Electric Restructuring

Q: What is electric restructuring/deregulation?
Electric restructuring – also referred to as “deregulation”, “retail competition”, or “electric choice,” is a model under which some or all customers can opt out of having their electricity provided by their local utility.  Instead, these customers receive electricity provided by an alternative retail energy supplier – but the local utility is still responsible for delivering this power and servicing the customer.http://customersfirst.org/wp/wp-admin/post.php?post=65&action=edit#

Q: Free market electricity sounds good, what’s the problem?
Under a deregulated market, retail energy marketers are able to pick and choose which customers they want to serve.  They are not required to provide service to all customers – as regulated utilities are required.  Because of this, unregulated energy marketers often only offer the best deals to high volume customers which shifts costs to the lower volume electricity uses who are likely residential, farmer, and small business customers.

Q: How many states have retail electric competition?
Only 13 states have active, full retail electric competition.  Most are located in the Northeast.

Of the 28 states the enacted electric deregulation in the early 2000s, 14 have either suspended their efforts, repealed and re-regulated, or have limited participation.

Several states with retail competition continue to change their laws and regulations to try and address significant consumer protection, reliability, and costs issues.

Two states (Arizona and Indiana) recently studied deregulation again, and chose not to pursue it.

Q: Has Wisconsin considered electric deregulation?
Yes. In the late 1990s, Wisconsin was one of many states that examined the use of retail electric choice. After extensive study, Wisconsin’s Governor, Legislature, and Public Service Commission determined that addressing reliability and power supply adequacy was paramount.

Wisconsin avoided the pitfalls of deregulation that plague other states. Instead, Wisconsin policy makers, with bi-partisan support, have enacted energy policies that have attracted investment and created jobs in the state, improved reliability, strengthened energy conservation and efficiency, and diversified our electricity supply while preserving a system of checks and balances that protects customers.

Q: Will deregulation lower my electric rates?
There is no evidence that deregulation lowers electric rates.  In fact, the average electricity rates in deregulated states continue to be about 30 percent higher than states with traditional utility regulation.

In some cases deregulation has caused electric rates to substantially increase. Many states that deregulated included temporary rate freezes to protect customers. When the caps came off, power prices skyrocketed – Maryland rates increased 60%, Illinois rates jumped 55%, and Pennsylvania rates increased as high as 53%.

More recently, an analysis of electricity rates in Texas, showed that from 2002-2012 residential customers in the deregulated area of the state paid $22 billion ($4,500 each) more than customers in the regulated areas.

Q: Will deregulation impact reliability?
In some states that have deregulated – for example, Texas, New Jersey, and Maryland – brownouts and rolling blackouts are a concern.  Those states are now re-inserting themselves into the electric markets to ensure reliable power for their state’s citizens and businesses.  Deregulated energy providers have demonstrated that they cannot be counted on to build sufficient generation to ensure reliable electric supply.

Out-of-state brokers and marketers are not proven partners within the community and will bear little responsibility for disruptions of power or reliability of service.  Under a deregulated system, long term planning becomes difficult, risky, and expensive. No one is held accountable for long term growth so reliability erodes over time when demand outstrips supply.

Wisconsin’s current regulated market ensures there is enough electric generating capacity to meet demand under even the most extreme conditions.