Most Americans view the last five years as a time of economic stagnation, but for those providing electric choice, a new study from COMPETE analyzes the strong performance of retail choice during the recession and predicts growth trends will continue for the foreseeable future.
From 2008 through 2011 electricity use in the country declined slightly by one percent but growth in the retail competitive load increased 40 percent. Since 2008, the number of residential accounts served by competitive suppliers has increased by more than 54 percent to nearly 11 million accounts. Non-residential accounts, which would include commercial and industrial consumers, have increased by more than 800,000 or 50 percent.
Why the surge in competitive electricity? The COMPETE study argues choice is spreading because it is providing sustainable value.
A combination of slow economic growth, more efficient electricity use and the dramatic fall of natural gas prices due to new domestic supplies have led to significantly lower wholesale prices. These lower rates open the door for competition with traditional utilities. Lower rates also encourage customer interest as they can benefit quickly from lower prices in a market where pricing signals are unhampered by a host of regulations. In fact, when supply exceeds demand under traditional utility regulations the prices often increase to cover fixed costs.
Of course, it’s easy to see significant growth rates when states have recently deregulated their markets. But experts expect adoption of electric choice to continue nationwide at a steady rate for several years and plateau in about five years, when roughly 70 percent of all kilowatt hours will be purchased in a choice marketplace.
As commercial and industrial customers continue to work for unobstructed access to lower wholesale prices, more residential consumers will come on board, especially since states with default utility-based services and competitive supply are considering phasing out default suppliers. Finally, strong empirical evidence from states that have successfully transitioned provides a road map for replication in other states.
Who will deregulate first? The COMPETE study argues California, Michigan, Montana, and Oregon are poised for a restoration of full electric choice. Internationally, Japan is expected to introduce a more deregulated generation market to rebuild the energy infrastructure after Fukushima?s nuclear power plant meltdown.
To ensure electric choice continues to expand, states must continue to remove common barriers to electric choice, including rate caps, poorly designed delivery rates and little access to utility billing services for small customers.
Electric choice is no longer a theory, but a robust reality that is improving the quality of electricity services and, in many cases, lowering costs.
