Retail energy markets for commercial and industrial customers are alive, however, government policymakers on the state and national levels could severely retard them if they continue to blame market-based solutions for the western wholesale power market meltdown two years ago, two industry speakers told a GasMart/Power 2003 audience in New Orleans Tuesday. From both a utility and merchant energy service provider’s point of view, the key is getting beyond current negative perceptions among regulated and elected officials, particularly in the West.

“We’re going through a public policy crisis, a crisis of confidence in our legislatures and public utility commissions, and right now Capitol Hill is having a real struggle with what to do with about an energy policy,” said Robert Dickerman, president of San Diego-.based Sempra Energy’s merchant retail energy services unit, Sempra Energy Solutions. “Right now we have a major public policy question–is the retail energy market dead? And the question people are really asking is whether the economic model for markets is dead

“What is striking to me is that we have forgotten the lessons we have learned in every other commodity market. We have forgotten what the public policy benefits are (of markets) because we are looking through these lenses in today’s financial crisis. We’re looking at a few companies that committed fraud; and some companies that over-leveraged their debt, and it is unfortunate for those companies and shareholders. So we’re looking at a lot of mistakes, and mistakes can happen in a market.”

While noting that there are no guarantees of immediate lower prices in any market, Dickerman described California as being “more screwed up” than any other state in terms of its energy policy because of its perception that its recent energy crisis was caused by the shift to market-based solutions. He said there are “two valiant efforts” currently in California’s state legislature to re-introduce direct access (retail choice) in the electric industry, but neither is going to pass. “Customer choice is not dead but it is limited to about 12% of the market (investor-owned utility) load in the state,” Dickerman said

“The talk in Sacramento is that markets don’t work and that markets are bad; this informal dialogue in legislative hallways goes on all the time there.” Dickerman called the current perception that retail markets are dead “a huge, politically motivated, self-serving lie.”

For his part, James Stanzione, gas supply/control operator for Consolidated Edison in New York City, confirmed that the retail gas market is very much alive in his utility’s service territory, and he said the New York state regulators for the most part are encouraging both electric and gas retail competition.

“Transportation service options and (utility) operations flexibility are critical to retail customers,” Stanzione told the industry audience at GasMart/Power. He added that firm long-term pipeline contracts, storage contracts and hedging by ConEd are also critical in allowing it to provide retail choices. Since a state regulatory commission mandate it to do so in the late 1990s, what Stanzione called a “substantial portion” of ConEd’s customer usage is hedged.

“Utilities in New York are very active with the marketers and with the public service regulators. Generally, in New York the retail market is alive and doing well, progressing steadily over the past few years.”

Stanzione said the utility is precluded from knowing how much, if any, retail industrial/commercial customers are saving through gas transportation/’storage deals, but Dickerman said from his experience as a merchant provider that any customers who buy their own gas and/or power are saving or they wouldn’t be doing it. Dickerman added that generally he finds the utilities around the country “quite supportive” of facilitating retail competition.

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