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UtiliCorp: ‘Patchwork’ Unbundling Slow to Develop
Despite the advent of retail gas and electric competition instates such as California, Georgia, Ohio and Pennsylvania,UtiliCorp United officials do not regret their decision earlierthis year to shelve retail commodity marketing and disband theEnergyOne partnership with PECO Energy. The outlook for retailcompetition is still quite bleak, UtiliCorp Chairman Richard C.Green, Jr. said last week at a press briefing in Washington, D.C.The status of the retail market has not changed, and regulators andlegislators still appear headed in the wrong direction.
Although 18 states, representing 46% of the U.S. population, areimplementing open access this year, with most reaching fullimplementation by 2003, that cannot be considered the fast track to”robust” retail competition, according to Green. “The bottom line[is that] we may very well end up facing something far short of therobust competition that can provide the broad range of benefits theAmerican consumer expects and deserves,” he said. The states arestill headed toward a “patchwork quilt” of regulations that willproduce at best “light competition.”
“And while a tremendous burden to us, it may be politicallyexpedient for Congress to simply permit the patchwork to continue.”Just the threat of competition has already forced power prices todecline. Competition in the wholesale power market will put addedpressure on prices. “So there will be an irresistible temptation tobelieve.that we in fact have robust competition” when, in fact, wedon’t.
Evidence that the industry is beginning to realize competitionis a long way off can be seen in the recent decline of mergeractivity. “With deregulation essentially not moving forward, theurgency to consolidate, to think about those competitivestrategies, is not there,” said Green. “You’re not compelled tomove.”
Green offered three suggestions for regulators and legislators:”What they really need to do is.recognize that as soon as they evenhint that there is any competitive market coming that the spirit ofcompetition begins right there. The competitors are right there intheir face, smiling, deciding how they can skew the marketstructure in their favor. And that could tilt and delay a goodmarket going forward. Secondly, they need to go over the wall andunderstand that competition is the best regulator of the industrygoing forward. And thirdly, they need to recognize where the burdenof proof should be. The burden of proof needs to be with the onethat offers the restriction, [the regulators]. To prove that thisrestriction does enhance the competitive market as opposed to causean advantage for some of the competitors in the market.”
In an interview with NGI, Green said the overriding message isthat the states need to get on the same time line and start with a”common path of rules so that there’s definition in themarketplace.” Exactly what those rules should be he wouldn’t say.But Green thinks the incumbent utility should be able to compete inretail sales.
“It needs to start with some framework legislation at thefederal level, and I say framework because I’m not saying mandates.I think it’s important that it is recognized that we’re talkingabout a national marketplace. I am pessimistic that a lot willoccur soon. I think inevitably it will happen over time. It willjust take long. I think next year there will be some restructuringlegislation, but I think it will be a very small first step. But atleast it’s a first step.”
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