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EISA, NEM Battle Price Caps, Re-Regulation and Lack of Supply

EISA, NEM Battle Price Caps, Re-Regulation and Lack of Supply

More power generation, more competitive choices for customers and less regulation are the keys to limiting power price increases, according to the Electric Power Supply Association (EPSA), and the National Energy Marketers Association (NEM), which are mounting separate attempts to diffuse growing public outrage over energy price increases.

NEM is urging state public utility commissions (PUCs) and Congress to help fight against the recent price volatility in wholesale energy markets across the nation. NEM will hold an Industry Leadership Roundtable Oct. 30-31, and EPSA will convene a stakeholder summit on Aug. 29, "The Summer of 2000: Lessons Learned during the Transition to Competition," to identify and discuss possible solutions that would bring competitively priced power to consumers.

"At our April meeting, [Energy] Secretary Richardson warned the country about price spikes and possible shortages. Now that it has come to pass, many politicians are surprised and are calling for actions that could make matters worse," said Craig Goodman, President of NEM.

Why are more generating facilities not being built in Southern California and other energy-short areas? "It is because arbitrary price caps, after-the-fact price revisions and other regulatory interventions into the free market send misleading signals to market participants," according to a position paper being circulated by EPSA.

NEM says that Congress is responsible for "stripping down" restructuring legislation in the electricity industry to the point where there is no meaningful or constructive overhaul in sight. In response to widespread price volatility, state legislatures, along with PUCs, have established a series of regulations including price freezes, roll-backs and discounts. Demand is increased due to lower prices, but new plants are not being built to meet that demand. NEM believes these actions have "exacerbated a shortfall in new power supply."

"You can't legislate or regulate lower prices, block new power plants from coming on line, and then expect prices to remain stable," said Goodman. "Retail customers suffer when regulators fail to provide for truly liquid wholesale markets. Either the federal government needs to mandate price decontrol and grant FERC the powers necessary to get the job done, or the states will have to fully unbundle utility rate bases quickly and fairly so consumers can start shopping for competitively priced energy with shopping credits that reflect the full costs of serving retail load. Under partial decontrol, consumers are forced to pay twice for these services, whether they want them, or not."

Lynne H. Church, EPSA's president, said, "The events this summer in San Diego clearly show that we have not reached full competition. Much work needs to be done so consumers won't be faced with unnecessary market volatility and higher prices for power. Re-regulation isn't the answer, full competition is." In the position paper, "Real Competition is the Solution, Not the Problem," the group notes the lack of sufficient generating capacity in many parts of the country, and blames in part, excessive environmental and other local regulation which has delayed siting and construction.

Also, EPSA maintains, in order to send the correct signals to the market, new equipment and controls are needed so consumers can cut their usage during peak periods to save on their electric bills. Customers also should have the option to purchase energy cost insurance as a risk management tool for small users.

EPSA's stakeholder summit will convene in Chicago. Invited are customer representatives, consumer advocates, regulators, energy experts, regulated utility officials and competitive power suppliers. The all day meeting will be held at the Radisson Hotel, O'Hare near the Chicago airport. A copy of the EPSA position paper can be found on the EPSA web site, www.epsa.org.

NEM's Roundtable will be held in The Woodlands, TX. NEM will extend invitations to leaders in the energy information, services, technology and telecom-bandwith industries to join NEM's Policy Development Team in discussing these issues. More information can be obtained at NEM's web site, www.energymarketers.com.

Alex Steis

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