Tuesday, January 5, 2010

Electricity in NH - Retail electricity choice has fallen short


Screenshot of NH PUC website on electric power choice

I've blogged about the general framework for electricity market restructuring in New England and I've touched on some of the specifics for New Hampshire. Overall, our electricity restructuring effort seems to be working out reasonably well. Unfortunately though, for New Hampshire's residential electricity customers, restructuring is a story of unfinished business.

New Hampshire's restructuring model sought to eliminate the monopoly that local utilities had over electricity generation, distribution, and delivery. Under the new approach, the maintenance of the electricity distribution and delivery system would still be handled by a monopoly utility, but the provision of virtual "energy" to ratepayers would be the responsibility of independent power marketers. The plan follows an approach similar to the telephone long distance model. Power marketers would offer retail electricity customers various energy rate plans and would then contract with power generators or procure power using ISO-NE's bulk electricity trading markets.

PUC has been unable to bring residential choice to NH so far

Although NH regulators tried to open up electricity markets to consumer choice, their attempts have failed so far, at least for residential customers. Currently, business ratepayers in New Hampshire can choose from around 10 or 12 energy suppliers, but residential ratepayers have no choice and seem to be permanently stuck with their "transition" energy supplier (aka their old monopoly power company).

Even though residential electricity customers are stuck with their monopoly energy supplier, you'd never know that from reading the NH PUC's website on electricity choice. The site talks about the benefits of choice and even lists several competitive suppliers. Unfortunately, there's not a single mention anywhere on the site that none of the competitive suppliers service residential customers.

What retail choice might look like

For examples of some potential benefits of retail electric choice, consider the market in New Hampshire for home heating oil. Folks in New Hampshire that heat with oil have lots of choices. We can stick with one company and sign up for automatic delivery. We can call around each time we need a fill and get the best rate. If we're concerned about the environment, we can choose one of the new biofuel offerings. Finally, if we're worried about the variability of oil prices throughout the winter, we can choose a rate-lock plan. With retail electricity choice, electricity consumers could have many of these same options.

Texas gives us an example of how electricity choice might have turned out. To be sure, Texas is no shining star of ultra-low electricity rates, but their electricity choice model is well developed and shows us a glimpse of how things could look in New Hampshire. This website (use zipcode 75001) shows a list of rate plans available to texas electricity consumers. For a comparison datapoint, PSNH currently charges around 9 cents per kilowatt hour for energy.

Pennsylvania has also developed retail choice for electricity consumers. The state's Office of Consumer Advocate website has information for consumers about the state's retail electricity choice program, along with several price comparison charts that show the offerings available in different parts of the state.

The retail electricity choice programs in Texas and Pennsylvania offer variable pricing plans, rate lock plans, and even green-energy plans. There seems to be something for everyone. To be sure, some folks may find this all too confusing and might rather let their state PUC figure it all out for them. Unfortunately, the PUC is forced to create a "one size fits all" rate structure and can't possibly make decisions that are optimal for everyone.

Where should New Hampshire go from here?

In the end, I think residential electricity choice would be a good thing and I hope we get it here in NH. Sure, there will always be consumers who are under-served by having to fend for themselves and some may prefer to have someone else make the choice - and take the blame for making the wrong choice.

In addition, there will always be studies that show restructuring has lowered rates or caused rates to skyrocket. It just depends on the time period chosen and what's been happening to fuel prices (like natural gas and coal) over the period evaluated. As I've said before, you can't evaluate the efficacy of restructuring just by taking a snapshot of electricity rates. You've got to consider the risk model and the generation mix and evaluate rates in that context.

Still, in New Hampshire, our regulatory framework is set up for retail choice, and in order for our framework to function properly, retail choice must be established for residential electricity consumers. Without a choice, residential ratepayers are at a distinct disadvantage compared to businesses and consumers may end up getting a raw deal.

If an effective retail market for energy won't form on its own, the NH PUC will have to act to correct the situation. That could mean incentives to create more retail offerings, or we may need a complete restructuring of how retail electricity rates are set. In either case, leaving NH ratepayers in this restructuring limbo seems like the wrong approach.

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3 comments:

  1. Well, great news could just be right around the corner for the residential market. Yes, "Choice" at last for the American Homeowner. Soon, here in NH, we are rolling out a plateform to provide lower rates for The Granite State. There will NOT always be consumers who are under-served by having to fend for themselves when it comes to NH's residential energy market. Yes, the time has come! For more information please call 1-603-513-1988. Frank Dumont

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  2. www.residentpower.com. Just heard about it and looks like they are taking homes and small biz in NH.

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  3. Electricity New Hampshire electricitynh.com now taking new residential customers rates are fixed and are 15% LOWER than PSNH

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