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Retail electricity market could be improved, industry rep says [Central Penn Business Journal (PA)](Central Penn Business Journal (PA) Via Acquire Media NewsEdge) STATE Richard Hudson Jr. thinks Pennsylvania's rollout of a deregulated retail electricity market was a great success, yet further improvements might be warranted. Hudson is first vice president and Pennsylvania chairman of the Retail Energy Supply Association, a national trade group based in Harrisburg. The state's competitive electricity market got under way in earnest Dec. 31, 2009, when rate caps on PPL Corp. expired. Other utilities followed a year later. The state passed a milestone in late March when its 1 millionth electricity customer switched to a competitive supplier, Hudson said. Competitive suppliers offer electricity at prices 10 to 20 percent below those of regulatory utilities, he said. Yet despite that clear price signal, more than half of all households still buy their electricity from the latter. Regulators have taken note, and they are wondering if the state's retail electricity market could be improved, perhaps by ending the utilities' status as default suppliers. Last month, the state Public Utility Commission launched a review of the market that will consider that option, among others, PUC spokeswoman Denise Mc- Cracken said. "Th e investigation ... should result in recommendations for legislative changes, as well as changes the commission can initiate on its own, to improve competition," McCracken said. Th e supply association endorses the review and looks forward to participating, Hudson said. Th e Business Journal recently spoke with Hudson about the association's vision for Pennsylvania's electricity suppliers and consumers. Q: What's going on in Pennsylvania's competitive electricity markets? A: Th e competitive market opened in the beginning of 2010 for the PPL area, and 2011 for PECO and the rest of the state. Residential customers have about 28, 30 diff erent suppliers to choose from. Nonresidential customers have even more options available. Are things going as you expected them to? I think the initial transition has gone quite well. Customers are responding quickly, thanks in large part to education eff orts that the Pubic Utility Commission has initiated, like the Pa. Power Switch website. But I think there's still work to be done. We're about a year and three or four months into the switch in the PPL area, and still about 60 percent of residential customers are still with the utility, even though they can save signifi cant money by switching. Were you expecting more residential conversions by now? Compared to what's happened in other states, the residential response, particularly in the PPL area, has exceeded expectations; but it still is perplexing, now that we're a year and a half into it, why we still have so many customers, 60 percent, still with the utility when there's so many other choices. What do you expect in terms of additional companies entering or leaving the retail energy market? Has that leveled off ? I think it will be a continuing, evolving process. In a state like Texas, which has been at this much longer than Pennsylvania, you see an ebb and fl ow; but the long-term trajectory has been more choices. How are business customers doing? Business customers are doing quite well. Th e percent of load for some of the larger industrial markets is upwards of 80 to 90 percent in most areas. Th ose customers have a wider range of options available to them - customized energy purchasing strategies, options where they can integrate energy effi ciency programs and demand response programs with their electricity supply (contract). Is the renewable component becoming a bigger player? It is. A lot of companies are focused on sustainability initiatives. Our members off er, both on the residential side and on the commercial and industrial side, options for customers to go up to 100 percent green with the purchase of renewable energy. What, in your view, needs to be done going forward? Th e continuing focus on education is key, particularly for the residential market. I also believe it's appropriate to step back and take a look at some of the other retail market design issues. In Pennsylvania, the utility is the default service provider - if customers do nothing, they remain with the utility. I think there are some structural market issues that result from that policy decision. So that's something we would like to take a look at. Could you go into a little more detail as to how that could be changed? I think there are a variety of options. One approach is the Texas market's: Th e regulated utility is no longer the default service supplier. Th e default service has essentially been transitioned to the competitive market. Th ere are other approaches as well. When the telecom industry was restructured, splitting local and long distance apart, customers were required to choose their long-distance provider. I think that's an approach that could be looked at for the energy industry as well. Pennsylvania is pretty much the center of the Marcellus Shale natural gas drilling industry. Do you see natural gas-fi red power plants as possibly playing a role in the competitive (electricity) market? I think that is an important link, the link between energy prices and the Marcellus Shale industry. Obviously, greater production of domestic energy supplies means lower energy prices on a variety of fronts. And I think that's a good thing for customers. Obviously there are environmental issues that need to be thought through, that I think our elected leaders are defi nitely focused on and tackling. Any fi nal thoughts? I think the main message is, the transition to competition has been a success. Customers are getting a lot of innovative energy options and are now in the driver's seat. Th at's what was anticipated in 1996 when we fi rst embarked on this policy. "I think that is an important link, the link between energy prices and the Marcellus Shale industry. Obviously, greater production of domestic energy supplies means lower energy prices on a variety of fronts. And I think that's a good thing for customers." Richard Hudson Jr., retail Energy Supply Association YOUR TAKE Have an opinion about this issue? Email us at [email protected]. By Tim Stuhldreher [email protected] (c) 2011 Journal Publications Inc. |