Small Customers at the End of Standard Offer

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Small Customers at the End of Standard Offer

• Frank Gorke
• Energy Advocate
• Massachusetts Public Interest Research Group

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To summarize it all in one sentence I am
confident that the smaller customers will
ultimately begin to reap the benefits of
competitive wholesale and retail markets long
before the Red Sox ever win another World Series.

• William Flynn, Chair, NYPSC, 10/7/04

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Why do we care?

• Wallet, pocketbook
• Air and water
• Economic development
• Global warming

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Toward a Consumer-Oriented Electricity System

• National Association of State PIRGs
• July 2004

http//www.newenergyfuture.com/newenergy.asp?id21
3959
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Findings 10 yrs of restructuring

• Few benefits for majority of consumers
• 1993-2002 residential rates declined consistent
  w/ trends
• Factors other than choice
• Lower energy prices and mandatory rate
  reductions/deferrals
• 2001 and 2003 first year-to-year increases in
  nearly two decades

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Findings 10 years of restructuring

• Use up, efficiency down
• Rates down 18, bills only down 10
• 1993-2000 efficiency spending down 38

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Findings 10 years of restructuring

• Degraded reliability, increased volatility
• Double the disturbances
• Natural gas expansion

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Findings 10 years of restructuring

• Costs on the way
• Deferred rates
• Massive transmission system expansions
• Natural gas dependency
• Financial instability, greater risk ? higher costs

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Findings 10 years of restructuring

• Among states that have deregulated retail sales
  there currently is only minimal active
  competition for the business of residential
  customers.

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There is little reason to think that the
restructuring experiment will produce improved
results in the future. The problems with the
current regime are systematic. we recommend
total abandonment of restructuring and a more
thoroughgoing embrace of markets than
contemplated in current restructuring
initiatives. But we recognize that such reforms
are politically difficult to achieve. A
second-best alternative would be for those states
that have already embraced restructuring to
return to an updated version of the old,
vertically integrated, regulated status quo.

• Rethinking Electricity Restructuring Van Doren
  and Taylor, Cato Institute 11/30/2004 (emphasis
  added)

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Small customers sometimes have benefited from
rate guarantees in restructuring legislation, but
they have received little direct benefit from
retail competition itself. Retail distribution
should remain a responsibility of utilities under
state and local regulation, along with electric
energy resource portfolio management for
residential and small business customers. By
electric resource portfolio management the
commission means assembling a diversified mix of
short- and long-term resource commitments and
other risk management tools, in order to sustain
the economical and reliable electricity services
that a healthy economy requires.

• Reviving the Electricity Sector
• National Commission on Energy Policy, August 2003
• Co-chaired by John Rowe, CEO of Exelon and former
  CEO, NEES

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Where do we go from here?

• Toward a Consumer-Oriented Electricity System
• National Association of State PIRGs
• July 2004

http//www.newenergyfuture.com/newenergy.asp?id21
3959
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Small consumers deserve

• A reasonably and stably priced, regulated
  electricity product, and
• The ability to aggregate and negotiate for
  electric service

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Massachusetts context

• DTE Proceeding, DS principles
• Legislatures Renewable Energy Standard
• Governors Climate Protection Plan
• Regional power sector carbon caps

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Where do we go from here?

• Protect consumers basic rights
• Portfolio management
• Aggressive energy efficiency policies
• Long term contracts for renewable power

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Protect consumers rights

• Access to electricity at equitable, just,
  reasonable rates
• Low-income assistance
• No slamming
• No above-market rates for sake of market
• Aggregation

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Portfolio Management

• Market doesnt just mean short-term
• Irresponsible not to use available tools to get
  best result
• Contract term diversity
• Biewald et al, Portfolio Management, 2003
• Manage for customer migration and market
  volatility

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Aggressive Energy Efficiency PoliciesNEEP 11/2004
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Renewables and Efficiency Lower Gas Prices

• 2005 Lawrence Berkeley Lab study (Wiser,
  Bolinger, St. Clair)
• 1 demand reduction ? .8-2 wellhead price
  reduction
• NE RES ? 34 85 million NPV regionally
• NE RES ? 625 million 1.6 billion national
  consumer benefits

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Sweet spots

• No downside to efficiency major downsides to
  waste
• Long term contracts for renewables make much more
  sense than current practice
• High capital, low operating
• 50? Or 30?