Is Electric Retail Choice Working?

Yes, or maybe? I thought it would be simple to answer this question, but it turns out it really is not.

To determine if electric retail choice is working, we first need to determine what it was intended to do.  The most frequent answer is to reduce electricity bills. So, is electric retail choice reducing electricity bills?

Yes — for some customers. It is generally agreed that it is working well for commercial and industrial customers who can thoroughly evaluate options and utilize the competitive market in their favor. However, it has not resulted in lower electric bills for many mass market consumers including residential and small commercial consumers.

New York has been reviewing retail choice since 2012, with the attorney general looking to prevent retail energy providers for residential consumers. In March 2018, the Massachusetts Attorney General’s Office reported that consumers in the competitive supply market paid $176.8 million more than they would have had they gotten electric supply from the utility between July 2015 and June 2017.  The report also recommended that the Massachusetts legislature consider eliminating retail choice for residential customers.

In February, Connecticut announced proposed legislation that would prevent retail electric suppliers from entering into new contracts with residential customers after October 1 of this year. State Consumer Counsel Elin Swanson Katz reports that between 2015 and 2018 Connecticut consumers using retail electric providers paid about $200 million more than customers getting electric supply from the utility company. It seems the answer to the question of whether electric retail choice is reducing the electric bills for mass market customers is no.

However, other goals of electric retail choice include creating a competitive, rather than monopolistic marketplace, and creating new product offerings. Has electric retail choice been successful in helping achieve these goals?

Yes, it has. Electric retail choice has been successful at creating a market in which consumers can choose an electric supplier based on cost as well as other criteria such as program benefits. For example, many retail electric providers give consumers options to select a green generation source such as solar or wind. Customers may be willing to pay more for this option for the benefit it provides to the environment. Or consumers may choose an option that has a higher rate but is flat, rather than variable and unpredictable, over a defined period of time.

Overall, electric retail choice is working for commercial and industrial customers, and may or may not be working for mass market customers depending on your perception of what retail electric choice is intended to do for consumers. Hopefully, with strict regulation and oversight to make choices transparent, electric retail choice will continue, and perhaps, satisfy consumer expectations.

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