Slow Transition to Competition.

• Author: Brown, Matthew H.

Although industrial electricity consumers can profit from competition amongst electric utilities, residential users see few benefits in switching providers.

By the time you read this issue of State Legislatures magazine, close to half the states will have ended what most legislators agree has been a tortuous debate about a complex and arcane topic: the future of the electric power industry.

No one claims this debate is trivial. The power industry is the country's most capital-intensive, it supplies state and local governments with a huge amount of tax revenue, and it releases more pollutants than any other single industry. Americans now take for granted that the lights will go on when they flip a switch and that their computers will work when they push a button. Yet 24 states now assert that they can make the industry better than it has been by deregulating it and allowing competition. It's a big experiment, and the early results are just coming in.

And what are we finding so far? Assemblyman Rod Wright, the chair of California's Assembly Energy Committee, sums it up nicely when he says that "whether it's working or not working really depends on whom you talk to," Wright says.

Although it's a little early to tell, we're finding that for the vast majority of customers, the world hasn't changed much. Almost everybody who grew up buying power from the local utility still buys power from that same utility.

But there are some notable exceptions to this. It doesn't apply in general to big power users; they've found that they can save money by switching suppliers. The situation also varies from one state to the next. Most states have developed rules that dictate a slow transition to competition while one or two are pushing harder and faster to make competition happen early. Maybe the most measurable change so far has been in the policies that states enacted around the edges of the move to competition. What's become known as system benefit funds that keep low income, energy efficiency and renewable energy programs alive are a new and common phenomenon in many states.

WHO'S SWITCHING AND WHY

Well over half the population of this country will soon, at least in theory, be able to make a choice among electricity retailers, Customers can now choose their suppliers in California, Pennsylvania, Massachusetts, Rhode Island, Maine, Illinois and New Jersey. In most of those states that's meant some notable changes in the way that big customers buy electricity.

Of Massachusetts' industrial customers, 15.8 percent now buy from a different provider, in California the number is about 19.6 percent. In Pennsylvania's PECO Energy service territory, close to 60 percent of the industrial customers have switched providers. In Maine, where markets just recently opened, about 455 large customers have switched. This represents about 17 percent of the kilowatt-hours sold to that class of industrial consumers. The terms of these deals are proprietary, but we can safely assume that the customers wouldn't have switched if they hadn't snagged a better price. This shows that the biggest customers can and do benefit from the ability to negotiate with their suppliers, and shows a few retailers in swift pursuit of these large customers.

Yet for most people, this...