It’s January 2011 and, finally, all Pennsylvanians have the right to choose their own electricity suppliers, ending a 15 year process.
As a member of the Pennsylvania Public Utility Commission and a “choice advocate” at the very beginning, I can look back today and say that we did well, knowing what we did at the time and understanding that the electric generating and distribution industry had hundreds of billions of dollars invested in a hard-wired system that needed to be changed gradually over time.
Now that the transition is complete, it’s time to look at ways we can tweak and improve how consumers can and do exercise choice to bring the benefits and full and robust competition to the marketplace.
Looking at the record, over time, we can see that many people are shopping for electric power. In the industrial and commercial sector, almost everyone shops for power. Over the past decade, most have switched suppliers, many more than once. Competition is real and there’s an active market in competitive pricing and a new cottage industry in consultants who make a good living from taking a small percentage of the money they are able to save their clients by shopping aggressively and scientifically as well as by recommending ways to conserve and reduce energy consumption.
On the residential side, we’ve made a good start. But it’s only a start. We can do better.
Residential choice has been a disappointment to me in some ways because we – the de-regulators – underestimated the bonds of decades of living under a public utility monopoly. Like the “Stockholm Syndrome,” consumers develop a bond with the people who have been supplying their electricity that’s difficult to break even if they know they can save $5 or $10 or even $20 a month by shopping for a better deal. And, for many, the choices become confusing.
That’s why, like many who have worked hard for utility choice for years, have come to support the idea of changing the so-called “default provider” approach which assigns an electricity consumer to a “default supplier” chosen by the PUC – usually the electric generating company affiliated with the power distribution company – to consumers who don’t designate a choice.
The truth is that customers are a tangible asset for power generators and distribution companies. In the merger now proposed between First Energy and Allegheny Energy in Pennsylvania, the deal is valued at upwards of $8.7 billion in no small part because the combined companies will have some 2 million customers in Pennsylvania.
Customers are so valuable, in fact, that one company has proposed that the PUC auction off blocks of customers to the highest bidder. The positive consumer twist is that the money raised from the auction would go not to the PUC but would be divided up pro rata among the utility customers. Economists estimate that auctioning off the default provider pool resulting from the First Energy/Allegheny combine would result in one-time, cash rebates of $150 to $500 per household. And that would be in addition to any money saved from the increased competition resulting ending the virtual monopoly owned by generating companies owned or affiliated with power distribution companies.
The auction could even have protections built in to assure that small, alternative power providers would be able to bid competitively for smaller blocks of customers. In other words, the auction concept would be good for competition and good for consumers and champions of the environment.
Thus, it’s a concept we should all recommend highly to policy makers in Harrisburg as we enter the next chapter of energy choice in Pennsylvania.
Nora Mead Brownell, an Erie native, is a former member of the Pennsylvania Public Utility Commission and the Federal Energy Regulatory Commission and is a consultant on public utility issues.