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EPSA Releases Policy Paper and 10-Point "Why and How" on Competitive Electricity Procurement
The next build out of electricity generation will be the most expensive in the nation's history. How that generation is procured will have profound economic and environmental consequences for decades.
WASHINGTON, D.C. - John E. Shelk, President and CEO of the Electric Power Supply Association (EPSA), today applauded state and federal regulators for continuing their examination of the competitive procurement of electricity and announced the release of EPSA's policy paper: "The Case for Competitive Procurement." At this weeks National Association of Regulatory Utility Commissioners meeting in New York City, he will urge swift action by states on an issue that is of critical importance to consumers and the future of the nation's power supplies.
"The next build out of electricity generation will be the most expensive in the nations history, and how that generation is procured will have profound economic and environmental consequences for decades," Shelk said. "Rather than allowing utilities the exclusive right to build new plants on a cost-plus basis, a process which has proven to be very expensive, regulators in states that did not restructure their electricity markets should protect consumers by requiring utilities to obtain new power supplies on a competitive basis. In this regard we once again applaud the Georgia Public Service Commission for last week upholding its competitive procurement requirement despite efforts by the largest utility in the state to circumvent the state's rule."
Shelk expressed optimism that the joint federal and state dialogue at the NARUC meeting in New York City on July 18 will produce substantive results that will help guide states toward the effective implementation of competitive procurement processes. As this critical policy discussion moves forward, EPSA urged regulators to keep the following 10 points in mind:
A Perfect "10" for Electricity Consumers - Why competitive electricity supply procurement makes sense in vertically integrated regions and how it should be implemented:
Why:
1. With competition in wholesale power markets the established "law of the land," policymakers have new procurement choices beyond utility-owned generation.
2. A comprehensive, robust competitive procurement process is the only way to ensure that customers get possible deal on electricity in terms of risk, reliability and environmental performance.
3. A fair, accurate and transparent competitive solicitation process is an important tool at both the state and federal levels for determining the prudence of utility power purchase and investment decisions.
4. Competitive procurement provides a market test to assess any utility proposal to build its own generation on a cost-plus basis.
5. Competitive suppliers build new plants largely at their own risk and expense, shifting risks away from captive utility ratepayers.
How:
6. Use an independent evaluator to monitor competitive procurement processes in concert with state regulators to ensure fairness.
7. Conduct a competitive procurement process on a level playing field with all proposals meeting the same requirements and being evaluated under the same standards.
8. Use a collaborative process to establish the amount and type of power to be procured and the evaluation criteria.
9. A utility should not unfairly skew the solicitation process by imposing requirements that only it can satisfy and should not be allowed to subsidize certain costs that are otherwise recoverable in regulated rates.
10. When assessing utility "cost-plus" proposals, the evaluation should explicitly take into account the greater risk imposed on customers as compared to pay-for-performance bids.
"This is just plain old American common sense; if state governments enter into competitive procurement processes for products as inconsequential as pencils and paper, why would we not want to bring the same market forces to bear on something as large and costly as an electric power plant," added Shelk. "The goal for all states, regardless of market structure, should be to obtain the best possible deal for consumers by credibly evaluating the full range of resource alternatives offered in the wholesale power market."
EPSA urges all state utility commissions to adopt and enforce fair and open competitive procurement rules for utility resource needs. For more information on the necessary elements of a fair and open process, please contact EPSA for a hardcopy of the guidebook to competitive procurement, "Getting the Best Deal for Electric Utility Customers" or go to http://www.epsa.org/documents/industry/merchantPower/Policy_Guide.pdf.
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EPSA Competitive Procurement Policy Piece.PDF
EPSA Competitive Procurement Best Practices and Model Rule
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.