Restructuring and Electricity Prices- IPU Bibliography
November 2016
Al-Sunaidy, A., and Green, R. 2006. “Electricity Deregulation in OECD Organization for Economic Cooperation and Development Countries,” Energy 31, no. 6-7, 769-787. [link]
Abstract: “This paper discusses the spread of electricity deregulation in OECD countries since the early 1990s. England, Wales and Norway were the pioneers, but almost all OECD countries have now introduced some degree of liberalisation, and several have free entry to generation while allowing all electricity consumers to choose where they buy their power. The paper discusses some of the issues raised by competition in generation and in retailing or supply, and the need to have appropriate regulation for the transmission and distribution systems, which will continue to be monopolies.”
Apt, J. 2005. “Competition Has Not Lowered U.S. Industrial Electricity Prices.” The Electricity Journal 18, no. 2:52-61. [link]
Abstract: “Previous studies have shown that significant price reductions resulted from deregulation in airlines, trucking, railroads, and natural gas. Retail electricity price data from 1990 through 2003 show no such benefit to industrial customers.”
Blumsack, S., Apt, J., and Lave, L. B. 2006. “Lessons from the Failure of U.S. Electricity Restructuring.” The Electricity Journal 19, no. 2:15-32. [link]
Abstract: “Blind faith is unlikely to produce a free market that is competitive. Substituting markets for traditional regulation is only one choice among many policy instruments to achieve a goal of lower prices; such substitution should not be in itself a goal.”
Blumsack, S., Apt, J., and Lave, L. B. 2008. Electricity Prices and Costs Under Regulation and Restructuring. Working Paper CEIC-08-03, Carnegie Mellon Electricity Industry Center [link]
Abstract: “Restructuring of the electricity industry was expected to improve the operating efficiency of electric power generators, leading to lower production costs and retail prices. Most studies conclude that there have been some efficiency gains, but the subject of whether retail prices have fallen has been contentious. The existing literature has a number of shortcomings, including the use of blunt or inappropriate definitions of restructuring, failure to incorporate the effects of regulatory decisions regarding price caps and stranded cost recovery, and the use of highly aggregated data. Our study addresses many of these problems and thus represents a significant improvement on existing work. We use a detailed firm-level data set to estimate how the markets and institutions established as a part of “restructuring” have affected the difference between prices and costs. Based on a number of different definitions, we find that utilities that have undergone restructuring display significantly higher price-cost markups than utilities that remained traditionally regulated. We find that some elements of restructuring are associated with higher price-cost margins, while others appear to be uncorrelated with prices and costs. The combination of introducing retail competition into an electric utility’s operating territory and divestiture of that utility’s generating assets has increased costs, but has increased prices even more. In particular, we find an average difference of 2 to 3 cents per kWh between prices and costs that is explained by restructuring rather than by increases in fuel prices. We conclude that restructuring has been beneficial to companies that restructured, but the evidence is far less clear concerning benefits to consumers.”
Borenstein, S., and Bushnell, J. 2015. The US Electricity Industry After 20 Years of Restructuring. Working Paper No. 21113. National Bureau of Economic Research. [link]
Abstract: “Prior to the 1990s, most electricity customers in the U.S. were served by regulated, vertically-integrated, monopoly utilities that handled electricity generation, transmission, local distribution and billing/collections. Regulators set retail electricity prices to allow the utility to recover its prudently incurred costs, a process known as cost-of-service regulation. During the 1990s, this model was disrupted in many states by “electricity restructuring,” a term used to describe legal changes that allowed both non-utility generators to sell electricity to utilities — displacing the utility generation function — and/or “retail service providers” to buy electricity from generators and sell to end-use customers — displacing the utility procurement and billing functions. We review the original economic arguments for electricity restructuring, the potential winners and losers from these changes, and what has actually happened in the subsequent years. We argue that the greatest political motivation for restructuring was rent shifting, not efficiency improvements, and that this explanation is supported by observed waxing and waning of political enthusiasm for electricity reform. While electricity restructuring has brought significant efficiency improvements in generation, it has generally been viewed as a disappointment because the price-reduction promises made by some advocates were based on politically-unsustainable rent transfers. In reality, the electricity rate changes since restructuring have been driven more by exogenous factors — such as generation technology advances and natural gas price fluctuations — than by the effects of restructuring. We argue that a similar dynamic underpins the current political momentum behind distributed generation primarily rooftop solar PV which remains costly from a societal viewpoint, but privately economic due to the rent transfers it enables.”
