South Carolina is in the spotlight following a recent report from Brattle Group on possible changes in the structure of the state’s electricity market. The report outlines estimates that “South Carolina’s electric customers could save anywhere from a few million dollars to a few hundred million dollars a year if the state were to overhaul the way electricity is managed, by introducing competition and efficiencies.”
The report also says “reforms could speed adoption of renewable energy, which would help the state’s fight against climate change.”
We are pleased to see the potential establishment of an independent system operator in South Carolina and the possibility of introducing wholesale competition into the state’s electricity market. This could pave the way for retail competition, giving consumers the opportunity to choose their power supplier, affording them greater energy choice and control over their energy usage.
In a recent op-ed in The Post and Courier, former Maryland Gov. Parris Glendening warned against restructuring South Carolina’s energy market, citing Maryland’s competitive restructured electricity market and saying, “Deregulation has led to higher electric bills and less reliable power.”
Glendening referenced 1999 as the year that Maryland chose to restructure its power market. Therefore, we chose 1998 as the reference year in our analysis to compare the state’s power price performance before and after restructuring in Maryland, and we then compared it to South Carolina, which did not restructure.
The data shows that Maryland has outperformed South Carolina on several important metrics, including price performance; carbon emissions reductions attributable to electric generation; grid reliability; and risk shifted from ratepayers to investors.
Between 1998 and 2021, Maryland has seen superior all-sector price performance, including residential, commercial, and industrial. Maryland’s all-sector prices have increased by 63.1% while South Carolina’s have increased by 83.8%. Not only have Maryland’s prices for residential customers performed better than in South Carolina, but the absolute price for residential customers in South Carolina has also now surpassed that in Maryland.
Moreover, Maryland has made impressive strides in reducing its carbon emissions attributable to electricity generation, another key metric benefit of competitive markets. Specifically, U.S. Energy Information Administration data analyzed by the Retail Energy Supply Association shows that between 2008 and 2020, Maryland reduced its carbon emissions by 65.0% while South Carolina only achieved a 45.7% reduction on the same measure.
Glendening also claimed that competitive markets decrease reliability, using Maryland again as an example. However, U.S. News ranks Maryland at No. 11 in the nation in terms of power grid reliability, while South Carolina ranks No. 19. Seven of the fully competitive states were in the top 15 on the U.S. News ranking, hardly consistent with claims that competition results in decreased grid reliability.
If South Carolina does proceed with electricity market restructuring, we expect the state to improve its performance reducing carbon emissions while also delivering cost savings to consumers. Any restructuring efforts should bring forward the benefits of competitive markets, including innovation, competition and economic development, allowing customers to select products that meet their preferences rather than a one-size-fits-all approach.
We welcome the potential establishment of an independent system operator in South Carolina and the introduction of wholesale competition. We encourage South Carolina to follow the lead of states that have successfully restructured at the retail level and prioritize consumer protection, clean energy deployment and added-value products while delivering cost savings to consumers.
Christopher Ercoli of Charleston is the president and CEO of the Retail Energy Advancement League.
Boston, MA (June 7, 2023) – At a Senate Telecommunications, Utilities, and Energy Committee hearing on Monday, stakeholders and customers spoke out against two proposed bills, House Bill 3196, sponsored by Rep. Frank Moran (D-17th Essex) andSenate Bill 2106, sponsored by Sen. Brendan Crighton (D-Third Essex), that would close the residential competitive retail energy market in Massachusetts.
“I have been a proud consumer in the choice market for electricity in the town of Brookline for over 10 years,” said Young Kim, testifying in opposition of market closure. “Recently, I bought an EV and found a supplier willing to give me a flat monthly bill no matter how much energy consumed. It was amazing value. I wanted to give the voice of the customer from a positive experience. I don’t think we should close the residential market. With the rise of EVs, heat pumps, and solar panels, I want every option on the table.”
Those calling for the closure of the market referenced a report by Susan Baldwin who was contracted by the Attorney General’s office to analyze the state’s retail energy market. The Retail Energy Advancement League (REAL) issued a release noting concerns with the report methodology and representation of data.
The most staggering omission was the absence of data for the past two calendar years. For example, during the most recent winter rate term, almost every offer from retail energy suppliers was below the utility default service rate and many were 100% renewable energy. Analyses show that if all utility ratepayers had switched to the lowest priced product in each service territory, residents would have saved $1.1 billion from November 2022 to April 2023.
The table below breaks down the current potential cost savings if all residents in each utility market switched to the lowest alternative offer.
