Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS 2015)

Millions of electricity customers in North America live in states and provinces that allow shopping for electric service. At least seventeen million residential consumers (forty-three percent of those eligible) and most large business consumers (eighty to ninety percent) have exercised their right to choose, according to DEFG’s Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS). Most residential consumers lock in a price that is not subject to market volatility. Others prefer bargain shopping, and they willingly and frequently switch providers. Others prefer a convenient bill payment feature, such as prepaid utility service, or a time-of-use option that encourages changes in behavior. One example is “free mornings and evenings” with no cost for electricity between 7:00 and 10:00 a.m. or 7:00 and 10:00 p.m. daily. To read the full report or executive summary, go to DEFG.

After the July 28, 2015 release, several news organizations wrote about ABACCUS 2015. Here are sample stories:

Utility Markets Today. (subscription service) “DEFG: Latest retail market-states report released” by James Downing; Reproduced with permission.

The Energy Daily. (subscription service) “Report shows electricity choice entrenched, but stagnating in U.S., Canada” by George Lobsenz.

Energy Wire. (subscription service) “Texas garners top spot in residential choice as 8 states see decline” by Edward Klump; Reproduced with permission.

The Knowledge Problem. (blog) “ABBACUS report highlights benefits of retail electric markets” by Lynne Kiesling.

Houston Public Media. “Power To Choose -Or To Pay More? State Of Texas Website Faulted By Consumers” by Dave Fehling.

Retail Energy X. “Regulator: End of Default Service Would Likely Be Considered In ‘Utility of the Future’ Proceeding” by Paul Ring.

Energy Choice Matters. “ABACCUS: Municipal Aggregation Risks Becoming ‘End Point,’ Stifling Choice” by Paul Ring

Energy Choice Matters. “ABACCUS Releases Ranking of Top Retail Electric Markets” by Paul Ring.

Texas Electric News. “Study Finds High Percentage of Consumers Participating in Competitive Electric Markets, as Texas Remains the Leader” by Margarita Fournier.

Fierce Energy. “Clear winners? Experts claim deregulated retail energy markets are better” by Barbara Vergetis Lundin.

Pittsburgh Post-Gazette. “PA electric market grows as customer base shrinks” by Daniel Moore

Pittsburgh Post-Gazette. (blog) “Report: Pennsylvania electric market grows as customer base shrinks” by Daniel Moore.

PA Environmenal Digest. “Report: PA Ranks 2nd In U.S. For Electric Competition” (article based on PA PUC press release)

Pittsburgh Tribune-Review. “Pa. improves performance among competitive electric markets” by Tory Parrish.

Energy Manager Today. “40% of Consumers, 80% of Businesses Choose Competitive Electricity Retailers” by Cheryl Kaften.

Buildings.com (blog) “Competitive Electricity Markets Benefit Consumers”

Retail Energy Supply Association (RESA). “Electricity Competition Drives Market Entry and Innovation in Products and Services, ABACCUS Study Shows”

COMPETE Coalition. (blog) “ABACCUS Study Shows Competition Thrives in States That Allow Customers To Choose Providers” by Bill Massey

The DEFG press release, “Four-in-Ten Small Consumers and Eight-in-Ten Large Consumers Participate in Competitive Electricity Markets,” appeared on Business Wire.

Statistical relationship between electricity prepayment and conservation

DEFG’s “Prepay Energy Working Group” has been studying the potential for energy conservation as a result of prepayment. Using billing data from Oklahoma Electric Cooperative, an economist hired by DEFG applied econometric techniques (statistics) to estimate the effect of prepayment on electricity usage. DEFG and the Prepay Energy Working Group announced, “The major finding is that participation in prepaid electricity service results in an average reduction in energy usage of 11%.”

This is huge! A white paper released on March 20, 2013 explains that the cost savings are due to reductions in energy use, and not disconnection (“service disruption”). For more information on prepaid electricity, click here.

This finding implies that better informed consumers make better decisions. Customers at the Oklahoma Electric Cooperative can check their usage daily and adjust usage accordingly by paying closer attention to energy waste. The daily feedback is thirty times more information than we normally receive from a monthly utility bill, and it is more timely.

