TX, OH Report Retail Successes

February 2005

Texas PUC Details Retail Choice Successes

In a recent report to the Texas legislature, the Texas PUC offered a complete review of the market rules and switching trends and concluded that, "By most objective measures, Texas has the most robust, well- functioning retail market in the United States."

High residential switch rates. To date, more than 1.1 million retail customers in Texas are taking service from Retail Electric Providers (REPs) not affiliated with their local transmission utility, more than double the amount that had switched two years ago.

> 50% C&I load competitively served. Over 50% of the megawatt-hours (MWh) sold to small commercial customers, and nearly 70% of MWhs sold to large commercial and industrial customers, are served by non-affiliated REPs.

Wide field of competitors, choices. As of October 2004, 55 REPs certificated by the Commission are actively serving customers. Residential customers in all service areas of the state have numerous offers and suppliers available to them.
2005 Scope of Competition Report.

CAEM report Advises Market-based Pricing to Boost Competition

In a January 2005 report titled, "Resource Adequacy and the Cost of Reliability: The Impact of Alternative Policy Approaches on Customers and Electric Market Participants," Center for the Advancement of Energy Markets and the Distributed Energy Financial Group, advised that a market-based approach to ensuring electricity reserves are sufficient could produce as much as a $19 billion benefit to retail customers.
The study recommends that market-based approaches to improving reliability -- including market-based demand response initiatives, distributed energy and moving towards an energy market with limited or no extra capacity costs fixed for reliability -- be adopted or phased in to more closely link consumer preferences and consumption levels with costs to give customers more accurate, short term price signals on which to base their decisions.

The study includes a number of specific recommendations, including:

-- Matching of capacity reserves to expected peak generation plus a reserve margin, during a short planning period (months, not years);
-- Linking the marginal cost and marginal value of reliability to customers, as opposed to setting a reserve margin by a rule of thumb;
-- Floating wholesale prices to accurately reflect the marginal cost of supplying electricity;
-- Eliminating barriers to a highly responsive demand market; and
-- Larger capacity reserves during the transition (for example, when prices are capped), and reduction or elimination of capacity reserve requirements once the market is competitive.