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NEW REPORT CONFIRMS COMPETITION PROVIDES CONSUMERS BENEFITS AND CHOICES IN RISING COST ENVIRONMENT
WASHINGTON, D.C. - The Electric Power Supply Association today released "Decoding Developments in Today's Electric Industry-Ten Points in the Prism," a new report prepared by Dr. Susan F. Tierney of the Analysis Group. The study takes a close look at today's electric industry and provides an independent view of the industry with respect to price, costs, regulated and competitive markets, customer behavior and the potential long-term outlook for the electric power industry.
"This report proves that the marketplace is creating definite and quantifiable benefits thanks to competition," said John E. Shelk, President and CEO of EPSA. "The report shows that environmental and reliability benefits are being achieved as a direct result of electricity providers doing business in a competitive marketplace."
One of the key findings in the study is that global conditions, increased demand, and needed industry investments to address environmental concerns will continue to put upward pressure on electricity prices. Those factors, combined with higher fuel costs and increased costs for labor and construction, have been the driving force behind recent price increases. Prices have been rising in all parts of the country - regardless of market structure. Electricity price increases from 1999 to 2006 have been significantly lower (33%) than those for heating oil (269%), for gasoline (122%) and for natural gas delivered to commercial users (116%).
The study also notes the important role competition plays in enabling customers to better manage their electricity use and employ innovative energy efficiency and demand reduction tools. This leads to a fuller understanding of the true cost of power and can have a direct impact on consumer purchasing and behavior. The electric industry has been effective in bringing forth substantial capital investment, providing efficiencies in the production and delivery of power through incentives and innovation, as well as delivering increased environmental benefits. Competitive conditions in the marketplace have led to operational improvements in plant efficiency, increased plant reliability and availability, and more efficient plant dispatch. Aggregated across all facilities, these improvements are providing annual savings in the billions of dollars.
The report also notes that consumers have benefited from market structures that have transferred financial risk from ratepayers to investors, unlike under traditional cost-based rate regulation. Between 1996 and 2004 roughly 74% of electricity capacity additions were made by non-utility entities who are not assured full cost recovery through rate based, cost-plus contracts. As a result, private investors, and not consumers, have borne the financial burden of the new generating capacity built in many parts of the country since 2000. A conservative estimate of the capital costs of the capacity added between 2000 and 2007 is $99 billion.
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Decoding Developments in Today's Electric Industry-Ten Points in the Prism.PDF
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.