Brennan, T. J. 2010. “Decoupling in Electric Utilities.” Journal of Regulatory Economics 38, no.1:49-69 [link]
Abstract: “Distributing electricity to users has been covered through the charge per kilowatt-hour for electricity used. Conservation advocates have promoted policies that “decouple” distribution revenues or profits from the amount of electricity delivered, claiming that usage-based pricing leads utilities to encourage use and discourage conservation. Because decoupling separates profits from conduct, it runs against the dominant finding in regulatory economics in the last 20 years-that incentive-based regulation outperforms rate-of-return profit guarantees. Even if distribution costs are independent of use, some usage charges can be efficient. Price-cap regulation may distort incentives to inform consumers about energy efficiency-getting more performance from less electricity. Utilities will subsidize efficiency investments, but only when prices are too low. If consumers fail to adopt energy efficiency measures that would be individually beneficial, decoupling can increase welfare, but only if all energy revenues are separated from use, not just those associated with distribution.”
Bushnell, J., and Mansur, E., 2005. “Consumption Under Noisy Price Signals: A Study of Electricity Retail Deregulation in San Diego.” The Journal of Industrial Economics 53, no.4: 493-513. [link]
Abstract: “Utility services employ nonlinear tariffs that attempt to convey information on cost convexities. This paper examines how customers respond to noisy and volatile tariffs by measuring deregulated retail rates’ impact on electricity consumption in San Diego. When rates doubled in 2000, consumers appear to have reacted more to recent past bills than to current price information. By summer’s end, we find consumption fell 6% while lagging price increases. Even months after the utility restored low historic rates customers continued curtailing demand. We conclude that rate structures relying upon lagged wholesale price averages produce delayed responses to scarcities or high costs.”
Carlson, J.L., and Loomis, D. 2008. “An Assessment of the Impact of Deregulation on the Relative Price of Electricity in Illinois”. The Electricity Journal 21, no.6:60-70 [link].
Abstract: “Though it’s commonly thought that electricity deregulation has, by and large, failed to deliver its anticipated results, consumers in Illinois have benefited from deregulation when compared to what has happened to rates over the past several years in bordering states. This conclusion is supported by a comparison of nominal and real rates paid by different customer classes, theoretical predictions, and consideration of fuel cost impacts and capacity expansions.”
Caplan, E., and Brobeck, S., 2012. “Have Restructured Wholesale Electricity Markets Benefitted Consumers?” Electricity Policy. [link]
Abstract: “The evidence is clear that generators are profiting excessively from RTO power markets, and that sellers’ rates are not ‘just and reasonable’ as the law requires. Consumers are paying the price, to their detriment and that of the overall economy.”
Costello, K. 2003. The Shocking Truth About Restructuring of the US Electricity Industry.” The Electricity Journal 16, no. 5:11-19. [link]
Abstract: “The author, early on a strong supporter of restructuring, now seriously questions whether at this time we are capable of doing it right on account of the highly divergent visions of the electricity industry held by major stakeholders. This revelation is akin to converting from being a Christian Fundamentalist to a Unitarian, who looks at most things not in black-and-white terms but in shades of gray.”
