The big retail "bust": What will it take to get true competition?

Electricity Journal

Volumn 13, Issue 2, 2000, Pages 41-54

  Flaim, Theresa ^a  

^a NONE

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EID: 0034148523     PISSN: 10406190     EISSN: None     Source Type: Journal    
DOI: 10.1016/S1040-6190(00)00087-7     Document Type: Article

References (22)

1. We estimate that the "shopping credit" in Pennsylvania in early 1999 was between 0.6 and 1.3 cents/kWh higher than the utilities' cost of supplying the commodity, depending upon the utility and type of customer.
2. Regulatory Research Associates, Gas Industry Restructuring Update, Regulatory Focus, Special Report, July 21, 1999.
3. Kenneth W. Costello, Household Participation in Gas Customer Choice Programs: Some Facts, Explanations, and Lessons Learned, NRRI 99-05, National Regulatory Research Institute, Columbus, OH, Jan. 1999, at 45.
4. This article will not explore how floating vs. fixed competitive transition charges (CTCs) affect the ability of new entrants to compete. Fixed CTCs are more common than floating CTCs, which are used in California. In New York, only Niagara Mohawk has floating CTCs. For a discussion of how they have worked in California, see Robert McCullough, California's Electricity Market: Are Customers Necessary? Pub. Util. Fortnightly, July 15, 1998.
5. Kellogg L. Warner, Henry Y. Yoshimura, and Philip M. Marston, Whatever happened to efficient price signals? Elec. J., April 1999, at 40-48.
6. Taken from Electric Sales and Revenue - 1998, Energy Information Administration, Washington, DC, Oct. 1999, Table 1, at 5.
7. The gross profit on a pack of cigarettes is $1.00, according to Seth Lubove, Brand Power, Forbes, Aug. 9, 1999, at 103.
8. An alternative interpretation would be that the incumbent can sustain existing prices in the face of a threat of entry or real entry by competitors who are offering an equivalent product at a lower price.
9. The Electric Power Supply Association argues that "The right to provide last-resort service should be awarded through a competitive process." See Retail Electricity Competition: Charting the Price to Beat, undated brochure, Washington, DC.
10. Richard Shapiro, Vice President, Enron Corporation, presentation to the Joint Meeting of the Committee on Energy Resources and the Environment and the Ad-Hoc Consumer Affairs Committee, National Association of Regulatory Utilities Commissioners Winter Meetings, Washington, DC, Feb. 22, 1999.
11. David Moskovitz, "Default Service," presentation to the National Association of State Utility Consumer Advocates, Baltimore, MD, June 1999. Slide 15 in the presentation states that "market volatility isn't the answer [for default service] because most residential and commercial customers will be billed on the basis of monthly average kWh. They simply will not see the volatility."
12. These are day-ahead forecast hourly marginal energy and outage costs, which were used to bill customers who were buying from the spot market prior to the start-up of the New York ISO. Because Niagara Mohawk was operating in a cost-based power pool during the period November 1998 through October 1999, these estimates are only proxies for competitive market prices. Nevertheless, they are sufficient to assess preliminarily how spot market price variability might affect residential bills. When the New York ISO began operating in November 1999, Niagara Mohawk began using ISO prices instead of its internal forecasts to bill customers who selected spot market pricing.
13. A recent study of consumer switching behavior reveals that consumers prefer fixed-price contracts because their disposable incomes are also generally fixed. Fixed-price contracts reduce uncertainty about the size of the bill they receive each month and enable them to plan their expenditures over the course of a year. Kenneth Train and Anne Selting, National Economic Research Associates, Customer Choice in Competitive Energy Environments, draft report prepared for Edison Electric Institute, Washington, DC, Nov. 1999, at 9.
14. Shapiro, supra note 10.
15. In a recent survey, 81 percent of residential Niagara Mohawk customers surveyed indicated that they favor allowing local electric utilities to continue to sell to New York consumers, with 36 percent saying they "strongly favor" this initiative and 45 percent saying they "somewhat favor it." Some 10 percent oppose the initiative and 9 percent were undecided or neutral. These results are consistent with extensive research that the Edison Electric Institute has conducted of customers across the country.
16. In October 1999, Maine's Public Utilities Commission rejected all the bids it received for default supply for two of the state's three utilities because they were "unreasonably high." Megawatt Daily, Oct. 27, 1999.
17. Customer care costs include bill calculation, printing and mailing, billing-related call center activities, collections processing and payment remittance - at $1.50/month; and an additional $1.00/ month to reflect additional collections activities that must take place when operating in states that have cold weather shut-off restrictions that limit the circumstances under which customers can be terminated for nonpayment.
18. See Jonathan M. Jacobs, Setting a retail generation credit, Elec. J., May 1999, at 80-87; Electric Power Supply Association, Retail Electricity Competition: Charting the Price to Beat, undated brochure, Washington, DC; Richard Shapiro, supra note 10.
19. See Jonathan M. Jacobs, Setting aretail generation credit, Elec. J., May 1999, at 80-87; Electric Power Supply Association, Retail Electricity Competition: Charting the Price to Beat, undated brochure, Washington, DC; Richard Shapiro, supra note 10.
20. See Jonathan M. Jacobs, Setting aretail generation credit, Elec. J., May 1999, at 80-87; Electric Power Supply Association, Retail Electricity Competition: Charting the Price to Beat, undated brochure, Washington, DC; Richard Shapiro, supra note 10.
21. See, for example, Sheldon L. Bierman, Paul A. Nelson, and David F. Stover, Anomalies in Residential Electric Rates: Harbinger of Competition? Pub. Util. Fortnightly, July 15, 1999, at 40-47.
22. Larry Ruff, Competitive electricity markets: One size should fit all, Elec. J., Nov. 1999, at 35.