By Marce Fuller, President and CEO, Mirant
“Consumer Benefits Of Retail Power Competition Lagging”; “Power Shortages Called ‘Inevitable'”; “Public Health Concerns Fuel Debate on Controlling Coal-Fed Facilities’ Emissions”
Do these headlines look familiar? They should because they’ve all been in print recently.
With headlines like these, it’s little wonder that the competitive energy industry, and deregulation of power markets in general, carries the burden of negative perception – deserved in some instances, completely fabricated in others.
Bottom line? All of us in the industry face a major challenge: to reverse this negative perception. It is imperative that we work collectively to overcome this challenge and reshape the debate. We have to act now to clearly communicate the many benefits competition will bring to consumers, economies and governments, as well as the companies responsible for providing affordable, reliable energy.
In the USA, some might argue that the benefits of competition are difficult or impossible to prove since no state has fully completed the transition to competition. Roughly half the states are in some stage of opening their electricity markets although a number are slowing or stopping plans for fear of duplicating the California debacle.
Unfortunately, California’s problems and the ensuing media frenzy derailed a great deal of constructive, rational discussion about how best to achieve the benefits of competition.
But at least energy issues became topical and got people talking. Some began to understand that economic expansion is not possible without the addition of new generating capacity. And others relearned the necessity of conservation – that energy cannot be taken for granted; it is a precious resource.
With the California issue simmering – not boiling – it’s time for our industry to begin to build on this new level of awareness and advocate competition.
That opportunity got a lift from a recently released Federal Trade Commission report titled, “Competition and Consumer Protection Perspectives on Electric Power Regulatory Reform: Focus on Retail Competition”. The report comes to a number of interesting conclusions.
One is that wholesale markets must be competitive in order for the benefits of retail competition to be realized.
Another states: “When competition is effective, it is likely to result in lower prices, higher quality, and greater innovation than takes place under a regulatory regime.”
Thanks. We needed those comments to refocus our collective attention on why we’re in this business in the first place.
Despite competition being in various stages of development in the USA, the benefits are showing and signal more to come. A few examples:
- Competition attracts the capital necessary to fund the development of reliable supplies of electricity. Today, competitive energy companies like Mirant construct more than three-quarters of the new plants in the USA.
- The mid-Atlantic region has implemented a carefully thought out competitive structure that operates collaboratively and produces results. More than 200 members of the PJM Interconnection have a voice in the policies that affect over 20 million customers in Washington, D.C., Pennsylvania, Maryland and New Jersey. Consumers in Pennsylvania have saved over $3 billion by paying prices for electric power 4.5 per cent below the national average.
Mirant recently commissioned a study to determine the underlying value associated with the creation of a regional transmission organization (RTO) in the Northeast. By analysing inefficient transmission flows among the New England, New York and PJM independent system operators, the study identified $440 million per year in efficiency gains through the creation of a Northeast RTO.
Good news is also to be found in Europe. Case in point: the United Kingdom:
- Domestic electricity prices in the UK have dropped nearly 28 per cent since competition was introduced in 1990.
- 14 million consumers have switched suppliers.
- Annual carbon dioxide emissions have been reduced by 28 per cent even though electricity consumption has increased 15 per cent.
And still more developments:
- Since competition was introduced at the wholesale level, the efficiency of new generating technology has increased 20 per cent.
- Companies like Mirant are investing millions of dollars in venture capital funding with technology companies seeking to further boost generating efficiency, as well as uncover alternative and renewable forms of energy such as fuel cells and wind power.
- The industry is investing additional millions to address environmental challenges, among them, global climate change. My own company recently announced a $50 million commitment to explore solutions to this issue.
- And, like other competitive energy providers, we are continuously taking action to become better environmental stewards. Our actions range from the ongoing installation of state-of-the-art emission control equipment on plants to development of a wildlife viewing station in Freeport, Bahamas that protects habitats and supports local tourism.
This list is solid proof of what can happen when competition is allowed to stimulate innovation and creativity. Nothing spurs efficiency, technological improvements, secure supplies and lower costs better than competition.
As such, we must all be committed to its advancement – and not stop half way. To ensure that happens, our industry has to carry the torch about the many benefits competition brings.
By doing so, we can look down the road and see the day when we will be met with a different set of headlines:
“Long-Term Energy Supplies Now Stable”; “Innovation Improves the Energy Industry’s Environmental Record”; “Consumers Win Through Increased Competition”
If we are diligent in telling our story, we can make it happen.