Utility Supplier
Rate Term
Price to Compare
Lowest Alternative
Potential Market Monthly Savings
NSTAR (BECO)
NSTAR (CAMB)
NSTAR (COMM)
1/1/23 – 6/30/23
25.7¢kWh
25.7¢kWh
25.7¢kWh
10.9 ¢/kWh
10.9 ¢/kWh
9.9 ¢/kWh
$70,024,169
Eversource (WMECO)
1/1/23 – 6/30/23
21.9¢kWh
11.5 ¢/kWh
$8,287,256
NGRID
(MECO)
NGRID (Nantucket)
5/1/23 – 10/31/23
14.1¢kWh
14.1¢kWh
11.5 ¢/kWh
14.0 ¢/kWh
$13,406,126
$10,118
Unitil – FGE
1/1/23 – 7/31/23
21.4¢kWh
12.1 ¢/kWh
$1,191,172
“Choice in competitive markets is the single most important consumer protection you can have,” said John Hanger in his testimony, a former consumer advocate and commissioner with the Pennsylvania Public Utility Commission, who now lives in Shrewsbury, MA. “That $500M figure in the Attorney General’s report is based on a dataset that ended two years ago. That data ended in June 2021 and misses the whole ball game. In addition, those ‘overcharges’ are not overcharges at all. Those ‘overcharges’ are someone who signed up for a long-term contract. The report is saying ‘you got overcharged because you chose to have a long-term contract.’ That is not an overcharge; it is a difference in consumer preference.”
Customers across the Commonwealth who were unable to participate in the hearing, which was announced last week and held during the day, have shared their personal stories and opposition to any proposed removal of their right to choose their energy supplier.
“…to only be tied into one choice makes no sense to me. They need to talk to some of their constituents who use that and they need to understand it’s a really valuable tool that can save money in an environment where everybody is going through this inflationary period,” said Mike Kelly who lives in East Sandwich, Massachusetts.
In Massachusetts, customers can shop for the supply portion of their electric bill. The commonwealth-managed website,www.EnergySwitchMA.gov lists available offers so customers can compare and find a supplier that aligns with their environmental goals.
Almost half a million Massachusetts residents are enrolled with a competitive supplier. Last summer, more than 1,200 customers signed a petition urging their legislator to oppose any market closure and protect their right to access the variety of products available from retail energy suppliers.
“I opt to pay a little more to get 100% clean energy from my current provider. There’s a benefit to having suppliers to choose from in electricity particularly when prices are posted online and it’s so easy to make comparisons. There may be some confusion on the part of legislators on how things are working or they may be focusing exclusively on price and not any other considerations,” said Larry Cole who lives in South Weymouth, Massachusetts.
As of June 2nd, there were 163 offers from competitive retailers for customers to choose from on EnergySwitchMA. Many of these offers were cheaper than the utility supply rate, with some products offering savings of 40-58%. Additionally, 72 of those options offer a 100% renewable product.
In the absence of proactive education for ratepayers about their options to shop, the Retail Energy Advancement League developed a shopping guide to help customers navigate the EnergySwitchMA website with explanations of contract terms and helpful shopping tips.
“I have exercised my energy choice right in Pennsylvania and shopped for energy supply for the past 15 years. When you look at some of the other state competitive markets, it becomes clear there are some fundamental consumer protections and market structures that do not exist in Massachusetts,” saidAbby Foster, Vice President of Policy and Advocacy for REAL. “We applaud Rep. Tackey Chan for his leadership in identifying the common sense reforms and consumer protections laid out in House Bill 3155 that will improve the market, rather than resorting to removing the right for Massachusetts residents to access options and choose for themselves.”
Why Utility Rates Are So High: How Retail Markets Can Help
With energy prices on the rise, monthly utility bills are catching many consumers by surprise.
Rate shock occurs when utility rates increase so sharply that some customers struggle to pay their bills. Rate shock is stressful and disruptive to people’s day-to-day lives, wreaking havoc on household budgets.
Consumers, on average, paid 14.3% more for electricity last year than they did in 2021, which is more than twice the overall 6.5% increase other commodities saw from inflation, according to data released by the U.S. Bureau of Labor Statistics. Electricity to heat homes is expected to cost 10.2% more this winter compared to last year — that’s around $1,400 for the season, according to data from the National Energy Assistance Directors’ Association.
PECO Energy’s Residential Standard Service Price, 2020-2023
While volatility in the market always exists, it’s fairly unusual to see peak after peak for ten days or more. While consumers can expect energy prices to dip over the coming months, volatility is expected to return next winter.
Why Are Utility Prices So High?
Utility rates increase when there is volatility in the market. Natural gas is the marginal fuel in many power markets, meaning utilities use it to meet increases in power demands. So, when the cost of natural gas goes up, or there’s a short supply of natural gas, it impacts all electricity costs.
Right now, economists warn that electric bills will continue rising because liquified natural gas (LNG), which fuels more than one-third of our nation’s electricity, is still in short supply as the United States ships large amounts of LNG to Europe. These shipments replace the lost imports from Russia, which, due to the war with Ukraine, have dropped significantly.1
As such, default service (non-shopping) rates for electricity have spiked recently in Northeast states like Connecticut, Massachusetts, and Pennsylvania, leaving customers paying a heavy price.