This writer received prepaid electricity at his home in Houston (May 2012 through March 2014). Each day a text message on my phone indicated daily usage, daily cost, account balance, estimated days of service remaining, cost per kWh, etc. That’s a lot of information packed into one SMS. I can ignore or review the daily message depending on my needs. I learn what it costs to power major appliances.  I note the savings when I am out of the house for a day, and learn the value of adjusting my thermostat.

Alberta Retail Market Review Committee

I am pleased to announce that I have been selected to serve as a panelist on the “Retail Market Review Committee” (http://www.rmrc.ca) for the Province of Alberta, Canada. The March 22, 2012 announcement indicated that the RMRC will examine the volatility and costs of the “regulated rate option” (RRO). (RRO is the name given to Alberta’s default service. Other jurisdictions refer to “basic service,” “standard offer service,” or “price to beat” for the default or transitional service.) Default service is a service defined in a regulated electric tariff. The tariff sets forth a price for for consumers who have not yet selected a retail energy provider (competitive supplier). A typical consumer may not take action right away, waiting to see what friends and family do in the new retail energy marketplace. Default service allows a transition period from fully regulated utility service to competitive retail energy service. Nearly 20 states and provinces in North America take this approach for electricity. With competitive energy service options, consumers have choice, control and convenience.

The Retail Market Review Committee will submit a report with recommendations by late June 2012. (Note: This was extended to September 2012.)

• Government of Alberta Department of Energy Ministerial Order 32/2012
• Government of Alberta News Release March 22, 2012
• Government of Alberta Retail Market Review Committee Website (Note: This now contains numerous documents for public inspection.)
• Government of Alberta Utilities Consumer Advocate Website

(This entry was updated on March 19, 2013. The Minister of Energy issued a press release on January 29, 2013 to announce its decisions regarding the report. DEFG issued a press release on Alberta’s decisions.)

When exactly did electric competition begin?

On November 30, 2011, a media call was conducted to announce the release of the 2011 ABACCUS report. During the call, the chairman of the Pennsylvania Public Utility Commission explained that the price caps on default service in Pennsylvania were removed in 2011; therefore, competition in residential electricity was really just beginning. The numbers support Chairman Powelson’s declaration. Consumer switching numbers have been rising rapidly for a year or so. The number of retail suppliers is increasing. The number and types of distinct offers is increasing.

But when did electricity competition begin in Pennsylvania? When have enough actions been taken to reform a market that we declare it “open to retail competition”?

In Texas, the “price-to-beat” default service (regulated basic or standard service) was in place from 1/1/2002 to 12/31/2006. During those five years, the residential consumer could take no action (or simply remain oblivious to retail choice), and be assured that they would receive service on a regulated rate (tariff). The PUC of Texas continued to set and adjust the price-to-beat every six months. While it is difficult to compare one state with another, it appears that the disappearance of the price-to-beat marked the beginning of a significant new era in competitive electricity markets in the U.S.

The 2011 ABACCUS report states that phasing out default service is a key issue relating to electricity choice. Many Texans were exposed to market forces on 1/1/2007 for the first time, even if they had not made an affirmative choice of retail supplier by then.

That was five years into the “opening of the market.” It’s now five years later … the tenth anniversary is approaching!  But when did retail electric choice in Texas actually begin, in 2002 or 2007?

Consumer access to electricity prices and choices

During the November 30, 2011 media call to announce the release of the 2011 ABACCUS report, the chairman of the Public Utility Commission of Texas explained that Texas had been a leader in the development of a Web site to allow residential consumers to compare prices and options in the competitive retail electricity market in Texas. Chairman Nelson encouraged everyone to visit “PowerToChoose.org” to see recent improvements.

Texas is one of a handful of states that has determined that among the most important tools available to residential consumers is easy access to good pricing information. Let’s face it: after a century of prices set by a governmental agency, it can be daunting for the typical consumer to believe that you can buy electricity the way you select a gasoline brand, choose the octane level, or pick a favorite gas station. We have made those fuel choices for a century, but until recently we have lacked the choices that power our homes. Moving from the regulated electric utility tariff to a market price from a competitive energy supplier may be daunting to some people.

These states offer a Web site that facilitates price comparisons. Try them and comment on which ones you prefer and why!

