Did You Know

Two New Reports Point to Good News on Retail Competition

Newly released reports from the Michigan Public Service Commission (MPSC) and KEMA Consulting demonstrate that retail customer choice of electricity supplier is a viable and worthwhile policy option—even in the face of daunting challenges for competitive retailers, such as mandated rate cuts or freezes, or formidable marketing and customer acquisition costs.

In the MPSC’s annual “Status of Electric Competition in Michigan” report, the commission stated that electric competition in the state continued to make significant progress throughout 2003, with the number of customers participating more than doubling to over 13,000, and the number of megawatts (MW) served by alternative suppliers growing by 70 percent, to 2,728 MW.

The number of alternative electric suppliers serving customers grew considerably during 2003. Suppliers active in Consumers Energy service territory doubled, from four to eight. Those active in Detroit Edison’s service territory grew from 12 to 18. Three open-access programs currently exist in the state; one program is in Consumers Energy service territory, and two are in Detroit Edison’s territory. Full open access for customers of Michigan investor-owned utilities took effect Jan. 1, 2002.

As for nationwide progress of retail power competition, KEMA reported that more than 52,000 MW of estimated peak electricity demand is now being competitively served, an increase of 12,000 MW over the past year and 35,000 since 2001.

“Competition in power markets, primarily for large buyers, continues its rapid advance,” Taff Tschamler, director of KEMA’s retail energy markets advisory service, said in a news release. “Although the momentum to open up new markets has stopped since California, those that are already open have resulted in substantial and growing market activity. Reforms expected in several open markets over the coming year or two are likely to further accelerate competition across the U.S.,” he said.

KEMA said the growth in customer participation is occurring in conjunction with an increase in the number and market share of new entrants. More than 20 firms have entered competitive retail power markets over the past year, and the top five competitive providers now serve between 2,500 MW and 10,000 MW of customer peak demand, KEMA said.

“Although some individual firms continue to struggle, the overall financial health of competitive providers has unquestionably improved over the past two years as the scale and scope of these organizations increases and they gain experience and build infrastructure to profitably compete for customers,” Tschamler said.

KEMA’s findings will be presented at the Center for Business Intelligence’s Retail Power Markets Summit, which will be held Feb. 25-26 in Orlando, Fla. To access the MPSC’s full report, visit http://www.cis.state.mi.us/mpsc/electric/restrict/status.htm.