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,concludes that “all consumers, in both high- and low-cost states,stand to benefit from a competitive retail electricity market” inthe years ahead.

Customers in formerly regulated industries, such as natural gas,”have embraced the notion of competition,” resulting in lowerprices, better customer service and more efficient use of thenation’s resources. “There is no indication that the impact ofintroducing competition in the electric generation industry will besubstantially different.”

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 find that the benefits will beconsiderable for these customers “contrary to what some people aresaying,” noted Anne Roland, executive director of the INGAAFoundation.

The study said that while competition may cause electricitymarkets to become more integrated and prices to move towardconvergence, the differentials in regional pricing still willcontinue as the retail markets are opened up. This is largely dueto the fact that transmission costs and capacities between andwithin regions place limits on power flows. As a result, “suchconstraints mean that low-cost regions should continue to enjoylower than average costs while high-cost regions attract newsuppliers.”

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.

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