• Connecticut: CTenergyinfo (select a utility)
• Illinois: PlugInIllinois (select “compare offers” then select a utility)
• New York: NewYorkPowerToChoose (try Zip code 10001)
• Pennsylvania: PApowerswitch (select “shop for electricity” then select a utility)
• Texas: PowerToChoose (select “go directly to offers” then select a utility)

It does not take long on these sites to understand the range of service and pricing options available. In Texas, for example, there are about 250 choices from nearly 40 companies. The choices are organized by type with tabs to allow a filtering of the display: fixed pricing (3 to 60 months of price protection), variable offers (month-to-month pricing), indexed pricing (e.g., electric price linked to another price such as natural gas), promotions (discounted months or other option) and prepaid energy. (Read blog entries about prepayment/pricing.) A drop-down option allows filtering on renewable energy content for the other choices. (For example, 61 of the 214 fixed price offers in the Dallas-Fort Worth area are 100% renewable energy content; however, none of the ten prepaid offers is 100% renewable energy content.)

Read about the ABACCUS report release.

Consumer‐Focused Innovations in Electricity Markets

States that have opened their electricity markets to retail competition have seen a surge in consumer‐driven product and service innovation over the past few years. The Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS) was released today. According to the 2011 ABACCUS report, commercial and industrial customer choice is thriving and growing in many U.S. states and Canadian provinces. Well‐structured retail electric markets encourage the introduction of new products and services. In fact, in a highly competitive market, retail suppliers must develop new products and services in order to acquire and maintain C&I consumers.

In residential markets, competition has prompted retail electric suppliers to deliver a growing portfolio of innovative energy management solutions and energy transaction options. The result is greater control of energy usage by consumers. While not all options in the market today are designed to promote energy management, the sheer number of options available to residential consumers ensures that everyone can find a product that meets his/her needs. The number of residential products in states at this time is:

The ABACCUS report identifies Texas as the competitive retail market leader for the fifth consecutive year. New York also is cited for policies that have created an excellent competitive market. Illinois and Pennsylvania are highlighted as having made the most substantial progress with their competitive markets since the last year’s ABACCUS report. These markets have vibrant markets with numerous retail energy suppliers and numerous service choices for customers of all sizes.

Energy Conservation and Energy Prepayment

We have issued the seventh “Series of Regulatory Choices” white paper at no charge to the public. Dr. Michael Ozog, a respected economist, sets forth a methodology to measure the impact of energy prepayment (prepaid electricity) on energy consumption. (Download the paper.)  The simple truth is that when you pay in advance, you give more attention to how you spend your money. Prepayment removes the utility or competitive energy supplier from the role of money lender. It places the consumer into the role of energy manager which is compatible with the role each of us plays as home budget manager for everything we buy.

How much does this matter?

Previous studies show about 10% savings simply because consumers pay more attention to how they are using the electricity. I expect this to grow over time as consumers seek new channels of information, new technologies and new services to reduce energy use through increased investments in efficiency. A portion of the energy savings will go to consumers who make these choices. And a portion of the savings will go to the businesses that come up with products and services that allow the consumer to be more efficient.

The 7 billion bodies question

A lot of people are worrying about the world population this week as we approach 7 billion. (US and World population clock.) I am an optimist; I believe we can find new resources, develop new technologies and use the existing resources and technologies more appropriately. That is, we could be much, much more efficient. We can reduce the impact of the industrial revolution on the planet, even as we approach 10 billion people in the coming decades.

The blunt, inefficient tools of the industrial age create pollution and waste. We can use information technologies to dramatically reduce waste. The old tools were great in their day — in the 18th, 19th and 20th centuries. It is time to move on to the information age.

Aren’t we already in the information age?

No, with respect to energy use, we are not out of the industrial age. It is premature to declare that we have entered the information age. Smart phones, mass communications and the Internet are just the tip of the iceberg of necessary advances. We must educate and inform ourselves. We must make a transition to much greater efficiency to lessen our waste of resources.

Freedom, education and wealth are excellent ways to promote the stabilization of the population. Population grows more slowly in places with freedom, education and wealth. Education and awareness lead to changes in the patterns of behavior. With freedom, education, and wealth we develop new technologies and tools that can lessen the impact of humans on the planet.

A lot of Americans are ready to criticize other countries for their population growth. Let’s stop finger pointing. It’s easy to talk about what other people should do. Find a mirror and take a look.

Education and self dicipline are great tools for each of us to apply to get our literal and figurative houses in order. Nearly every major issue facing the US today would be resolved if we were more efficient and less wasteful.

