American consumers to deregulation: Drop dead

By Kathleen Davis, Associate Editor

August 22, 2001 – It started with California-not just the “bad” part of deregulation, but the good as well. When it first opened, we were proud. We heralded it; we trumpeted it.

And then it fell from grace. And we scrambled, crab-like and sideways across the nation to Pennsylvania. “Look at the Keystone State,” we said. “Look at PJM. Now they know how to deregulate. Forget California. Forget the ISO. Pennsylvania and PJM: they’re the ones to watch.”

Now we’d do anything to stop consumers from staring at the building train wreck. We can feel the collision coming. Rising wholesale prices, consumer fear and a slow economy have converged. It’s time to duck under the desk until the Keystone State finally pops.

Pennsylvania began at a nice steady pace, with over 500,000 initial alternative generation users when they opened to competition in 2000. In July 2001, Pennsylvania still had approximately 500,000 participants in its alternative supply program, which doesn’t sound so very bad. Five hundred thousand isn’t any less than we started with; it may be a bit stagnant, but these things happen. However, the state has lost nearly 200,000 customers in the last four months. (There were over 700,000 registered in April of this year.) Add to that the nearly 3,000 MW that have followed those customers, and Pennsylvania starts to loose a little luster.

And on top of the falling numbers, there are complaints and lawsuits and general litigation: between NewPower, PJM and FERC over ICAP*, between the Office of Consumer Advocate and whomever is representing the now defunct over broken agreements and refunds. Consumers are being bumped back to default providers unprepared for the onslaught, leaving the utilities begging state and federal government agencies for permission to offset growing costs.

So our second example is now relegated to the back of the box. Where do we go from here?

This leaves us Texas. Texas is our shining hope. I’ve heard more than one executive say that the Texas model is the “one to sell” or the “one to bet on.”

Except, now there are delays. The pilot program started two months late, and now that they have finally managed to kick-start it, there have been a rash of computer problems. Of the nearly 100,000 customers who have signed up to participate in pilots, only about 200 have actually been switched. ERCOT says they promise to have everything smooth by January (when retail competition opens fully), but this doesn’t give me much ammunition when asked for good examples of deregulation.

I’m starting to feel personally embarrassed for our entire industry, and when people ask me about deregulation, I pray that they are mostly ignorant of the details, so I can tentatively bring up Pennsylvania and Texas without having the most recent grumblings thrown back into the whirlpool of my timid argument.

I have to admit that my “game face” is starting to crack. Sometimes I want to whine “I just don’t know” when asked about the final results of restructuring, but it sounds so pathetic. For now, I’ll stick to bluffing until the cards are all out on the table. (And I’ll pray that the average consumer remains mostly apathetic until then.)

*Editor’s note: NewPower filed a complaint with FERC regarding installed capacity (ICAP) charges in the PJM markets in late July. It contends that the rules for ensuring reliable electric service in the PJM control area have resulted in prices for capacity that are “unjust and unreasonable, and unduly discriminatory and preferential” against new market entrants.

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