by Shane Henson — February 17, 2012—A new report released by Pike Research, Corporate and Institutional Procurement of Electricity, examines the critical role that electricity plays in commercial and industrial operations, explores the motivations for seeking non-utility and green power among a variety of business types, and identifies existing policies that promote competition—as well as barriers that may inhibit further access to competitively priced power.
Significant changes in the regulatory structure of the 125-year-old electric utility industry have allowed for competitive sales of electricity by a new set of restructured retail power sellers and service providers, note the authors. As a result, the past decade has seen a steady increase in commercial and industrial (C&I) customers that are able to purchase electricity from sellers other than their incumbent utility. Since the California power crisis a decade ago, though, no additional state has opened its market to competitive providers. In fact, several states and regulators have imposed limits and financial requirements, as well as increased their scrutiny of competitive players, with the goal of protecting consumers.
According to the report, the competitive market is poised for further growth in the coming decade, as competitive electricity purchases will nearly double from $29.4 billion in 2009 to $55.9 billion by 2020. Regulatory policy, however, remains the single biggest limiting factor on the development of an open and competitive market for electricity supplies to commercial and industrial customers.
“Even though some 20 jurisdictions have enacted restructuring laws and policies designed to open their electricity market to new competitors, only about a dozen states allow for full-scale access to competitive markets for all customers,” says vice president of research Bob Gohn. “Even in these states, laws and regulations tend to impose costs that are meant to ensure that expenses caused by the departure of other customers to competitive suppliers are not passed on to customers who remain with incumbent providers.”
A decade after suspending new retail competition in the wake of the power crisis, California has begun opening the door slightly to further access to competitive providers in regulated utility territories. Because the Californian market is so large, this is expected to have a significant impact on both the total national market and other states’ general perception of how much pent-up demand there is for competitive supplies.
There are no indications that states that have previously avoided restructuring have intentions to reexamine their policies, notes the report. However, several other states that have frozen their efforts may restore competitive options for larger customers. In particular, Arizona and Michigan represent strong potential markets for competitive procurement.
In general, increases in market activity will take place over the next five years in states that already have favorable policies, and in the 2015-20 period for areas that still need to reexamine their policies, the report asserts.
