Choice, Consequences, and Consumers

PACE Looks Ahead with Manufacture Alabama
July 26, 2017
A Lease on Life for U.S. Offshore Resources
August 2, 2017

PACE was on the road in July, covering national meetings of state legislators such as the American Legislative Exchange Council, the Southern States Energy Board, and the Council of State Governments’ Southern Legislative Conference. It was a privilege to hear hours of thoughtful discussions and be reminded how hard our elected officials work to get energy policy right for consumers. We were also able to share some thoughts about net metering and the importance of policies that avoid cost-shifting to customers who don’t (or can’t afford to) choose solar.

The energy policy workload isn’t going to lighten up anytime soon. If summer discussions are a good predictor, state legislatures nationwide will be considering issues including: support for baseload power, electric vehicle subsidies, storage programs, cybersecurity, wind tax credits, and energy efficiency incentives.

Just as in the past several years, state policy discussions will be influenced by reports and rhetoric surrounding changes in the energy industry. In the late summer or fall, national policy directions from the Trump Administration, such as the Department of Energy’s grid study and the White House task force on regulatory reform, may emerge and further shape the state-level policy debate.

Taking a look at the landscape and reflecting on talk of change in the air, PACE anticipates that advocates for energy deregulation, labeling themselves as “customer choice” voices, will re-emerge on the state and national scene. They’ll seize upon the mantra that “changes in technology demand changes in fundamental market structures and rules.” New market research will appear saying that an overwhelming majority of consumers favor choice. Attractive advertisements will show images of electric cars, smart thermostats, and fresh-faced millennials managing their energy consumption from their fitness band-watches. This is, of course, a rosy picture that belies a much more complicated reality.

For that reason, it seems timely in August, as states look ahead to 2018 legislative sessions, to share some lessons learned from our country’s 20-plus year experiment with competitive retail electricity markets.

In a nutshell, deregulation hasn’t worked for consumers. In state after state with deregulated electricity markets, prices are higher than in state with traditional markets. Consumers and businesses grapple with price volatility under deregulation. Reliability emergencies can be directly tied to supply constraints caused by deregulation. In some states, regulators and courts are investigating energy marketers for misleading claims and ordering refunds to low-income consumers. Furthermore, regulators seem to be spending just as much time watching over and fine-tuning the deregulated markets as was required previously for traditional regulatory structures. The bottom line? Deregulation is fraught with consequences that advocates aren’t likely to advertise, but that policy makers need to hear.

This Fall, PACE will devote more blog space to this important topic, highlighting specific case studies and consumer experiences.  As we develop this conversation, we’d love to hear from consumers, legislators, regulators, and staff about deregulation and how it has manifested in your states.