Read John Hanger’s Op-Ed In Las Vegas Sun, Electricity Competition Worked For Them

October 26, 2016

Nevadans on Nov. 8 will vote on an important ballot question about ending electric-generation monopolies and allowing all electricity customers to choose the company that will generate their electricity. Twenty years ago, Pennsylvania’s electricity customers also were captured by their monopoly utilities and were paying the price for their captivity.

Residential customers in our two most populous regions — Pittsburgh and Philadelphia — paid electric rates that frequently were among the 10 highest in the nation. Small-business customers also typically suffered from high rates to power their restaurants, stores and small manufacturing shops. In 1996, Pennsylvania’s electricity rates were about 15 percent above the national average.

Pennsylvania’s electricity rates skyrocketed 20 years ago because state utility regulators voted repeatedly to make electricity customers pay for nuclear plants that had costs way over budget and way behind schedule. Customers were stuck, captured by their monopoly utilities.

In return for high rates, Pennsylvania’s customers got electricity from monopoly-owned generation plants that spewed enormous amounts of pollution, sickening and even shortening the lives of hundreds of thousands of people. Mercury, sulfur, soot, nitrogen and carbon poured into our air from coal plants, which guzzled huge amounts of fuel and converted it inefficiently into power. Those customers who wanted to generate power for themselves faced a bureaucratic nightmare that made it difficult, if not quite impossible, so very few could.

Tired of high rates and dirty power, as well as dealing with often arrogant generation monopolies, Pennsylvania adopted electricity competition and customer choice in both the wholesale and retail markets. Right from the beginning, Pennsylvania committed to ensuring real competition, installing strong market monitors to prevent abuses of competition by power plant owners as well as increasing programs for low-income families and accelerating clean energy.

After 20 years of allowing customers to choose their generation supplier and competitive power markets with appropriate oversight, customers in the Philadelphia and Pittsburgh regions are paying much less for power generation than they were in 1996. In real or inflation-adjusted dollars, those residential customers are paying about 50 percent less. And Pennsylvania’s statewide average electricity price is at the national average as opposed to well above it.

Thanks to competition for customers, power plants don’t earn revenues for their owners unless they operate, unlike during the monopoly era, when ratepayers typically paid for power plants even when they did not operate. As a result, power plants today are much more efficient and burn much less fuel to produce the same amount of power. The pressure to run more efficiently means they pollute less.

Customers now can buy renewable energy products for their homes, as I do. My electricity generation supplier provides me with 100 percent wind power that is generated from wind farms in Pennsylvania. Thousands of other customers are installing solar and using other technologies to generate their own power.

Customers now can buy multiyear contracts of fixed-priced power to ensure long-term price stability. They can also get innovative energy-efficiency services customized to their homes and businesses to reduce usage and cut power bills.

Pennsylvania shows that a well-designed and implemented policy of wholesale and retail electricity competition and customer choice will deliver economic and environmental benefits.

Good design includes strong market monitors, with authority to identify and prevent wholesale market abuses, such as withholding generation to drive up power prices. Good design has strong consumer protections on marketing of power products and programs to ensure low-income customers can realistically pay for their electric bills. Lastly, good design includes policies that enable customers to generate their own power at their homes and businesses and to control their demand in real-time.

Policies implementing competition are not the same as “deregulation,” where there is no public oversight of corporate behavior. Market rules, and the means to enforce them, are vital to ensure competition is real and beneficial to the economy and environments.

Today, Pennsylvania’s residential customers are saving approximately $818 million per year thanks to well-designed and implemented competitive wholesale and retail electricity markets. Pennsylvania’s economy and environment are better today because the state ended generation monopolies and allowed customers to choose their electricity supplier. Properly designed and implemented electricity competition can benefit Nevada too.

John Hanger is a former head of the Pennsylvania Department of Environmental Protection, sat on the Pennsylvania Public Utility Commission and was president of the environmental advocacy group PennFuture. More recently, he served as Pennsylvania Gov. Tom Wolf’s secretary of planning and policy.

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