Domagalski, J.L., and O’Connor, P.L. 2013. “Regulation & Relevancy: Assessing the Impact of Electricity
Customer Choice.” Electricity Policy, January 2013. [link]
Abstract: “The price spread between restructured states and traditionally monopoly-regulated states has narrowed in the three years since 2008 as much as it had widened in the previous six-year period. In-depth analysis will be needed to determine whether traditional regulation provides discernible consumer benefits compared to competitive customer choice.”
Goto, M., & Tsutsui, M. 2008. “Technical Efficiency And Impacts Of Deregulation: An Analysis Of Three Functions In U.S. Electric Power Utilities During The Period From 1992 Through 2000.” Energy Economics 30, no.1:15-38. [link]
Abstract: “The main purpose of this study is to examine the impacts of deregulation on technical efficiency and its changes over time for large-scale U.S. electric power utilities during the period from 1992 through 2000. We analyze the efficiency of three individual functions, i.e., generation, transmission/distribution, and general administration, and the deregulatory impacts on each of them. In order to implement the analysis, we estimate an input distance function by using a stochastic frontier analysis. The results indicate that there is a significant impact of deregulation on efficiency in the generation and general administration functions, while no effects are observed in the transmission/distribution function.”
Hickey, E.A., and Carlson, J.L. 2010. “An Analysis of Trends in Restructuring of Electricity Markets” The Electricity Journal 23, no. 5: 47-56 [link]
Abstract: “The transition from traditional rate-of-return regulation to competition in generation in the electricity industry has been a bumpy one. While the outcome has been largely criticized, there is evidence that ratepayers in the majority of restructured states have in fact benefited, albeit less dramatically than was originally predicted, from their state’s restructuring initiatives. Nonetheless, as regulated and restructured states move forward, there are lessons from the experience that should inform future restructuring efforts.
Hurn, A. S., Silvennoinen, A., and Teräsvirta, T. 2015. “A Smooth Transition Logit Model of the Effects of Deregulation in the Electricity Market.” Journal of Applied Econometrics 31, no. 4:707-733. [link]
Abstract: “This paper introduces the smooth transition logit STL model that is designed to detect and model situations in which there is structural change in the behaviour underlying the latent index from which the binary dependent variable is constructed. The maximum likelihood estimators of the parameters of the model are derived along with their asymptotic properties, together with a Lagrange multiplier test of the null hypothesis of linearity in the underlying latent index. The development of the STL model is motivated by the desire to assess the impact of deregulation in the Queensland electricity market and ascertain whether increased competition has resulted in significant changes in the behaviour of the spot price of electricity, specifically with respect to the occurrence of periodic abnormally high prices. The model allows the timing of any change to be endogenously determined and also market participants’ behaviour to change gradually over time. The main results provide clear evidence in support of a structural change in the nature of price events, and the endogenously determined timing of the change is consistent with the process of deregulation in Queensland.”
Hosoe, N. 2006. “Deregulation of Japan’s Electricity Industry.” Japan and the World Economy 18, no.2: 230-246. [link]
Abstract: “Japan’s electricity industry is now in the process of regulatory reform. This industry consists of three sectors: generation, transmission, and distribution. The reform phases out the entry barrier in the first sector, while keeping the latter two as they were with a rate-of-return ROR regulation. To simulate this regulatory reform, we employ a computable general equilibrium model, which distinguishes these three sectors and is equipped with the ROR regulation and substitution among various energy sources. Our numerical simulations show a potential for significant welfare improvements and substitution among energy inputs even if the reform scope is limited.”
Hyland, M. 2016. “Restructuring European electricity markets- A panel data analysis.” Utilities Policy 38: 33-42.[link]
Abstract: “This paper looks at the restructuring of European electricity markets that has been taking place since the 1990s. This liberalisation process, driven largely by EU legislation aiming to create a single market for electricity, has led to significant changes in how electricity markets in member states operate. In this paper I estimate the impact of the restructuring process on electricity prices for industrial consumers. Much of the literature to date estimating the impacts of electricity market restructuring fails to take into account the potential endogeneity of the reform process. By using dynamic panel-data techniques, I aim to overcome this shortcoming. I find that once the potential endogeneity of reforms is accounted for, restructuring has, as of yet, had no statistically significant impact on electricity prices. This research highlights the importance of accounting for dynamics and endogeneity before drawing inferences about the results of EU electricity-market reform”.
