In an age of costly electricity and cheap efficiency, smart utilities will sell less electricity and more efficiency.
Efficiency gains, if not properly managed, can quietly take away most of the present market for electricity. But they also offer alert utilities an unprecedented opportunity to control risk, improve cash flow, secure market share, save operating costs, and become once more a declining-cost industry.
2 percent of California's gross state product. Competitively priced electricity is vital to California's $800-billion-a-year economy, one would think.
Vikram S. Budhraja
Vice President of Planning and Technology
Southern California Edison Co.
The transition to a competitive generation marketplace is underway. Customers want choices, flexibility, and competitive prices. Producers want open nondiscriminatory access to markets. Regulators want a smooth transition to the new system based on competitive efficiency, not cost-avoidance or cost-shifting among customer groups. And policymakers want a system that protects consumers without sacrificing environmental and energy policy objectives.
The debate over the merits of pool-based markets as opposed to reliance on bilateral transactions and the invisible hand of competition began without much care taken to define the details of the bilateral alternative. On closer examination, however, we find the two approaches have much in common, being more like different pews than different churches. A further debate that emphasizes only the few differences would not inform so much as distract from solving the common problems.
Retail wheeling has been repeatedly condemned by opponents who claim that it would cause rate discrimination between customer classes. They allege that it would unfairly reduce rates for large customers, while raising them for small ones. But discriminatory rate structures already result from the selective discounts that utilities grant their large customers.
We begin the new year with a recap of the major rulings issued last year by state public utility commissions (PUCs).
Electricity took center stage as state commissioners began in earnest to examine rising competition in the power generation market. The seemingly endless number of privately sponsored seminars, conferences, and reports on the issue might suggest that regulators are following rather than leading on policy.
In a final decision issued December 6, Commissioner Kris Sanda of the Minnesota Department of Public Service (DPS) found that Northern States Power Co. (NSP) threatened the St. Paul Neighborhood Energy Consortium (Docket No. G,E002/CC-94-426). The consortium claimed NSP said it would withhold a contract to perform home energy audits if its Conservation Improvement Program (CIP) did not support dry-cask nuclear waste storage at NSP's Prairie Island nuclear plant.
While acknowledging the threat, Sanda found no evidence that the newly implemented bid process was tainted.
Competition in electricity is part of a general trend toward deregulation (em from airlines to stock markets (em that characterized economic evolution in much of the western world during the 1980s. The move to liberalize electricity in some countries has been spurred on by the disenchantment of politicians and large customers with the traditional monopolistic arrangements. Monopoly not only prevented customer choice, but was increasingly seen as inefficient and paternalistic.
The Oregon Court of Appeals has upheld rules implemented by state regulators requiring local exchange telephone carriers (LECs) to offer physical collocation to enhanced service providers. The court emphasized that the complaint brought by GTE Northwest Inc, an LEC, was limited to a "facial challenge" of the open network architecture (ONA) rules under state public utility law.
Commercial and industrial customers of Consumers Power Co. paid almost $500 million above their actual cost of service to subsidize residential customers over the past five years, claims John W. Clark, Consumers Power senior vice president. "The current subsidy of residential electric rates by Michigan industry is shortsighted and costs Michigan jobs," he told a business roundtable in Detroit.