South Carolina Legislative Report: "Defer" Mass Market Retail Choice, Introduce Large C&I Choice and Municipal Aggregation -- EnergyChoiceMatters.com

South Carolina Legislative Report: "Defer" Mass Market Retail Choice, Introduce Large C&I Choice and Municipal Aggregation

May 1, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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A report prepared by a consultant funded by the South Carolina State General Assembly under the Electricity Market Reform Measures Study Committee recommended the introduction of retail electric choice for large C&I customers, but recommended that policymakers "defer" consideration of retail choice for residential and small business customers

The consultant's report recommended:

• "Introduce partial retail choice for large C&I customers, enabling businesses that are large, sophisticated energy consumers to negotiate rates, self-supply with clean energy, participate in RTO markets as demand-side resources, and optimize their own consumption."
• "Introduce a path for Community Choice Aggregation, enabling local communities to pursue environmental goals and negotiate rates."
• "Defer consideration of retail choice for residential and small business customers until after other reforms are implemented. Revisit the option to expand retail choice to all consumers after gaining experience with wholesale market participation, partial retail choice, and the other market reforms discussed above."

"We find that a measured approach to introducing retail access could offer benefits to South Carolina customers, particularly if initially focusing on enabling partial retail choice for large C&I customers and communities (via Community Choice Aggregations (CCAs)). These consumers are sophisticated buyers, able to take advantage of retail competition to procure electricity supply in alignment with their preferences. More options for retail choice would permit these buyers greater flexibility to control costs and tailor electricity service to their environmental goals and business operations. Enabling partial retail choice would allow South Carolina to compete on a more level playing field with other states to attract investment by these large consumers that can spur economic development in the state," the report states

"The benefits of retail competition have lagged and been less clear for mass-market (residential and small businesses) consumers, who tend to have lower switching rates in most states. In some cases, the explanation of lower switching rates is that retail electricity markets are too confusing, have high switching costs, or that alternative suppliers cannot offer sufficiently lower rates to make a change worthwhile," the report states

The report listed a potential disadvantage of full retail choice as, "Additional regulation needed to protect residential consumers against excess price volatility, unfair or deceptive marketing practices, and ensure transparent communication of product offerings."

The report said that full retail choice would require the following, "Regulated service options need to be designed for customers who do not choose competitive options."

Unlike with mass market retail choice, where the report noted the potential disadvantages listed above, specifically stating, "Additional regulation needed to protect residential consumers against excess price volatility, unfair or deceptive marketing practices, and ensure transparent communication of product offering," the report curiously makes no such observation with CCAs, notwithstanding the recent experience at NOPEC as well as certain other CCAs with respect to price and product transparency (here) and (here)

The report listed only a single potential disadvantage of community choice aggregation as, "Need to equitably address legacy investment costs and avoid cost shifting," which was listed under any change in the status quo.

The report also concludes that having South Carolina's utilities join PJM would produce $281-$362 million in annual savings, the highest savings of any option considered (a southeast RTO and the Southeast EIM were also considered, among other scenarios)

"We do recommend that South Carolina join, create, or integrate with a regional wholesale power market that includes regional optimization of transmission usage and commitment, dispatch of generation resources, and regional resource adequacy coordination," the report states

The report recommends that the state establish a policy and timeframe for integrating with an RTO, considering at least three alternative pathways for full RTO integration:

• Join an existing RTO (i.e., PJM) under the existing governance and membership model (South Carolina would maintain all authorities over vertically integrated utility planning and ratemaking, but would not be in a position to dictate any changes to the existing RTO governance structure); or
• Create a new Southeast RTO, provided that neighboring states and utilities show interest in initiating the multi-state effort to create a new RTO; or
• Integrate with an existing RTO but under a new governance model, such that energy and resource adequacy benefits can be achieved, but under a governance structure that is suited to the prevailing state regulatory model in South Carolina and other states in the Southeast (e.g. possibly modeled after the Western EIM and EDAM, SPP’s Markets+, and WPP’s WRAP).

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