King, M., King, K., and Rosenzweig, M. 2007. “Customer Sovereignty: Why Customer Choice Trumps Administrative Capacity Mechanisms.” The Electricity Journal 20, no.1: 38-52. [link]
Abstract: “In a functioning market, price performs a central role of rationing existing capacity to those who value it most and signaling the need for capacity investment. Together, price signals and demand response restrain price spikes when the system is under stress, reducing the political impulse to intervene with measures that erode incentives for capacity investment that would mitigate price excursions.”
Kuipers, W. and Chappelle, L. 2016. Electricity customer choice out-performs traditional monopoly. Utility Dive. August 23, 2016. [link]
Abstract: “The evidence continues to accumulate that the performance of electricity customer choice is superior to that of traditional vertically integrated monopoly. Since the recession of 2008-9, electricity customer choice has been routinely outperforming traditional monopolies in terms of price.”
Lave, L. B., Apt, J., and Blumsack, S. 2004. “Rethinking Electricity Deregulation.” The Electricity Journal 17, no.8:11-26. [link]
Abstract: “Proponents of free markets for electricity assert that minor fixes to the California market and to FERC’s proposed Standard Market Design would generate lower prices. We disagree. Designing a competitive market that remedies the problems seen in California and other restructured markets is difficult; emulating even good ISOs like PJM will not do the job. Each one of the problems can be overcome, but the costs of doing so might make full deregulation unattractive.”
Lesser, J.A., and O’Connor, P.R. 2014. “The Electricity Choice Debate: Conjectures and Refutations.” The
Electricity Journal 27, no. 7:9-22. [link]
Abstract: “As the debate over electricity customer choice has awakened from a decade-long hibernation, four key assertions have been advanced about the supposed negative consequences of retail electricity competition and customer choice. These conjectures echo those originally proposed during the decade leading up to restructuring of wholesale electricity markets across the country as well as the inauguration of retail electricity choice in a number of states.”
Littlechild, S. 2006. “Competition and Contracts in the Nordic Residential Electricity Markets.” Utilities Policy 14, no.3:135-147. [link]
Abstract: “The main Nordic residential electricity markets Norway, Sweden and Finland effectively opened to retail competition around 1998. They have not been subject to regulatory controls on prices or other contract terms. Competition is developing well. Between 11% and 32% of residential customers have switched to other suppliers, and a further 19% or more have chosen new terms with their local supplier. Terms available include fixed-price contracts ranging from 3 months to 5 years duration and spot price-related terms, in addition to the standard variable tariffs. The use of these new products is increasing over time, and there is considerable product innovation. This raises questions about the ability of regulation to substitute for retail competition.”
