on page 13 include switching statistics for 2001 and 2002.]
Confusion and inaction with regard to federal transmission market issues is a major barrier to possible improvement, says a state-funded residential consumer advocacy group. The report suggests that state policy-makers consider what would happen if there were few or no competing electric suppliers when the market development periods end, and what price protections consumers will have when the current rate freeze disappears.
According to the OCC update,