NGI The Weekly Gas Market Report
More power generation, more competitive choices for customersand less regulation are the keys to limiting power price increases,according to the Electric Power Supply Association (EPSA), and theNational Energy Marketers Association (NEM), which are mountingseparate attempts to diffuse growing public outrage over energyprice increases.
NEM is urging state public utility commissions (PUCs) andCongress to help fight against the recent price volatility inwholesale energy markets across the nation. NEM will hold anIndustry Leadership Roundtable Oct. 30-31, and EPSA will convenea stakeholder summit on Aug. 29, “The Summer of 2000: LessonsLearned during the Transition to Competition,” to identify anddiscuss possible solutions that would bring competitively pricedpower to consumers.
“At our April meeting, [Energy] Secretary Richardson warned thecountry about price spikes and possible shortages. Now that it hascome to pass, many politicians are surprised and are calling foractions that could make matters worse,” said Craig Goodman,President of NEM.
Why are more generating facilities not being built in SouthernCalifornia and other energy-short areas? “It is because arbitraryprice caps, after-the-fact price revisions and other regulatoryinterventions into the free market send misleading signals tomarket participants,” according to a position paper beingcirculated by EPSA.
NEM says that Congress is responsible for “stripping down”restructuring legislation in the electricity industry to the pointwhere there is no meaningful or constructive overhaul in sight. Inresponse to widespread price volatility, state legislatures, alongwith PUCs, have established a series of regulations including pricefreezes, roll-backs and discounts. Demand is increased due to lowerprices, but new plants are not being built to meet that demand. NEMbelieves these actions have “exacerbated a shortfall in new powersupply.”
“You can’t legislate or regulate lower prices, block new powerplants from coming on line, and then expect prices to remainstable,” said Goodman.”Retail customers suffer when regulatorsfail to provide for truly liquid wholesale markets. Either thefederal government needs to mandate price decontrol and grant FERCthe powers necessary to get the job done, or the states will haveto fully unbundle utility rate bases quickly and fairly soconsumers can start shopping for competitively priced energy withshopping credits that reflect the full costs of serving retailload. Under partial decontrol, consumers are forced to pay twicefor these services, whether they want them, or not.”
Lynne H. Church, EPSA’s president, said, “The events this summerin San Diego clearly show that we have not reached fullcompetition. Much work needs to be done so consumers won’t be facedwith unnecessary market volatility and higher prices for power.Re-regulation isn’t the answer, full competition is.” In theposition paper, “Real Competition is the Solution, Not theProblem,” the group notes the lack of sufficient generatingcapacity in many parts of the country, and blames in part,excessive environmental and other local regulation which hasdelayed siting and construction.
Also, EPSA maintains, in order to send the correct signals tothe market, new equipment and controls are needed so consumers cancut their usage during peak periods to save on their electricbills. Customers also should have the option to purchase energycost 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.
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