Washington D.C. – A new report finds that consumers in states with restructured energy markets are better off than states still holding onto the monopoly utility model. States that allow competition are also better positioned to support the transition to clean energy, consumer adoption of electric vehicles and reduce carbon emissions without relying on ratepayer or taxpayer dollars.
The report, “At the Crossroads: Improving Customer Choice for Products in the U.S. Electricity Sector,” authored by the Analysis Group, provides a thorough analysis of different state and industry experiences with retail energy markets, explores effective methods to evaluate market benefits, and proposes reforms to maximize these advantages.
Report findings demonstrate that retail energy choice has substantially increased the options available to consumers for the purchase of electricity, played a critical role in the development of clean energy resources, created and marketed a wide range of products that are designed to meet consumers’ energy cost management and non-price preferences, and creates the conditions to lower all energy costs in the state market over time.
“While the original intent behind retail choice was focused on reducing energy costs, the benefits of today’s competitive retail energy market extend well beyond price,” says Paul Hibbard, author of the report and former chairman of the Massachusetts Department of Public Utilities. “It allows consumers to exercise choice, allows for unique product offerings tailored to consumer interest, and fosters innovation that will be a powerful tool in the toolbelt states will need if they are to successfully achieve decarbonization goals. However, now is a critical time for states to get it right.”
The report raised concerns on the methodology used in some existing market analyses that fail to consider the comprehensive impacts of competitive markets, relying solely on a price comparison of the default utility product and the variety of retail energy products over a specific time period as an indicator of the success of the market. For example, comparing the utility short term basic service rate against a 12-month, fixed rate 100% renewable retail energy product, an electric vehicle charging plan that includes charging equipment or a product that includes free nights and weekends for a set price. The comparison does not account for the additional derived value chosen by the customer.
“These diverse features and the continuously changing components and pricing of retail product offerings make it difficult to compare on a consistent basis outcomes across states, among retail suppliers within a state, or between competitive suppliers and utility default service offerings. Thus, an effective analysis on the health and success of competitive retail energy markets cannot hinge on price alone.”
Report recommendations include having states prioritize consumer education, improve state regulations to better protect consumers against deceptive advertising and increase penalties for bad actors.
“We stand ready to work with regulators on implementing the proposed reforms outlined in the report,” said Chris Ercoli, President and CEO of REAL. “By prioritizing consumer education initiatives, creating a fair environment for competition and ensuring fundamental consumer protections in place, restructured states can unlock the full potential of competitive retail energy markets and foster a more transparent, inclusive, and sustainable energy landscape.”