Marcus, W. B. 2011. Does Deregulation Raise Electric Rates? A Cross Sectional Analysis. JBS Energy. [link]
Introduction: “The theory behind deregulation is that competition would be salutary and would create greater efficiencies and reduce costs. A number of economists and a larger number of deregulation proponents have advanced this view… However, a large number of reasons can be identified as to why costs have not necessarily gone down as originally expected, including but not limited to markets’ raising costs of generation to marginal cost; strategic bidding the extremes of which were developed by Enron, as outlined in Woychik,2007 and McCullough 2002; costs of hedging generation for sales to retail customers; and “de-integration” that reduces economies of scale and increases costs Kwoka, 2006. De-integration cost increases arise from 1 separating generation from other utility activities, 2 shifting of transmission from state to federal jurisdiction and more generous regulation at FERC; 3 increased administrative costs arising from Regional Transmission Organizations which duplicate utility functions; 4 costs of building and administering new computer systems for both utilities and RTOs to handle system requirements caused by deregulation direct access billing requirements, load settlement, RTO bidding” requirements, etc.. Finally, costs arise from separating retail services from wires in places with full competition such as Alberta and Texas, including even assuring a rate of return for retail services in Alberta to create room for other competitors. Alberta Utilities Commission, 2006”
Morey, M., and Kirsch, L. 2006. “Retail Rate Impacts of State and Federal Electric Utility Policies.” The Electricity Journal 26, no.3:35-49. [link]
Abstract: “Most states that pursued restructuring hoped that it would encourage competition and other efficiencies that would reduce their relatively high rates. An analysis finds that retail access has provided such a rate reduction for residential customers, though this reduction has been relatively small in states that adopted RPS. Retail access has had no significant impact on commercial and industrial rates in states without RPS, but has significantly raised these rates in states with RPS.”
Nakajima, T., and Hamori, S. 2010. “Change in Consumer Sensitivity to Electricity Prices in Response to Retail Deregulation: A Panel Empirical Analysis of the Residential Demand for Electricity in the United States.” Energy Policy 38, no. 5: 2470-2476. [link]
Abstract: “About ten years have passed since the deregulation of the U.S. retail electricity market, and it is now generally accepted that the available data is adequate to quantitatively assess and compare conditions before and after deregulation. This study, therefore, estimates the changes in price elasticity in the residential electricity market to examine the changes, if any, in household sensitivity as a result of retail electricity market deregulation policies to residential electricity rates. Specifically, six types of panel data are prepared, based on three cross-sections—all states except for Alaska and Hawaii and the District of Columbia, deregulated states, and non-deregulated states—and two time series—the period before deregulation and the period after deregulation. The panel empirical analysis techniques are used to determine whether or not the variables are stationary, and to estimate price elasticity. We find that there is no substantial difference in the price elasticity between deregulated and non-deregulated states for both periods—before deregulation and after deregulation. Thus, it can be said that the deregulation of the retail electricity market has not made consumers more sensitive to electricity rates and that retail deregulation policies are not the cause of price elasticity differences between deregulated and non-deregulated states.”
O’Connor, P., and O’Connell-Diaz, E. 2015. Evolution of the Revolution: The Sustained Success of Retail Electricity Competition. COMPETE Coalition. [link]
Abstract: “After more than a century of a universally accepted vertical monopoly model, the idea of retail electricity competition “Customer Choice” that emerged in the 1980s was indeed revolutionary. To succeed, a revolutionary idea must evolve to reflect changed conditions and lessons learned. Measured against objective criteria over almost two decades, Customer Choice has met that test.”
Rose, K. 2000. Electric Restructuring Issues for Residential and Small Business Customers. Report, The National Regulatory Research Institute.[link]
Abstract: “When a state considers electric restructuring, a commonly expressed concern is that the introduction of retail choice should not leave residential and small business customers behind. In other words, while “big dogs” may “eat first” (and perhaps the most), these smaller customers should also benefit from retail choice. Some states have adopted policies that specifically target residential and small business customers, such as customer education programs and measures to prevent unscrupulous marketing tactics (for example, “slamming” and “cramming”). However, some policies, such as setting low generation standard offer prices and rate discounts, may appear to be beneficial, but can actually reduce the competitive options available to these customers.
Rose, K. 2006. Performance Review of Electric Power Markets. Review for the Virginia State Corporation Commission [link]
Abstract:” The overall status of state retail access has remained relatively unchanged for several years. Sixteen states and the District of Columbia have fully implemented their legislation and commission orders and currently allow full retail access for all customer groups. Nevada and Oregon allow retail access for larger customers only. Six states that passed restructuring legislation later delayed, repealed, or indefinitely postponed implementation. Twenty-six states are not considering retail access or restructuring at this time and no state has passed restructuring legislation since June of 2000, when the California and western power crisis was just beginning. A total of 34 states have repealed, delayed, suspended, or limited retail access to just large customers, or are now no longer considering retail access.”
