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Think Tank Study Says Retail Electric Choice Results In Lower Rates, Better Reliability
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A study released by the Pacific Research Institute, which is described as a nonpartisan California-based, free-market think tank, says that states with competitive electricity markets saw cheaper energy prices, more energy infrastructure investment to improve efficiency and reliability, and greater emission reductions compared to monopoly states
States with competitive retail electricity markets have seen smaller price growth compared to monopoly states, the study said. Since competition was fully implemented, the 14 jurisdictions with retail electricity competition saw all sector electricity prices decline 0.3 percent between 2008 and 2020 compared to a 20.7 percent price increase in the states lacking retail competition, based on EIA data calculations, the study said
"Once
the transition to competition was complete, a
meaningful difference in the growth of prices
is evident between the two sets of states such
that, over the entire period, prices grew 20.1
percent slower in the jurisdictions with retail
competition compared to the monopoly states.
Looking at the percent change in prices during
the period of fully implemented retail competition
(i.e., since 2008), prices declined slightly
in the competitive jurisdictions (-0.3 percent)
compared to continued growth in the monopoly
states (+20.7 percent). Thanks to this slower
growth, over the entire period prices grew
50.5 percent in the competitive jurisdictions
compared to 70.6 percent in the monopoly jurisdictions," the study said
"The price benefits are widely shared by states with retail choice as well. Four of the five states with the lowest
price increases between 1996 and 2020 (Pennsylvania, Illinois, New Jersey, and New York) and five of the ten
states with the lowest price increases (plus Texas), were competition states. Alternatively, the ten states with
the largest increases in retail electricity prices were all monopoly states (Hawaii, Wisconsin, Kentucky, Idaho,
Washington, Alaska, Montana, Minnesota, Wyoming, and Oregon)," the study said
"[T]he switch to
competition also benefited residential customers.
Prior to competition, residential
customers in both categories of jurisdictions
saw similar price increases (+39.0 percent
in the retail competition jurisdictions
compared to +37.0 percent in the monopoly
states), which were less than the price increases
for other customers (e.g., commercial
and industrial). After competition was
effective, prices increased for all residential
customers. However, the price increases for
residential customers living in jurisdictions
with competitive markets (+9.2 percent)
were significantly smaller than the price
increases for residential customers living
in monopoly states (+25.4 percent). In fact,
residential customers in monopoly states
have seen the largest increase in prices since
2008 whereas residential customers in competition
jurisdictions have seen relatively
modest price increases. Due to these trends,
overall, the price increases in competitive
jurisdictions between 1996 and 2020 were
20.0 percent less than the price increases
that occurred in monopoly states," the study said
"[C]ommercial customers
have benefited from retail competition
to a greater extent than the average customer.
Price growth between the two categories of
jurisdictions was similar prior to the introduction
of competition. Following the implementation
of competition, commercial customers
in the jurisdictions with retail competition
have seen prices decline 7.6 percent, which is
in stark contrast to the 20.2 percent growth
in electricity prices for commercial customers
in monopoly states. Thanks to the decline in
prices, total price growth over the entire 1996
through 2020 period were 27.1 percent less in
the competitive jurisdictions than the price
growth that occurred in the monopoly states," the study said
The study also finds that retail choice states have better reliability than monopoly states
"Similar benefits also exist at the retail level. While not without limitations, two common measures of reliability
are the system average interruption frequency index, or SAIFI (a measure of the frequency of a sustained
interruption), and the system average interruption duration index, or SAIDI (a measure of the duration of a
sustained recovery). A lower SAIFI/SAIDI measure indicates greater reliability. Based on these metrics, the
14 jurisdictions with retail electricity competition have more reliable distribution than the monopoly states.
The SAIFI in the jurisdictions with retail competition was 10.4 percent lower than the SAIFI in the monopoly
states and the SAIDI in the jurisdictions with retail competition was 6.5 percent lower than the SAIDI in the
monopoly states," the study said
See the full study here
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September 29, 2021
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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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