Energy Expert: Competition Produces Benefits For PA Electricity Customers

Harrisburg, PA - Competition can continue to produce better results for Pennsylvania electricity customers than regulation. That's the message from William Massey, one of the key architects of federal policies that advanced competitive forces in electricity markets, in a white paper released recently by the Electric Power Generation Association (EPGA). (http://www.epga.org/EPGA.PA.11-6-07rev.doc)

"Evidence confirms that competitive electricity markets provide the lowest possible cost resources, improve reliability, and are good for the environment," Massey said in his white paper entitled "The Operation and Benefits of Competitive Electricity Markets in Pennsylvania."

Massey summarized a series of benefits that consumers in Pennsylvania and the broader region have enjoyed because of competition, including:

• Lower costs driven by efficiency gains.
  Massey noted that nuclear plants in Pennsylvania are operating more, saving over $120 million per year. He argued that increased availability and better plant efficiency also help keep market prices down in PJM, the electric market that serves Pennsylvania customers.

• More conservation.
  Massey noted that "demand response" programs that pay customers to cut their electricity use during times of peak demand have increased six-fold in PJM since 2002. Demand response programs saved customers more than $650 million in August 2006.

• More renewables.
  Massey said competition spurs the development of renewable power sources, such as wind and solar power. For example, Massey noted that approximately 73 percent of installed wind capacity is now located in regions with competitive markets, while only 44 percent of wind energy potential is found in these areas.

• New power plants.
  Since 1998, Massey said, competitive suppliers have added 9,000 MW of new generation in Pennsylvania, enough to power 9 million homes.

In his paper, Massey also cautioned against simplistic rate comparisons between states that have restructured and those that have not. He said, "Snapshots can be misleading because prices will go up and down in markets to reflect … fundamental economic conditions that no regulatory model can eliminate." Massey argued for finding ways to gradually transition Pennsylvania customers to market rates as the remaining electric retail rate caps expire over the next few years. He said Pennsylvania policy makers should consider gradually increasing rates, staggering electricity purchases, and varying the length of contracts to help mitigate inevitable increases driven by global energy markets.

Massey concluded his paper by urging Pennsylvania policy makers to continue to rely on competitive electricity markets. He said, "Now is not the time to step backward toward monopoly regulation and reverse the market benefits enjoyed by Pennsylvania consumers. Pennsylvania should continue to move forward with its successful transition to competitive electricity markets."

EPGA is a regional trade association of major electric generating companies that supply wholesale power in Pennsylvania and surrounding states. Its member companies own and operate more than 141,000 megawatts of generating capacity, approximately half of which is located in the mid-Atlantic region.

SOURCE: EPGA