Internet procurement may be used in other states.
Since 2002, the annual energy auctions created and administered by the New Jersey Board of Public Utilities (BPU) have proven to be an innovative and successful way to meet our state's growing demand for electricity. We were the first state in the nation to procure most of its electric needs through an Internet-based auction. Our successful auction now serves as a template for other states, and is being considered for use by our neighbors in Pennsylvania, Delaware, and Illinois. Moreover, our auction is being lauded by economists and other industry professionals for its efficient allocation and explicit pricing of risk to market actors who wish to provide utility service.
The development of the New Jersey auction arose from our early experience with deregulation. In 1999, our state legislature passed the Electric Discount and Energy Competition Act, which assumed that residential and small-business consumers would jump at the opportunity to choose their electricity supplier. Many of these customers, however, found little incentive to incur the cost of becoming an educated energy consumer. Thus, most remained "rationally ignorant," preferring instead to have someone else choose their energy supplier for them. Even those few who were interested in shopping around found little or no savings due to retail price caps that did not expire until the summer of 2003.