Prepaid Energy: Choice, Technology, and Consumer Protections

DEFG’s research regarding the potential for prepaid energy service has revealed some differences among stakeholders. These differences parallel the approaches people take with regard to utility service. Is it a monopoly with costs and services shared equitably? Or is it a service provided in the market place with consumers exercising choice.

Some stakeholders consider prepaid energy service a positive innovation for consumers — a 21st century payment channel that uses the investments in advanced meters and leverages the capabilities of the smart grid. Others view prepaid energy as potentially predatory and discriminatory toward low-income consumers. A new DEFG white paper (in the “Series of Regulatory Choices”) discusses the low-income issues.

There appears to be a common desire to see low-income consumers pay fair rates for electric service. There is also a universal desire to protect consumers during dangerous weather periods (moratoria on disconnections). Despite these common concerns, the biggest barrier to prepaid energy service seems to be that industry stakeholders do not see eye-to-eye. There are significant differences in how they frame the issues, and this make it hard to resolve policy differences.

Can DEFG identify a basis for trust to address the challenges, concerns and opportunities presented by prepaid service? DEFG has four screens that create an analytical framework to examine existing regulations. Let’s see whether a fundamental principle involved, such as “everyone must be served equally”? A rule formulated decades ago may be based on a practice that could not anticipate 21st century technologies. New technological capabilities may allow a change in the rules without giving up our basic principles. To what degree will consumers be permitted to make choices and express their preferences? How will be balance equity and efficiency?

In some cases, a rule or practice may be rooted in an ideological difference, such as supporting or opposing the role of competition in energy markets. A more rigorous analytical framework may allow us to identify an underlying motivation, and thus advance the discussion and possibly narrow differences.

Resource Adequacy and Resource Attributes: Is the Jar Half Full or Half Empty?

When one approaches a task, however simple, the brain assembles a series of small steps that, taken together, represent a plan of action. You carry out the plan based on the picture in your brain. A disagreement can arise with someone else when there is a failure to clearly communicate the different meanings of the words used to describe the tasks or execute the plan.

There is a common parable about a jar of rocks. Imagine a jar. The task is to fill it. You have large pebbles, and you begin to drop them into the jar until it is full. A friend comes along and you show her your accomplishment. She observes that the jar is not full, and she collects small pebbles and sand. She adds them to your jar. The large pebbles serve one purpose, and the smaller ones serve another. The two of you agree the jar is now quite full. You share your story with a third friend, who finds some water. He adds the water until it reaches the rim of the jar. Liquid has brought a new attribute to the simple task of “filling a jar.” Indeed the mass in the jar is greater now than it was a moment ago. Sand filled spaces among the large pebbles, and water filled spaces among the grains of sand. The three of you have finally accomplished the task. But wait! Along comes a fourth friend with a bag of salt, and you find that salt brings additional attributes to task of “filling a jar.” Salt is added to the apparently full jar, and the mass of the jar plus its contents increases again as more salt is dissolved in the water. Will this ever end? Along comes a fifth friend with a heat source, and the jar becomes “fuller” still as thermal energy is added …

Download a white paper: Resource Adequacy and the Cost of Reliability

Electric systems seemed complete or “full” decades ago when utilities built power plants, transmission lines, distribution lines and the associated facilities to control voltage and frequency. Every day, it seems, a new device or service comes along to disrupt the tranquility of the electric system which was already “full.” New resources bring new attributes to a complex system. We disaggregate products and services to accommodate the new resources that have one valuable attribute but lack another. Wind power provides clean energy but cannot be counted on in the same way as a natural gas generator because wind has a lower availability. Electric batteries provide fast acting ancillary services–short duration and extremely fast responsiveness–but cannot economically provide many hours or days of electricity. Some technologies are displaced, but others are complemented by new technologies.

If we talk through the needs for the electric industry and how to assemble resources that will complement one another, we may settle on a good mix of resources to provide basic service at a low or reasonable cost. Let’s keep the jar in mind, and talk through what it means to “fill the jar.” Let’s keep in mind that a variety of resource alternatives can provide lower-cost products and services and improve on the simple “large-pebble” solution.

More information:

• Download a white paper: Resource Adequacy and the Cost of Reliability
• Blog by the Texas Competitive Power Advocates (TCPA): How EPA Rulings Affect Texas
• DEFG’s 2012 Resource Adequacy Working Group: contact Nat Treadway, ntreadway@defgllc.com