Electricity rates may be heading skyward sooner than we think.
Are state regulators in danger of bringing about the thing they most fear-...
- Lackluster growth in retail competition.
- Gen still highly concentrated.
- Relief perhaps by 2007, when rate freeze ends.
In a recent report to its state legislature on the progress of electric market restructuring, the Illinois Commerce Commission warned that competition has yet to develop either at the wholesale or the retail level.
The commission saw "lackluster growth" in retail competition in most areas of the state. As of Sept. 30, 2002, about 25,000 customers, or only about 6.5 percent of all non-residential customers, had switched to delivery services.
Regulators also found it "uncertain that the wholesale market will produce competitive prices in the foreseeable future or even by January 2007, when the existing freeze on bundled retail rates terminates" under Illinois law. At that time, conceivably, bundled rates could rise from current levels, leaving the currently outmatched alternate suppliers with a chance at gaining market share.
Generator ownership remains highly concentrated in most service areas. Thus, electric utilities were seen having little incentive to encourage diversity by facilitating entry of independent generators or by increasing transmission import capacity.
- A doubling of customers opting for choice.
- But number (5,700) and load share (7%) still negligible.
- Growth seen in gen and grid capacity.
- And all utilities join RTOs.
According to its most recent annual report, the Michigan PSC says that competition in the state's commercial and industrial electric markets continued to expand during 2002. (Full open access for all electric customers in Michigan took effect on Jan. 1, 2002.)
The PSC notes that the number of customers now participating in the PSC-guided Retail Open Access Program has doubled over the last year to approximately 5,700 participants, with 7 percent of the statewide peak load now served by alternate suppliers.
Other highlights: (1) the licensing of 12 new alternate electric suppliers in 2002, bringing the total to 25; (2) the start-up of 2,286 MW of new in-state generation capacity; (3) participation of all of the state's investor-owned utilities in regional transmission organizations; and (4) a transmission capacity increase of 2,000 MW.
Yet the PSC warned that competition remained under the influence of national events. It cited the recent economic downturn as well as documented accounting and energy trading scandals, including one involving CMS Energy, corporate parent of Consumers Energy, as contributing to an overall "slowdown in further transition to competitive energy markets."
- Poor participation in PECO area.
- Only 7-8% of commercial accounts choose choice.
- Situation forces random assignment of suppliers.
Approximately one-half of PECO Energy's commercial customers may be randomly assigned to alternative electricity suppliers under a plan approved by the state PUC to encourage electric competition in the Philadelphia area. A similar plan will be required for residential customers and is being developed before an administrative law judge. See,
According to the PUC, the "market share threshold" plan is a requirement of PECO's 1998 restructuring settlement. Under that agreement, the company must randomly assign half of its customers to alternative electricity suppliers if less than 50 percent of its customers had selected another supplier as of Jan. 1.
As of the first of