Low-Cost States Gain under Customer Choice, Study Says
The notion that electricity customers in high-cost states will
obtain lower priced power under retail competition at the expense
of customers in low-cost states was debunked in a pipeline-backed
study released last week.
The study, which was commissioned by the INGAA Foundation,
concluded that "all consumers, in both high- and low-cost states,
stand to benefit from a competitive retail electricity market" in
the years ahead.
The study hopefully will "contribute to a rational discussion of
the issue" on Capitol Hill, where concerns exist about whether
customers in low-cost electricity states, such as Kentucky and in
the Pacific Northwest, will reap any measurable benefits from
customer choice. The results indicate the benefits will be
considerable for these customers "contrary to what some people are
saying," noted Anne Roland, executive director of the INGAA
Specifically, the study said that while competition may cause
electricity markets to become more integrated and prices to move
toward convergence, the differentials in regional pricing still
will continue as the retail markets are opened up. This will be
largely due to the fact that transmission costs and capacities
between and within regions place limits on power flows. As a
result, "such constraints mean that low-cost regions should
continue to enjoy lower than average costs while high-cost regions
attract new suppliers."
In addition to price relief, "competition...can be expected to
significantly improve efficiency since in deregulated generation
markets, sellers - not consumers - will bear the risk of excess
generation capacity," the INGAA Foundation study noted.
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