The notion that electricity customers in high-cost states willobtain lower priced power under retail competition at the expenseof customers in low-cost states was debunked in a pipeline-backedstudy 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” inthe years ahead.

The study hopefully will “contribute to a rational discussion ofthe issue” on Capitol Hill, where concerns exist about whethercustomers in low-cost electricity states, such as Kentucky and inthe Pacific Northwest, will reap any measurable benefits fromcustomer choice. The results indicate the benefits will beconsiderable for these customers “contrary to what some people aresaying,” noted Anne Roland, executive director of the INGAAFoundation.

Specifically, the study said that while competition may causeelectricity markets to become more integrated and prices to movetoward convergence, the differentials in regional pricing stillwill continue as the retail markets are opened up. This will belargely due to the fact that transmission costs and capacitiesbetween and within regions place limits on power flows. As aresult, “such constraints mean that low-cost regions shouldcontinue to enjoy lower than average costs while high-cost regionsattract new suppliers.”

In addition to price relief, “competition…can be expected tosignificantly improve efficiency since in deregulated generationmarkets, sellers – not consumers – will bear the risk of excessgeneration capacity,” the INGAA Foundation study noted.

Susan Parker

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