A new study by Ownerly found Connecticut has the highest electricity bills in the continental United States. Connecticut’s average household, which only falls behind Hawaii on the list, has paid $2,077 in electric bills over 12 months through last September.
In Massachusetts, soaring electricity costs have left customers reeling. One of the state’s major utility companies, National Grid, reported in the fall that the monthly electric bills of an average residential consumer would increase by 64%, and the average monthly natural gas bill would increase by 24% for six months beginning Nov. 1. As the Boston Globereported, some families experienced increases of more than 80% even though usage only went up 17%. Energy assistance programs in Massachusetts reported an increase of 8% more applications than last year.
In Pennsylvania, rates that non-shopping (default service) customers pay utilities for electricity have more than doubled in some cases between December 2020 to December 2022. On June 1, prices spiked between 8% and 46%, depending on the utility. Then, on Sept. 1, after another adjustment, costs rose again as much as 19%. The next rate adjustment on Dec. 1 had prices tripling from what consumers were paying just two years ago.
So, what can competitive energy markets do about it?
How Retail Energy Markets Offer Relief
Consumers in 17 states nationwide have an option. In competitive retail electricity markets, customers have access to energy choice. This means they are not beholden to the default service rate and can shop around for better rates that are typically lower than the default service when rate shock occurs. Unlike utilities, retailers are able to base prices on a forward energy curve. That price can be lower, and it enables retailers to extend 3-36 month fixed-rate contracts, safeguarding customers from rate shock. In many instances, this market solution helps the customer save money, and budget more effectively, as their rates do not increase, despite changes in the overall market.
Using Pennsylvania as an example, as of April 2023, PECO’s price to compare sits at 9.72 cents per kWh.
There are 111 products available from retail providers in PECO’s service area
84 of the 111 products offer a more affordable price than standard service
76 of the 111 products are cheaper than standard service offer fixed price plans, meaning the price will stay the same throughout the entire contract period
23 products that are 100% renewable energy are cheaper than standard service offer rates
For states hit hard by skyrocketing rates, like Connecticut, Massachusetts, and Pennsylvania, REAL created shopping guides for customers to use to learn more about current rate increase information and resources for how to shop and how best to compare suppliers.
How Can Retail Suppliers Provide More Stable Prices than Utilities?
It’s only natural to wonder – how do retail energy providers maintain price stability during times of volatility? The answer to this question stems from the nuances of how power is bought, sold, hedged, and supplied. Although competitive energy suppliers purchase energy from the same wholesale market as utilities, competitive energy suppliers have the leeway to purchase power in many different ways. Utilities, on the other hand, are completely subject to live market conditions, meaning they are exposed to price volatility and have no option but to purchase power at the current market price.
For example, a retail energy supplier may have purchased its energy via a long-term contract prior to the unprecedented rate hikes we’ve seen over the last year. In this case, a retail energy provider’s cost will be unaffected by the current market conditions, as it was able to secure energy long in advance at a fixed price. This is known as hedging, where a retail energy supplier buys energy in advance to offset any potential price spikes or dips. By doing so, they can offer their customers a more stable and predictable price for their energy consumption.
In summary, retail energy suppliers are able to maintain price stability during times of volatility through advanced purchasing strategies, and in doing so, they can offer customers a more predictable and stable price, while shielding consumers from the risks of the live market.
Product Solutions to Rate Increases
Beyond market solutions, there are also product solutions to help customers save money.
Some retailers offer smart time-of-use tariffs with digital apps and simple interfaces so customers can save money by dictating how and when their usage will increase and decrease. Others implement demand response with smart thermostats where retailers pay customers for the right to roll back energy usage during peak periods.
Energy efficiency programs also help retail energy suppliers maintain price stability for consumers. These programs encourage customers to use energy more efficiently, thus reducing overall energy consumption and the need to purchase more expensive energy during times of peak demand. By reducing overall energy usage, retail energy suppliers can lower the demand for energy and the cost of energy supply, which ultimately benefits customers by keeping prices stable.
Depending on the situation of each individual consumer, the opportunities abound.
Customer Services and Consumer Protections
Exceptional customer service is at the foundation of competitive retail markets because suppliers must earn every customer every day; customer service is especially important during times of rate spikes. Retail energy suppliers have offered initiatives like usage alerts, payment plans, and funds for low-income customers to support their customers during rate hikes.
Consumer protection requirements are always necessary, particularly during times of high rates. Many states list the rights and protections consumers have on the official sites for shopping (listed at the end of this blog post). For example, in Pennsylvania, there is a list of shoppers’ rights that consumers should review before getting started.
In the end, restructured markets provide customers experiencing rate shock with optionality to choose the best product for their needs; retailers are investing in innovative products that provide cost-savings with access to data and voluntary demand response programs. Customers have the opportunity to choose their preferred product, while retail suppliers are motivated to provide innovative cost-saving products beneficial for all parties involved.
While retail suppliers may not offer a product that beats standard service 100% of the time, its stability offers a haven for customers impacted by rate shock.
