PA Tops in Restructuring

Issue 4 and Volume 104.

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A recent study shows that Pennsylvania and New York have made the most advances in electric industry restructuring. The Retail Energy Deregulation Index (RED Index), developed by the Center for the Advancement of Energy Markets, is based on a scale of 0 (monopoly) to 100 (complete competition). Surprisingly, California, once a deregulation pioneer, ranks only 11th by RED Index standards.

Texas leads the South with a score of 45, ranking seventh nationally. The national average score is 18, rising to 20.4 when weighted by sales volume, and to 23.3 when weighted by revenue.

The index uses 18 “attributes” to determine state scores. They include deregulation plan, percent of eligible customers, percent switching, divestiture of generation, default provider, default provider price risk, default provider rates, competitive standards, uniform business rules, stranded cost calculation, stranded cost implementation, billing, metering, wholesale market model, distributed resources interconnection, regulatory convergence, performance-based pricing for network facilities and commission reengineering.

“The genie is out of the bottle,” said CAEM President Ken Malloy. “The consumer choice model will eventually be implemented in all states. But there is so much detail involved in 51 jurisdictions moving at different speeds on different issues.”

The transition from the monopoly model of retail electric utility regulation to the customer choice or competitive model began in April 1994 when the California Public Utilities Commission issued its proposal to radically restructure its electric markets. In the ensuing period, nearly every state has begun to make dramatic changes to electric regulation to give customers the ability to choose an alternative energy supplier.