Customer Choice: Experts and Regulators Weigh In

June 28, 2024

At the Mid-Atlantic Conference of Regulatory Utility Commissioners (MACRUC) annual conference, the panel “Checking in on Customer Choice” brought industry leaders and regulators together to discuss the state of markets.

  • Moderator: PUCO Commissioner John Williams
  • Speakers:
    • Scott Hudson, President of Vistra Retail
    • Rasesh Patel, President of NRG Consumer
    • Shay Reed, Energy Buyer of Costco Wholesale,
    • Frederick Hoover, Chairman of Maryland Public Service Commission
PUCO Commissioner John Williams in conversation with Rasesh Patel (President of NRG Consumer), Shay Reed (Costco Wholesale), Scott Hudson (President of Vistra Retail), and Maryland Public Service Commission Chair Fred Hoover at MACRUC 2024.

The conversation revolved around the objectives of retail electric choice, the impact of innovation, and the evolving regulatory landscape.

What is the goal of retail electric choice?

Shay Reed from Costco noted the goal today is slightly different than procurement 30 years ago. “We used to say this is a tool to manage costs, although now I might also say I like to control how clean my supply chain is.” 

Scott Hudson explained that the primary aim is to provide options to consumers, which fosters innovation and meets diverse customer needs. “Customer flexibility is key and price does not equal value for every customer.” Vistra’s business lines include generation, retail energy, and value-added services like energy use management. Hudson emphasized the need for alignment between regulators and retailers in delivering reliable, affordable, and sustainable power. Retail choice is a big part of that.

Innovation and energy use management

Rasesh Patel echoed Hudson’s sentiment, drawing parallels with the telecommunications industry. He highlighted that while consumer tech has seen rapid innovation, the energy sector is still catching up. 

NRG’s merger with Vivint aims to address demand management through smart home technology, which can optimize energy use and reduce peak demand.

As demand outpaces supply and intermittent resources require additional load balancing, demand management presents an effective tool that can be leveraged for more than just commercial and industrial customers. The integration of smart home technology into retail energy services for the residential customer represents a significant step toward efficiency and sustainability.

“Innovation can play a critical role in meeting both consumer and clean energy goals,” Patel noted, citing the need for standardized data interfaces to enable more effective demand management.

Rasesh Patel pointed out that smart home customers often have energy-consuming devices running during peak times when their homes are unoccupied. Better use of smart technologies could help shave peak loads, reducing capital requirements and enhancing grid efficiency.

Scott Hudson discussed the role of technology in providing consumer flexibility and reliability noting a not-so-distant future where residential consumers actively participate in demand response, supported by smart technologies like electric vehicles that can interact with the grid.

“The technology is available to enable consumer participation in demand response. We just need to harness it effectively,” Hudson said, emphasizing the need to keep pace with technological advancements.

Shay Reed from Costco underscored the importance of having access to and control over energy usage data, advocating for a standardized approach to data management to help large consumers like Costco optimize their energy consumption and support sustainability initiatives.

“The best kWh is the one you don’t use,” Reed said, stressing the need for better data access to drive efficiency.

Challenges to Realizing Full Benefit of Competition

Heavy-handed regulations: Maryland Public Service Commission Chair Fredrick Hoover provided insights from Maryland’s experience with retail energy markets, describing a history of regulatory challenges and recent legislative efforts. 

The panelists debated the role of additional regulation in enhancing retail energy markets. Hoover suggested that while new regulations are being implemented, a balance must be struck to foster innovation without stifling market dynamics.

Data access: The conversation touched on the balance between competition and regulation. Rasesh Patel argued that a standardized framework for competition, including data and infrastructure, would lower costs and enhance consumer value. He noted that innovation and competition drive choice, which is essential for the market’s long-term health.

“Standardizing competition frameworks and data interfaces can break down barriers and reduce prices,” Patel emphasized.

Restrictions on choice: Shay Reed highlighted the importance of market participation for large retailers like Costco, advocating for minimal external control over their energy strategies to ensure optimal resource use.

“As a large retailer, we need control over our energy choices to run our business optimally,” Reed stated.

Product and Service Restrictions: Rasesh Patel discussed cost caps and production restrictions, noting that some states are considering or have already implemented price caps, which restrict retail energy products from exceeding the cost of basic utility service. Additionally, he spoke on the limitations on the types of retail products that can be offered. These measures hinder innovation by constraining the ability to test and introduce new products to the market, especially when there is clear customer demand for such innovations.

Customer Education: Looking ahead, Scott Hudson identified the rapid evolution of technology as a significant challenge. He stressed the need for consumer awareness about their ability to choose energy providers and the benefits of such choices, including specialized plans for green energy or demand response. If residential customers are expected to play a role in supporting grid resiliency, they need to be educated on their options and engaged as active participants in their energy usage. This requires education and seamless applications tailored to the residential customer for easy integration.

Key Takeaways
  • Customers value flexibility in energy options, which can be customized to meet their specific needs. This can include value-added services like energy use management and tailored plans that go beyond basic cost considerations.
  • The need for consumer education on energy choices remains important. Engaging residential customers in their energy usage is crucial for supporting grid resiliency and optimizing resource use.
  • Integrating smart home technology can optimize energy use and reduce peak demand. The potential for residential consumers to participate in demand response through technologies like electric vehicles and smart devices can balance load.
  • Large retailers, like Costco, advocate for minimal external control to ensure they can make optimal energy choices. Policies that allow flexibility and support large consumers’ goals will allow them to make those choices.
  • Balancing regulation with the need for market dynamism is crucial for fostering a competitive and innovative environment. Cost caps and restrictions on products or terms will hinder innovation and the market ability to respond to customer demand.
REAL Choice