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 electric service, or a new time-of-use option that encourages load shifting, such as “free mornings and evenings” with no cost for electricity usage between 7 and 10 a.m. or 7 and 10 p.m. daily. To read the full report or its executive summary, go to DEFG.

After the July 28, 2015 release, several news organizations wrote about ABACCUS 2015. Here is a sample of 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.

New website for DEFG

DEFG has a new website!

Sign up for DEFG’s announcements (fewer than 10 per year)
http://defgllc.com/publications/

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, 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.)

(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.)

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:

Regulatory Challenges Presented by Smart Grid-Enabled Prepay Offerings

The development of customer-facing applications of smart grid invites the question: How do existing regulatory constructs comport with technological innovation? At first glance, prepaying for energy may appear to be just another payment channel for consumers, where energy is purchased now for consumption later. When supported by smart technologies, prepay may be linked with a two-way communication channel between the supplier and consumer. Energy consumption data is made available to suppliers in regular intervals (fifteen-minute, hourly, daily, etc.), which allows for different types of pricing structures. Consumers may also opt to receive communications regarding payment and account updates, price signals (potentially using dynamic pricing), and energy management options. Prepay enabled by smart grid is thus a billing option with a consistent feedback loop delivered via SMS, email, web-based portal, in-home display, or perhaps a combination of these options. The information flow allows consumers to monitor their usage, creating opportunities to reduce energy consumption and costs. With prepay, moreover, the usage data is tied to the payment transaction in real time, so consumers can directly relate energy consumption with dollars.

Thus begins the newest paper in DEFG’s Series of Regulatory Choices titled, “Regulatory Challenges Presented by Smart Grid-Enabled Prepay Offerings.”  The paper sets forth many issues that regulators must address as they consider the balance between new customer service choices and customer protection.

DEFG believes that all regulatory agencies make a “series of choices” as they go about the business of administering the laws that govern the behavior of players in network industries. DEFG’s Series of Regulatory Choices explores the federal, state and local regulatory decisions that expand the choices available to energy consumers as they construct and inhabit buildings, purchase and maintain energy-consuming devices, purchase energy, or manage their consumption of energy. Greater choice increases efficiency.

It has been stated that prepay electric service is a “killer app” for smart grid — the first customer-facing application of smart grid that will have far-reaching consequences. Read more about our work on prepay or contact us to participate in our prepay working group in 2011.

Competitive Retail Electricity Markets Thriving

DEFG issued the “ABACCUS”  report today on the status of retail electricity competition in residential and commercial/industrial markets. (Press release.) Retail electricity competition is thriving. Prices are lower and the number of choices is up dramatically in certain markets.

ABACCUS refers to the Annual Baseline Assessment of Choice in Canada and the United States. The report identifies the successful markets in North America and explains the policy choices that led to those successes. Competitive electricity markets deliver the innovation, new investments, individual consumer choices, and new products and services that are not available in traditional electric markets.

Commercial and industrial customers have a significant variety of products and services available: locking in energy prices for a year or more, indexed energy prices, green or sustainable products, the development of on-site power generation, premium power quality services, backup power and reliability services, energy efficiency services and opportunities for customers to participate in bulk power markets.

Residential consumers enjoy lower prices and are poised to reap additional benefits as new technology is implemented. Smart grid infrastructure investments (advanced meters, communications and control devices, and in-home usage displays) allow entrepreneurial retail energy suppliers to develop innovative pricing and service choices. Consumers now have more choices, more information and better ways to control their energy bills and increase the value of electric service in their lives.

Bloomberg reported on ABACCUS with a story on electricity markets.  Several other stories are available:

Can we “go it alone” or do we require “nudges” to achieve our goals?

There is a certain pride when we “go it alone” to accomplish a personal goal. You may wish to do a little more exercise or eat fewer calories, and your ability to set and achieve the goal is gratifying. Make your goal harder, and your pride increases. 

Though we all set and achieve certain goals, we cannot achieve all our goals. There are goals which we consider less important to us personally, but which collectively may be quite important. Energy conservation goals may fall into this set. We may want to reduce waste, but we may not have the time, focus or discipline to achieve energy waste reduction. We may be aware that energy conservation is valuable to us personally (to reduce utility costs), but that collectively the value is extremely large if others achieve similar goals. Energy conservation may be something which is “nice to do” but which many individuals cannot focus on. As a result, energy conservation may not get done.

There is research in the field of behavioral economics which may help. It turns out that energy policies have real-world consequences. It matters how the utility program designer addresses energy efficiency. Not all program designs are the same, and small changes in how we approach energy efficiency programs may result in significantly different results. As a consequence, you or I might save a few dollars, but collectively we may avoid the construction and operation of a new coal power plant.

EcoAlign, a full-service strategic marketing agency owned by DEFG LLC,  has released its fifth Project Energy Code report. “Nudges for Energy Conservation” was written by Dean Karlan, Professor of Economics, Yale University. Professor Karlan explains that:

a “nudge” is a mechanism to promote a desirable outcome while respecting individual choices. Nudges work by shifting the way in which people make choices and by helping people to follow through on their decisions. Nudges work through recognition that it matters how a decision is framed, through “commitment devices,” and through a change in the “defaults” (starting points) for decision making.

Research in behavioral economics is revealing how a nudge can affect energy consumption without forcing people to behave in pre-determined ways. While many individuals have goals to save energy, in practice they may fall short of their goals. Behavioral economics can help businesses and government agencies to better understand why individuals fail to follow through. The report explains why “nudges” work, what makes for a good “nudge” and how we can employ “nudges” to create measurable energy conservation savings.

As more energy usage information becomes available through advanced metering and the smart grid, nudges can be used by energy utilities and others in the design of energy efficiency programs and innovative electricity prices. Professor Karlan concludes:

Nudges can help individuals achieve their goals by aligning their short-term and long-term incentives, changing their perceptions of success and failure, or helping them to understand how to accomplish their goals.

It is my view that there is a “kernel of transformation” in Professor Karlan’s analysis:

How revolutionary would it be for utilities and other program designers to first inquire what residential consumers’ energy consumption goals are, then design a customized program around those goals, and then pro-actively help consumers meet those goals? Beginning program design with consumer goals turns program design on its head, but this could improve the ability of utilities and others to engage customers.

The EcoAlign report provides insight that will help utilities and other energy service businesses to close the “green gap” between consumers’ stated intentions and their actual behaviors. Project Energy Code is a research program developed by EcoAlign which provides ongoing analysis of consumer motivations and engagement with regard to energy consumption and the environment from an approach grounded in social sciences.

So, keep working on that exercise regime.  And watch what you eat.  And when you work on energy conservation program design, consider human behavior. Can you can get people to state their goals, make commitments, and follow through on those commitments? “Nudges” may help you.

The report is available at no charge by visiting EcoAlign’s Web site at www.ecoalign.com or DEFG’s Web site at www.defgllc.com.