Study Finds High Percentage of Consumers Participating in Competitive Electric Markets, as Texas Remains the Leader
July 29, 2015
by Margarita Fournier; Copyright 2015 by Competitive Assets, LLC. All rights reserved
On 7/28/15, the Distributed Energy Financial Group (DEFG) released its Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS), which looks at consumer participation in competitive electric markets. The study found that more than 40% of residential consumers and 80% of large business consumers are able to shop for electric service. It also determined that Texas – with almost six million residential customers – remains the leader with the highest ABACCUS scores. “A variety of electric service choices is available to residential consumers in North America,” said Nat Treadway, DEFG managing partner and lead author of the report. “A key feature of choice relates to electric price risk. Most consumers lock in a price that is not subject to market volatility or changes in regulatory decisions. Others prefer bargain shopping, and they willingly and frequently switch providers. In Texas, the best deals for residential consumers reveal commodity prices far below the regulated rates of 15 or even 20 years ago. Commercial and industrial consumers are also satisfied. More than eight-out-of-ten units sold to the largest business consumers in a dozen U.S. states rely on direct retail access between consumer and supplier,” he said. The PUCT Chairman Donna Nelson commented that “[a]fter 15 years it is now crystal clear that Texans can save money under retail electric competition [and] when customers take time to shop for the best value, they can find a rate that is actually lower than the regulated rates they were paying when they had no choice.” The ABACCUS applies an analytical tool to measure progress in implementing retail electricity choice and its methodology sets forth 49 metrics considered important to the success of retail electricity markets. The Executive Summary lists the following observations for 2015:
– 17.1 million households in North America have shopped for electricity savings (down by 130K from 2013) out of a total of 39.2 million eligible residential accounts (44%)
– Commercial and industrial customers are very active and participate at extremely high levels in the states and provinces that allow direct access between retail energy providers (REPs) and consumers – Consumers shop for reduced monthly bills and valued features of service; consumer demand drives markets to reduce costs, increase the variety of offerings, and provide service innovations – Households now choose from an ever-increasing diversity of offerings with regard to price risk, time-of-use, technology offering, bill pay options; this diversity is an indication of robust competition – Retail electric markets are not fully deregulated: regulators oversee transmission and distribution service and key aspects of customer service and protection – Many recent modest regulatory reforms have encouraged the entry of new suppliers; the pathways to consumer choice and market opportunities are getting clearer in several jurisdictions – The phase-out of regulated default service remains the single most important change necessary to increase choice for the typical residential consumer and to increase competition among providers – Texas remains the leader with the highest ABACCUS scores – Nine U.S. states and one Canadian province each have more than 400,000 households participating in competitive retail electricity markets – In Alberta, Connecticut, Delaware, District of Columbia, Maine, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Texas, the direct market participation of individuals has been the key factor; in Illinois, Massachusetts, and Ohio, municipal aggregation has been important – ABACCUS scores have been relatively stable in recent years, reflecting policy stability – Retail competition is highly successful in the industrialized portions of North America, where 13 jurisdictions have very high levels of switching and workable competition – Retail providers bundle the commodity with valued services and customized solutions; these help consumers manage the risks and volatility of extreme commodity prices – Retail providers quickly respond to market conditions and adjust commodity price offerings, thus creating efficient interactions between supply and demand that do not occur in an administrative or regulated setting.
The summary also makes recommendations, including that (a) regulatory changes are needed regarding default service, municipal aggregation, distributed energy resources, and consumer access to advanced technologies; (b) describing the electric industry in pure commodity terms may be detrimental to reform; and (c) the most important consumer choices relate to price stability and risk, time-of-use, payment options, and distributed power and storage options. The release of the study was accompanied by a media call, during which several regulators highlighted their states’ advances in providing competitive electric service to their consumers.
Back to Texas Electric News Clips