"Higher Costs" One of Most Prevalent Terms Associated with Energy Deregulation

The term "higher costs" is one of the two most prevalent concepts that Americans associate with "energy deregulation," according to a new poll by EcoAlign, which is a unit of the Distributed Energy Financial Group, DEFG LLC.

When asked to provide a term to associate with "energy deregulation," poll respondents listed "higher costs" and "competition" about equally, as the two most prevalent answers. EcoAlign did not provide a numeric score for the terms, but in a "word cloud" the terms appear about the same size. A close third was the term "choices," with no other term coming close.

Although the EcoAlign survey found broad support for more embraceable concepts (88% of respondents said that having a "choice" of electric suppliers is a good idea), the baggage associated with the term energy deregulation should provide a stark reality check to musings that electric choice may see an expansion beyond the currently restructured states.

Such hope for a resurgence beyond retail choice's current reach was a hot topic at the recent KEMA conference; however, it seems at this point the industry is long on talk, but short on action (which is understandable given the need to devote time and resources to areas where choice is threatened -- Connecticut, Ohio, perpetually in Maryland -- but if the expansion of choice is going to be what the industry spins as the state of competition, it needs to follow through with concrete examples).

Excluding states that have previously restructured but which have various (or complete) limits on choice (e.g. Michigan, California, Arizona), the industry has essentially ignored the two lowest-hanging fruits for new electric choice territories -- the former Cap Rock territories now owned by Sharyland, and Entergy Texas.

In the case of the former Cap Rock territories, suppliers have at least intervened in the ongoing retail choice investigation (or rather a precursor docket); however, it should be noted that it was the PUCT, on its own motion, prompted by Sharyland's acquisition of the territories, that instituted the investigation of whether retail choice should be introduced to the areas. Cap Rock had, without any vociferous objection from REPs, operated as an anomaly in ERCOT for several years -- an investor-owned utility, with no generation ownership, that nevertheless did not offer retail choice, even after legislation removed the original prohibition on choice in this area.

In the case of Entergy Texas (which Matters intends to address in more detail in a future story), while the 2009 legislation suspending the transition to competition looms over the territory, the territory is going to undergo unavoidable structural change and upheaval in the near future despite this legislation, due to Entergy's intention to join the Midwest ISO, and the ultimate adjudication of that petition by the various retail regulators.

In any other non-restructured jurisdiction, calls for retail choice will have the daunting task of going against the status quo, whose rates are known, and whose maintenance does not involve additional costs (stranded costs, implementation costs, etc.). In the case of Entergy Texas, however, the status quo is not an option, and although joining MISO would not directly impact its vertical integration, two of the Entergy operating companies are leaving the system agreement, and generation pricing may change substantially for Texas customers as a result. Additionally, MISO membership, notwithstanding continued vertical integration, would structurally change retail rates at Entergy, by imposing unknown new costs such as unbundled capacity, socialized transmission, and RTO administrative costs.

The case of Entergy Texas thus presents a unique, and likely one-time, opportunity for retail choice advocates, because retail restructuring will not be competing against the status quo, but rather an unknown new paradigm. Despite these unique circumstances, Matters' exhaustive outreach to Texas retail market participants has not identified a single REP active in this issue. The so-called "Big 4" suppliers, during a panel at KEMA, all demurred when asked about Entergy Texas. If suppliers can't open up Entergy Texas (or won't even try), it's hard to take any talk of expanding retail choice to new areas seriously.

Turning back to the findings from the EcoAlign survey, solar programs were cited by far as the new service customers would like to be offered from their utility or electric supplier. Half of respondents cited solar programs as a new service they would like to see offered. Following solar programs were "energy efficient lights" (35%), "budget billing" (34%), and "green pricing" (31%).

With respect to respondents' "greatest concern about the electric industry," more than half of respondents (58%) selected "electric rates increase too often." None of the other cited concerns was even close.

The survey was conducted online in March 2011 among a sample of over 1,000 online adults across the U.S.