Competition is defined as “using more market-based mechanisms, or opening various parts of the electricity system to more players beyond the traditional monopoly single-provider model.”
The University of Texas recently published "The State of Electric Competition in the United States of America," evaluating the competitiveness of different states’ electricity sectors. The national "Electric Competition Scorecard" ranks each state based on how competitive their electricity markets are and provides recommendations for removing barriers to entry.
Each state was scored based on 10 different factors related to a wide range of issues to determine competitiveness, including the existence of wholesale and retail electricity markets, requirements for RFPs in vertically integrated states, data access policies for customers and third parties, compensation policies for distributed generation, and the percentage of power plants that are privately owned.
“Competition is paramount to forging a cleaner energy future. Unfortunately, it is difficult to capture how states enforce the policies, laws, and regulations that lead to higher scores. CEN is working hard to ensure that all ratepayers can benefit from an electric market that is truly competitive in practice, not just on paper.”
The highest scoring states were Connecticut, Illinois, Maine, and Ohio, and other deregulated states – particularly those with wholesale and retail markets for all customers, including residential – ranked high, as well. Conversely, Alaska, Alabama, and Tennessee were the lowest-scoring states, and most other fully regulated states with monopoly utilities ranked low, as well.
All but four states have policies that compensate distributed generation, typically through net-metering, though other more complex policies are starting to be considered, such as New York’s VDER (Value of Distributed Energy Resources) that more accurately reflect the systems’ true value to the grid. However, as the scorecard shows, many states still limit the extent to which these systems can be compensated. This will become an increasingly important issue, at least in states with wholesale markets, as FERC Order 2222 gets implemented, which mandates that Distributed Energy Resources (DERs) be allowed to fully participate in those markets.
It is also noteworthy that there is a strong correlation between the highest-scoring states and those states with the most privately-owned generation. However, states located in wholesale market regions do not necessarily have a substantial amount of privately owned generation. In fact, there are even some states located outside of wholesale markets (like Colorado, Oregon) that have more privately-owned generation than those located within them (like Virginia, Wisconsin).
“Today’s economy calls for a rethinking of the role of utility providers. Policies should be enacted to encourage competition in the marketplace and recognize the rights of individuals to choose how they purchase and consume electricity”
Interestingly, there was much less correlation between high-scoring states and states that were credited for their policies on data access. Again, with the rise of DERs, including various smart building technologies, access to customer usage data is increasingly important, as it allows for greater participation of those customers to provide services like demand response and frequency regulation to ISO/RTOs and utilities.
The paper was authored by Joshua D. Rhodes, PhD., Aaron Nisman, William Wade, and Michael E. Webber, PhD. from the Webber Energy Group at the University of Texas. Short dossiers for each state assessing its level of competition as well as explaining its competitiveness score are available here.
CEN’s Landon Stevens hosted a webinar on the new report with Joshua Rhodes. Watch the full video here.
Check out the scorecard and see how your state ranks. #EnergyChoice