New regulations from FERC to prevent energy industry market manipulation take deep root in securities industry law. Modeled in part on the Securities Exchange Act of 1934 (Exchange Act), the...
the same arguments that are always raised by the incumbent. “Not now, not at this time. You’re going to see reliability problems. You’re going to see stranded-cost problems. We’re not going to have stability.” All of that. What’s happening in Michigan is that customers are saying “Look, just give us the choice.”
Fortnightly: The other issue the IOUs raise is that the alternative energy suppliers will come in and cherry-pick the safest, biggest customers, leaving them with the smaller and more risky customers to service, plus the responsibility of being a provider of last resort.
Massey: Again, anytime there’s a movement toward competitive markets, those arguments are raised. That is standard fare. If you talk to the Australians, if you talk to Great Britain, you talk to any system that has moved to a market-based approach, the same arguments are raised. The philosophical underpinning of competition—and the great American tradition—is just let the market decide. If the incumbents offer the best products and services, customers will choose them. There’s risk for alternative suppliers as well. They’ve got to go out and find capacity and energy and line it up and take the risk that they’ll sell it. They could have a stranded cost as well.
The real issue is who will bear that risk. Do you want the consumers to always bear the risk? Or do you believe that the risk ought to be more fairly borne by the shareholders of the investor? Let the investors take a look at the environment, take a look at the market structure, make a decision about whether to take the risk to innovate or to build and move forward. If they succeed, that’s terrific. If they don’t succeed, then their own shareholders bear that risk, not the consumers.
Fortnightly: Just how much competition would the COMPETE Coalition like to see in Michigan? Is it just a matter of raising the cap? Fully deregulating the market?
Massey: Well, we try to be realists. I mean, we would love to see the cap raised. What’s the right level? I don’t know. We would love to see a robust, vibrant marketplace for electricity in Michigan. What level of competition is required for that? Arguably, the answer is full competition. But we would be pleased to see this cap raised legislatively, and we think there’s a good deal of momentum growing for that outcome.
Fortnightly: Is there any risk in destabilization in the price of electricity if you get too much competition too quickly?
Massey: I’m not worried about too much competition too quickly. We know quite well that electricity markets have to be thoughtfully structured. There’s a lot of experience with that now. If Michigan wants to move in that direction, they can take a look at Pennsylvania, for example. Illinois is a success story, particularly with respect to commercial customers. They can look around and see what other states have done to successfully provide the platform for a well-structured market. A lot of experience has been gained over the past 15 years, admittedly through