HOUSTON, Sept. 13, 2001 — More than 1 million Virginians will be able to choose an electricity supplier in January, as the state begins the initial phase of a 3-year electric restructuring program.
But state regulators warned they may be throwing a party to which no comes. Shopping eligibility doesn’t guarantee consumers will actually shop for power, regulators said.
During a pilot this year, the number of Virginians served by an alternative supplier peaked at 31,000, and today just 22,000 are actually being served by companies other than incumbent utilities. Some 9,000 customers were returned to the utility, after a supplier pulled out of the market.
The company couldn’t sell electricity for less than the utility, which was operating under a rate freeze, said Andy Farmer, a spokesman for the Virginia State Corporation Commission. No competitive suppliers chose to operate in the territories of two utilities during the pilot.
Farmer said it is unclear how many Virginians will choose to participate come January, but much depends on the state of the wholesale electricity market. That market is showing signs of stress, Kenneth Rose, an economist with the National Regulatory Research Institute, said in a report to Virginia state legislators. Rising power prices and market volatility have taken a toll on state retail markets.
Rose said his analysis of regional markets suggested generation owners have considerable market power, and given the characteristics of electric supply and demand, “this market power may persist for some time.” The lack of price information in many regions will continue to contribute to wholesale market power problems, he said.
The rolling impact of these developments in the wholesale market has been sharp declines in the number of competitive retail offers in Pennsylvania, Massachusetts, New Jersey, and California, Rose noted. Many suppliers are now only willing to offer electricity on a month-to-month basis, according to the report.
Rose also pointed out the amount of electric power being purchased from competitive suppliers has dropped, noting in Pennsylvania, for example, that power provided by competitive suppliers has declined more than 50% in the past year.
Despite low participation, Farmer said regulators learned from the pilot. He said the commission updated the rules for retailers and worked bugs of computer systems involved in billing and usage data. Between now and the end of the year, the commission must complete cases involving unbundling of rates, functional separation of the utilities, and metering and billing.
To date the commission has issued 27 licenses to new competitive suppliers of electricity or natural gas. Specifically, 16 are licensed to provide electric supply service themselves or will pool together the electric needs of groups of consumers and then shop for electric service on the group’s behalf.
However, the commission conceded newly licensed competitors may continue to face wholesale prices that inhibit their ability to sell retail power profitably in Virginia. “Such inhibition,” the commission said, “could prevent them from entering Virginia’s retail market during this critical market development period.”
By Jan. 1, 2003, the number of customers eligible to shop will approach 3 million statewide. Virginia’s remaining 500,000 customers will have retail choice by Jan. 1, 2004.