DEFG: Latest retail market states report released
© 2015 Modern Markets Intelligence, Inc. IMPORTANT: This article was reproduced from the July 29, 2015, issue of Utility Markets Today with the limited permission of the owner. To view the full story on Utility Markets Today’s website, please visit http://www.utilitymarketstoday.com/members/DEFG-Latest-retail-marketstates-report-released.cfm.
Powelson, McCabe, Treadway shed new light on issues
DEFG released its Annual Baseline Assessment of Choice in Canada & the US (ABACCUS) report yesterday, showing the same states dominated the retail market rankings as in previous studies. Texas took the top spot for both residential and C&I markets, maintaining its score of 90 points.
For residential markets, Texas was followed by Alberta, Pennsylvania, New York and Connecticut. On the C&I side, it was followed by Illinois, Pennsylvania, Alberta and New York, the report said.
QUOTABLE: ABACCUS starts with the premise that you can’t measure electricity markets by considering just one factor like cents/KWH. The robust ABACCUS methodology addresses 49 details including the role of the utility, the design of default service, access to advance infrastructure, the number of retailers in each market, the variety of choices, customer access to information and so forth. – DEFG Managing Partner and the report’s author Nat Treadway to reporters.
The main reason that Texas comes out on top every year in the ABACCUS is that it is the only jurisdiction that took the electric utility out of the default service role. Georgia did the same for natural gas, though ABACCUS does not rank retail gas markets.
The Pennsylvania PUC looked at whether it should follow suit in a retail markets investigation, but ultimately decided not to get utilities out of the default service role, Commissioner Robert Powelson said on a conference call yesterday announcing the report’s release. “My personal view – I don’t speak for my colleagues – but I think the record showed that Pennsylvania would have a unique opportunity to abandon default supply and move towards a model where customers could have the Texas-like experience,” he added.
Wires and poles firms should be focused on electric reliability, distribution and safety while energy should be left to the supplier community, Powelson said.
The default service question could soon be posed by the Illinois Commerce Commissioner, Commissioner Anne McCabe said on the conference call. “That’s a subject of discussion and if we pursue some kind of ‘utility of the future’ initiative, that will be one of the questions likely to be addressed,” she added.
Such ‘utility of the future’ proceedings are popping at PUCs nationwide, in restructured states and vertically integrated ones as regulators deal with the growing decentralization of the power industry, the report said.
In Pennsylvania, the PUC adopted a “singles and doubles” approach to get utilities to focus on upgrading their systems. So far, it did a lot of that work for the water utilities, but Powelson said some of the same effort would be put into the electric and natural gas utilities.
“I am firm believer, as we have discussions around what the whole modern utility looks like, that at the end of the day, there will still be a role for the distribution company,” Powelson said, “and going forward in competitive markets, that customers will embrace the whole notion of supply options and demand-side management.
“And the market will bring those product offerings to those customers,” he added.
Powelson does not want to see Pennsylvania have its utilities engaged in the business of “upselling” energy services. “I think that bastardizes the whole construct of the market,” Powelson said. He believes “in Pennsylvania, as demonstrated by our ranking this year, that all of the innovation that is taking place in the market will come from the retail energy supply side of the ledger, not the distribution side.”
The ABACCUS reports themselves try to broaden the focus away from a pure KWH price comparison on retail markets, DEFG Managing Partner and the report’s author Nat Treadway said yesterday. “Consumers want the value of the end uses. They really don’t care about electricity and, so I would offer, they really don’t care about the price of electricity. They care about the bill and they care about the value that they get from the bill.”
In a fully competitive bill, people are going to understand the value they are getting on a monthly basis – and to the extent they want more, they will go somewhere else, he added.
“Long-term, when we stop talking about cents/KWH and we’re out of the commodity mentality – we’ll be a lot better off,” Treadway said. Many of the utility of the future proceedings are still focusing on the commodity, but just shifting where consumers get it from (largely solar), he added. The focus should shift more toward electric service.
“Competition based on service will eventually lead to further market innovation. To fully anticipate future innovations is impossible,” the ABACCUS report said. “Innovation may come from within the industry, or it may involve the expertise from another industry that brings a transformative technology or idea to the retail electric sector.”