Transcript Document 7395034

National Perspectives on
Retail Energy Market
Development
Craig G. Goodman
President
National Energy Marketers Association
202-333-3288
[email protected]
www.energymarketers.com
State of Connecticut
Senate Energy & Technology
Committee
Informational Hearing
February 21, 2007
National Energy Marketers Association
Overview – Who Is NEM?
 Non-profit trade association representing wholesale and retail
marketers of natural gas, electricity, as well as energy and financial
related products, services, information and advanced technologies
throughout the United States, Canada and the European Union.
 Independent power producers, suppliers of distributed generation
ABCs-Aggregators, Energy brokers, Consultants--power traders,
electronic trading exchanges and price reporting services
 Advanced metering, demand side management and load management
firms Billing, back office, customer service and related information
technology providers
National Energy Marketers Association
Overview – Who Is NEM?
Energy consumers
Inventors, patent holders, systems integrators, and
developers of solar thin film building integrated
photovoltaic, fuel cells, and advanced BPL, PLC
technologies as well as Smart Electricity.TM
Committed to helping implement a consumer-focused,
value-driven transition to a reliable, price and technology
competitive market for energy and telecom related
products, services, information and technologies.
Potential Benefits of
Competition
 Energy choice programs provide consumers with a myriad of
benefits:
 Better price and service options
 Access to innovative new offerings of products, services, information and
technology
 Lower energy prices lower the cost of doing business permitting
companies to better compete
 Lower energy prices help states to attract new businesses, increase job
opportunities and increase state tax revenues
 Consumers do not bear the risk of generation investments as captive
utility customers
 Consumer Protection-The ability to do business when you want, with
whom you want, and then to buy what you want is one of the greatest
consumer protections that government can offer.
 Savings from competition in the marketplace are cumulative like compound
interest (even if prices are otherwise rising)
Documented Benefits of
Competition
Texas ----“the competitive market has provided
customers with prices that were significantly below the
estimated rates that would have been in effect in a
regulated environment. Even customers who did not
switch to a competitive rate have benefited from the
introduction of retail competition. During each of the
years 2002 through 2005, the PTB [Price to Beat] was
lower than the estimated regulated rates in both service
areas.”*
New York---“The total real (i.e., inflation-adjusted)
electric price for a typical residential retail customer in
New York, including supply and delivery charges, has
dropped by an average of approximately 16% between
1996 and 2004.”**
*Commission’s Legislative Report on Electricity Pricing in Competitive Retail Markets in Texas, Project 32198
**Staff Report on the State of Competitive Energy Markets: Progress To Date and Future Opportunities, March 2, 2006.
Documented Benefits of
Competition
 CERA Study---“[t]he majority of U.S. consumers have
paid less for electricity since the onset of power system
deregulation in 1997, achieving total savings of about $34
billion compared with the costs if traditional regulation
had continued.”*
 Joskow Study------for the period of 1996 to 2004, "real
residential prices fell more in states that implemented
retail competition programs than in those that did not.“**
*CERA, Press Release, “Power Deregulation Saved $34 Billion, Benefited Majority U.S. Consumers
Over Past 7 Years: CERA Study,” October 19, 2005
**Markets for Power in the United States: An Interim Assessment, The Energy Journal, 2006.
Problems to Solve
Depression Era Utility Regulations- the current utility
regulatory model was designed during the great depression. Is One Choice all
We Need? (Are two choices bad and ten choices terrible?)
The Utility’s Obligation to Serve the Public
Interest changed between early 20th century and
early 21st century- (new competitive services, information and
technology markets, global competition for jobs and economic growth and better
standards of living)
How can we best serve the Public Interest in a
Digital Global Economy
Energy and Technology
Competition
 Since the end of the Cold War, countries around the globe
have increasingly followed the lead of the United States in
adopting market-based solutions to laws, regulations and
public policies.
 Western-style economies in the EU, Scandinavia, and
Australia, have restructured their energy sectors to better
allocate resources and encourage economic growth.
 Even historical command and control economies of the
former Soviet Union and the Asia Pacific are also relying
more heavily on market-based solutions.
Energy and Technology
Competition
Historically, the United States has relied on its abundant
resource base, technology leadership and market-based
policies to drive economic growth.
However, global competitors are upgrading energy and
telecom infrastructures to better compete in the digital
economy of the 21st Century.
Deregulation of the U.S. telecom and airline industries
have yielded significant price and technology dividends to the
consumer and the economy.
Long distance telephone rates were $4.50/minute at the
dawn of telecom deregulation. Discount airlines such as
Southwest and Jet blue had not yet evolved
Technology is the Enabler
Increased Supplies & Cleaner Fuels(clean coal, smaller safer nuclear, landfill methane, bio-fuels,
solar, fuel cells, ocean thermal, DG, efficiency technologies)
Reduced Demand (time of day rates, smart
meters, net metering, DG units reduce utility demand)
Greater Reliability (digital power quality) &
Homeland Security (critical infrastructure
protection)
Economic Growth & Job Creation
Technology is the Enabler
Enhanced & Advanced Metering –
consumer monitoring and control of energy
usage-remotely aggregated and dispatchable
Solar Energy - innovative power generation
technology, enables the external surfaces of a
building, such as windows and other building
materials, to function as solar energy systems.
