PowerFacts
COMPETITION’S SUCCESS IN NEW ENGLAND
“What the New England Energy Alliance’s new report tells us is that competitive markets are yielding the kinds of benefits consumers and public officials were seeking when market restructuring laws were enacted. Unprecedented levels of new generation are being added, plant availability is up almost 10 percent, plants are operating more efficiently at less cost, and in spite of this new generation being built, power plant emissions are declining. The promise of electricity restructuring is being kept.”
John E. Shelk
President and CEO
Electric Power Supply Association
November 1, 2006
Excerpts from the New England Energy Alliance’s Report,
A Review of Electricity Industry Restructuring in New England
Fast Facts
• New Generation. “An unprecedented 10,000 MW of new generation was added during the first six years of restructuring – increasing supply by ~30%.” p. 2
• Improved Efficiency. “Since wholesale restructuring, plant availability has increased by 8%, avoiding the construction of up to five, 400 Megawatt generating facilities.” p. 3
• Savings to Customers. “Based on a comparison of actual retail electricity prices against a projection of where they would likely have trended in the absence of restructuring from 1998 to 2005, New England consumers have cumulatively saved between $6.5 and $7.6 billion.” p. 4
• New Investments in Transmission Infrastructure. “In the decade prior to the formation of an RTO, transmission infrastructure capital investment was lagging, which consequently puts the region in a catch-up mode today... It is important to note that the region would likely have had a transmission infrastructure capacity shortfall even if the former regulated utility structure remained in place.” p. 11
• Environmental Benefits. “While electricity generation within the region increased 25% between 1998 and 2004, associated sulfur dioxide (SO2) emission rates decreased by 56%, nitrogen oxide (NOx) by 57% and carbon dioxide (CO2) by 22%.” p. 3
• Benefits Are Here, Improvements Needed as Markets Mature. “Electric utility restructuring and development of competitive wholesale and retail markets in New England can increase efficiency through competition, provide consumers with choice and financial benefits, improve air quality and allocate risks of generation investments to developers. Imperfections in the restructured wholesale and retail markets as they mature are not unexpected and must be addressed by appropriate agencies and organizations.” p. 44
• No Easy Comparisons with Restructuring in Other Industries. “It is important to note that there was no federal legislation or national policy framework for retail electricity restructuring – only a series of rulemaking actions by FERC to create competitive wholesale markets and to provide open access to the transmission system. Conversely, a clear national policy was in place for the restructuring and deregulation efforts of other industries including the trucking, railroad, telecommunications, airline and banking industries that occurred over the past 20 years. As a result, the restructuring of the electric utility industry at the retail level has been accomplished on an ad hoc state-by-state basis with inconsistent policies and standards.” p. 20
Unprecedented New Generation to Meet Increasing Demand
• “Electricity consumption has increased by 15% in the region since the competitive wholesale marketplace was established. 29 Investors responded by investing more than $9 billion to build some 25 new generating plants in just a 6-year timeframe, increasing the region’s electricity supply by 30%. In an absolute sense, there is no precedent prior to restructuring for the quantity of generating plants built and brought to commercial operation over such a short period of time.” (emphasis added) p. 10
Dramatic Efficiency Improvements
• “Since the establishment of competitive wholesale markets, overall ‘generator availability’ has increased by more than 8%... Moreover, increased generating plant efficiency and availability reduce wholesale market costs – savings, which may be passed on to retail consumers – and decrease emissions to the environment, depending on fuel type... the region’s nuclear plants have unmistakably experienced significantly improved availability factors under new ownership... under a competitive wholesale market, existing generating plants operate more efficiently, consuming less fuel per unit of electricity produced.” p. 12
Significant Savings for New England’s Customers
• “Through state administered rate reductions and utility supply procurement requirements and competitive wholesale market forces, all classes of electricity consumers have benefited economically from restructuring.” (emphasis added) p. 23
• “This estimate quantifies about $7.6 billion in cumulative, region wide, consumer savings since restructuring efforts began.” (emphasis added) p. 23
• “Prior to restructuring, electricity prices in the region were up to 69% above the national average… Since then (through 2005), the difference between the national average price of electricity and New England’s has narrowed in each state (between 4-21%) with the exception of Massachusetts (which increased 3%).” (p. 19)
• “Massachusetts consumers in total have saved about $3.4 billion.” p. 24
• In Connecticut, “Between 2000 and 2005, it is estimated that consumers have saved between $700 million and $1.5 billion from restructuring.” p. 25
• In Rhode Island, “Between 1998 and 2005, it was estimated that consumers saved approximately $610 million.” p. 25
• In New Hampshire, “Between 1998 and 2005, it is estimated that consumers saved an estimated $950 million.” p. 26
• “…average real retail rates [inflation adjusted] in the five restructured New England states comparatively declined by 7 to 18%.” p. 26
Environmental Benefits
• “More specifically, restructuring has led to several fossil-fired generating plants to be: retired (and replaced with new natural gas fired facilities); refurbished or retrofitted with emission controls that go beyond federal and/or state requirements… generating plant efficiencies have increased in the competitive marketplace (due to better performance or the predominant operation by the most efficient facilities) which means that less fuel is consumed per unit of electricity produced which in turn means fewer emissions.” p. 16
• “Between 1998 (as restructuring was initiated in three of the six New England states) and 2004, the emission rates from generating electricity have declined by: 56% for SO2, 57% for NOx and 22% for CO2.” p. 16
• “In later years, the improved operation of the region’s nuclear plants is also a factor in reducing the emissions of SO2, NOx and CO2. The performance of these plants on average improved by 20% from 1990 through 2005 – a trend that continued under restructuring when nuclear units were purchased by companies specializing in nuclear plant operations.” pp. 17-18
A Review of Electricity Industry Restructuring in New England
CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660
EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.