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Why Rejecting the Energy Sector ‘Norm” is Long Overdue

Alexandrea Isaac's picture
General Counsel , Starion Energy
  • Member since 2019
  • 1 items added with 643 views
  • Jan 21, 2021
  • 644 views

While most of the world is anxious to get back to “normal” in 2021, the energy sector is no different. However, one question that many of us in the industry are not asked is what is our definition of “normal”?

For me, when it comes to energy policy, “normal” is synonymous with status-quo and frankly that is no longer what is in the best interest of the energy industry or consumers. Perhaps you have heard the phrase that “evolution is the key to survival”. While that may be true for most industries, it does not resonate well across the entire energy sector.

From a retail supplier point of view, we have seen year-after-year regulatory and statutory changes implemented to improve our industry and make it more transparent and understandable for consumers. While some of these changes have been the impetus to the development of new technologies, such as data collection from smart-meters or demand-side generation calling for the need of net-metering, not all changes have been positive. Some regulatory and statutory changes have peeled away at the core principle of consumer choice – from product-type restrictions to states mandating what renewable generation products can be sold to its residents. Subject-matter experts have written extensive papers on each of these topics — some of which are currently being litigated in our courts.

It is not my intent to argue for, or against, any of those statutory or regulatory changes here. I simply bring them to your attention to provide you with a basis of comparison to the negligible statutory or regulatory changes that have occurred for electric utility distribution companies. Since electricity became a commodity that could reach end-users in their homes or businesses, utilities have largely enjoyed being a monopoly. Lack of competition has translated into being able to shape the rules and have a strong influence over the governing bodies that were put in place to oversee them.

Relatively speaking, energy competition has been enjoyed by consumers in 14 restructured states for nearly 20 years. While retail suppliers have varied in corporate structure and size, few, if any, have the institutional political capital or deep pockets to fund the efforts necessary to provide an even playing field with the incumbent utilities. Utilities have had a stronghold on the energy industry for decades. And they have shown in recent years they will spend millions of dollars to keep it this way. In 2016, Nevada voters were given the option to break up NV Energy’s monopoly and liberalize the electricity market to more competition. NV Energy spent an unprecedented amount of money, totaling $63 million on a campaign to defeat the proposal. In short, they out-spent their competition using a fear-driven campaign and tactics. Sadly, they were successful.

However, the results from the Nevada election does not match what RESA’s scientific, national poll found, that overwhelmingly customers want to have the right to choose. Having the right to decide if we want to stay with the incumbent utility or select a supplier that may offer different products should be a choice enjoyed by all Americans, not a limited opportunity. Similar to other markets – such as picking a mobile phone provider – why would Energy be any different? It shouldn’t be – but unfortunately, it is.

As we begin 2021, I call on our policymakers, industry leaders and consumers to have their voices be heard on how they think the energy industry should evolve and provide choice. I am encouraged by the efforts taken recently by Jonathan Scott from the Property Brothers, who recently released his documentary “Power Trip” that sheds light on the very topic raised here. I also commend the recent actions taken by Connecticut’s Public Utility Regulatory Authority to move Connecticut’s utilities onto a performance scale model, where they will be compensated based on their ability to serve their customers. These are just two small steps in the right direction, but many more are needed. The evolution of the energy market demands an even playing field between competitive suppliers and incumbent utilities. Rejecting the “normal” or status-quo is what will create a truly competitive and well-functioning market that will deliver the best options for consumers.

Discussions
Bob Meinetz's picture
Bob Meinetz on Jan 21, 2021

Alexandrea, the deeper you delve into the mechanics and history of utility regulation, you will increasingly find that competition in electricity does not exist. It's an illusion generated by utility holding companies of vast scope and reach, to better exploit ratepayers by charging them for products they don't need. Though occasionally I'm accused of indulging in conspiracy theories, there's no conspiracy - it's 100% legal. It's corporations with a monopoly on an essential product screwing their customers, much like Standard Oil did in the 1880s.

Personally, all I need is reliable, clean electricity, the same thing I've needed for decades. I have never had a choice of providers (nor have you), but for some reason my rates have increased by 30% over the last decade. "Why, in 2021," a question I've repeatedly asked renewables advocates on Energy Central, "does 'free' energy from the sun and wind cost me more - a lot more - than 'expensive' electricity from a nuclear plant?" And they never have an answer.

It's both the reason electricity was regulated in 1935, and de-regulated in 2005. Eventually it will be re-regulated - and the sooner, the better.

Matt Chester's picture
Matt Chester on Jan 22, 2021

While retail suppliers have varied in corporate structure and size, few, if any, have the institutional political capital or deep pockets to fund the efforts necessary to provide an even playing field with the incumbent utilities. 

Do you think that the growing distributed nature and personal ownership/prosumer models are going to start chipping away at the immense political pull that utilities do tend to enjoy? For the first time in quite a long time it feels like the status quo is not guaranteed for utilities in  some way, so I'm curious what ripple effect that might have on other positioning of the industry. 

 

 

Daniel Duggan's picture
Daniel Duggan on Jan 25, 2021

Alexandrea, welcome to the world of energy, one of the most regulated sector of our  economy.  Regulations are made by politicians who are guided by what appeals to their voters, and of course the need to maximize campaign contributions, ideally large ones from wealthy corporations.  Lowest cost electricity for the consumer clashes with the priority of regulation.  I don’t see that situation changing any time soon, but hopefully in heaven, energy policy is made by experienced and logical engineers, so there’s something to look forward to.

Alexandrea Isaac's picture
Thank Alexandrea for the Post!
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