... a dozen states and two Canadian provinces continue to make progress in restructuring their electricity markets, addressing problems and moving forward. Retail electricity choice is thriving in Texas and New York because the market structure has advanced sufficiently for competitive markets to work effectively. Residential consumers in Texas and New York have a choice of suppliers and a choice of products and services. ...
... The design of “default service” ... is the most significant factor that determines the success of retail choice. ... A poorly designed default service undermines retail competition. If default service is designed to satisfy all residential consumers’ needs, or if it bundles and spreads risks among all consumers, then it is unlikely that retail electricity providers will enter the market.
The report presents a numeric ranking of the US states and Canadian provinces along with a qualitative assessment of the level of progress achieved. Fourteen states and provinces are deemed to have achieved "excellent," "good" or "medium" progress, while the other states and provinces considered are "marginal," "unsatisfactory" or have "no progress."
Nine recommendations were provided, and three of these deal with default service (basic or standard service). Default service refers to the mechanism to ease the transition from regulated rates and tariffs to competitive electricity prices and contracts.
Default service recommendations
Recommendation #4: Establish default service as a transition mechanism, with a clear ending date for the majority of residential consumers. Develop and implement a plan for a transition from the regulated default service for residential consumers to full competition.
Recommendation #5: Design a default service product that is easy to understand and meets the basic needs of the customer. Do not attempt to mimic the variety, scope or breadth of rates or services that the competitive market may eventually provide.
Recommendation #6: If supply procurement for default service is done through mandated auctions or competitive solicitations the term lengths should be shortened over time to an appropriate level for each customer group. This will ensure that appropriate pricing signals are sent to customers to allow them to better select their electric service product and to efficiently manage their energy usage.
|