Hydrogen Fuel Cells – clean, no emissions
power
Technology is Converging
Broadband over Power Lines (BPL)- generation and
transmission of electricity commingled with
information/content (inductively coupled) over
electrical power South Africa: Portugal Australia,
Tasmania Canada, Quebec Asia Pacific and Oceania
regions with many successful trials in Australia, China,
Indonesia, Hong Kong, Malaysia, Philippines and Taiwan.
.Middle East and Africa. a long term trial running in
Russia. Sources indicate 300,000 Chinese have access
BPL at speeds of 200 megabytes/second
Technology is Converging
Broadband over Power Lines (BPL) – One kilowatt
can transmit the entire film library of Hollywood
California around the U.S., 60 times every second
without any reduction in reliability
United States: Virginia: In October 2005 the city of
Manassas began the first wide-scale deployment of BPL
service in the nation, offering 10 Megabits service for
under $30 USD per month to its 35,000 city residents,
using MainNet BPL technology. California approved a
plan on April 27, 2006 allowing high-speed internet
providers to begin testing delivery of online access using
power lines.
NYPSC
Statement of Policy on BPL principles:
 The deployment of economically viable BPL technology by electric companies
 The deployment of BPL technology to provide communication services to the
public.
 The deployment of BPL technology to provide communications services to the
public may not be implemented by regulated electric utilities.
 Circumstances may arise when work related to the BPL system must be performed
by utility employees or utility approved contractors.
 Utilities remain responsible for ensuring safe and adequate electric service.
 The BPL provider and the utility should develop procedures for sharing and
protecting customer and system information.
 Pole attachment tariffs will continue to apply to attachments to utility poles by BPL
providers.
 BPL providers should pay a fee for the ability to access the electric utility system.
Low Cost/High Yield
Options
Avoid Duplication of Utility Charges:
 Transparent Utility Bills (unbundled rates allows competition)
 Full and Fair Disclosure of Costs and Risks
 Proper Consumer Shopping Credits (full costs not marginal
costs)
 Purchase of receivables, esp. in conjunction with
Marketer Referral Programs (NY – all except
Keyspan; NJ – PSEG, South Jersey Gas, New Jersey
Natural Gas; Ohio – DEO, Columbia; PA – PECO,
Columbia; MI – MichCon and Consumers; IN –
NIPSCO)
 Customer lists and usage data
Low Cost/High Yield
Options
Subsidies should not distort commodity
prices-- Compare FirstEnergy (OH) (25 year deferral) with BGE
(MD) competitively neutral non-bypassable charge
Migration Incentives –Higher returns tied to migration–
NY-ConEd, O&R, Central Hudson
Public Education- Compare Delaware to
Maryland to New York (optional repayment with interestConsumers are smart enough to shop– New York—1.3 million have
shopped)
Low Cost/High Yield
Options
Data exchange standardization
Fair allocation of utility resources–
(Assets follow the customer)
Customer choice of bill provider
Restructuring Dividends
Restructuring Dividend Reinvestment
Incentives- (Resources reallocated from
competitive markets to reliability
investments rewarded with higher rates of
return )
Reliability is increased- utility retains core
competency (more reliable delivery) –More
Reliable Supplies market supplies competitive
services (Contracts stronger than Compacts
Legal and regulatory risks reduced)
Market-Based Pricing
Electric
Residential and small commercial –
monthly-adjusted, market-based
pricing
Large commercial and industrial –
hourly pricing
Gas – monthly adjusted, market-based
pricing
Market-Based Pricing
NJBPU – expanded class of customers on hourly PJM
real time pricing to all customers above 1,000 kw effective
June 1, 2007*
NYPSC – required utilities to implement hourly, realtime pricing for their large customers**
ConEd/O&R (5/1/06) mandatory time of use customers w/peak
demands greater than 1.5 and 1 MW, respectively
National Grid (9/1/06) SC3 customers at 500kw and above
NYSEG/RG&E (1/1/07) time of use customers at 1000 kw or above,
later filing to convert remainder of mandatory time of use customers
Central Hudson (2005) customers w/peak demands greater than 1 MW
*NJBPU Docket EO05040317, Order, December 8, 2005, pages 15-16.
**NYPSC Case 03-E-0641, Order, April 24, 2006.
Market-Based Pricing
U.S. DOE recommended that state Commissions
consider adopting real time pricing as the default
service for large customers
“Default service RTP tariffs that index hourly
prices to day-ahead markets support demand
response and retail market development by giving
customers more notice and certainty of the
financial consequences of their response.”*
*U.S. Department of Energy, Benefits of Demand Response and
Recommendations, February 2006, at 52.
Market-Based Pricing
NYPSC reasoned,
“As price signals for highest peak hours are transmitted to customers,
those large customers can be expected to respond . . . . Since large
customers use amounts of electricity disproportionate to their number,
that response could have a significant impact on peak period prices.
More accurate price signals are also known to promote economic
efficiency in general. Moreover, as demand-side load reduction and load
control measures are implemented in response to these price signals, the
potential for the exercise of wholesale market power is mitigated.
Gaining and taking advantage of market power is more difficult,
particularly during peak periods, when efforts to increase the price of
supply meet resistance in the form of reductions to demand.”*
*NYPSC Case 03-E-0641, Order, April 24, 2006, pages 14-15.