Rose, K. 2012. “State Retail Electricity Markets: How Are They Performing So Far?” Electricity Policy. [link]
Abstract: “States that restructured their electricity market to separate power generation from other retail services did so in part to create competition and bring their generally higher power prices down. The move has not produced the desired result.”
Rosenberg, A.E. 2008. “A Way to Reorganize Organized Markets” The Electricity Journal 21, no.1:9-17 [link]
Abstract: “Although there has been widespread criticism of the standard market design, no satisfactory alternative has yet been proposed that will satisfy the consumers, the generators, and regulators. This article proposes a structured capacity market that entails a cost-based call on energy. The article demonstrates that this alternative market structure would not only facilitate new generation and encourage bilateral contracts, but would bring the all-in market price down compared to the Poolco model.”
Salies, E., and Price, C.W. 2004. “Charges, Costs and Market Power: the Deregulated UK Electricity Retail Market.” The Energy Journal 25, no.3: 19-35 [Link]
Abstract: “The residential UK electricity market was opened for the first time in 1999, introducing choice of supplier, and about 40 percent of households changed supplier in the first four years. After three years price caps were removed. We review this process and assess the competitiveness of the market by examining how the charges levied by suppliers depend on cost and demand factors for three different payment methods and consumption levels. We also identify signs of additional market power of incumbency and the effect of levying a tariff with no fixed charge. We find that both cost and demand factors affect charges, and the relationship varies for different payment methods and consumption levels; and that tariffs with no fixed element have different effects for different payment methods. We also conclude that considerable market power seems to remain with potentially adverse distributional effects.”
Simpson, J. L. 2015. “Deregulation in Electricity Markets: The Interplay of Political Stability and Fossil Fuel Prices.” In Energy Technology and Valuation Issues pp. 199-213. Springer International Publishing. [link]
Abstract: “Electricity markets are perceived to be monopolistic or oligopolistic in nature, whether government or private sector owned. Prices, therefore, are subject to government political interference and/or monopoly pricing as well as economic factors, such as the supply cost of fossil and other fuels. Greater interest is now being shown by international energy economists, regulators, policy
makers and practitioners as to whether or not country electricity markets are becoming more globalised with pricing subject to economic factors, such as global fossil fuel prices. This chapter examines a representative sample of larger OECD country and transitional/developing country electricity markets in a
dynamic model. In the long-term in the cointegrated markets, economic and financial forces of energy prices and fossil fuel prices interact with political forces indicating the degree of political stability and level of government interference to produce stability in the electricity markets. No such stability occurs in the long-term for the remainder of the markets where it might be suggested that government interference may yet be distorting the electricity markets concerned thus producing relatively less degrees of electricity market liberalisation. With regard to the short-term dynamics the only countries where the electricity markets are endogenous when all variables interact in each market on a 1 month lag are Hong Kong and Canada. Only in the cases of China, New Zealand and Malaysia are electricity prices significantly exogenous.”
Slocum, T. 2001. “Electric Utility Deregulation and the Myths of the Energy Crisis.” Bulletin of Science Technology & Society 21: 473-481. [link]
Abstract: “Electricity deregulation was meant to improve the quality of people’s lives by lowering the cost of a critical commodity. In every state that has chosen deregulation, however, power companies, free from the oversight of state regulators, have increased prices and, in California’s case, have driven a utility to bankruptcy. It is clear that deregulation was intended to benefit the energy industry more than consumers by removing cost-based regulations that restricted corporate profits but guaranteed low prices and reliable service to consumers. Deregulation proponents argued that California’s commitment to strong air quality standards prevented development of adequate power plant construction and that not a single power plant was constructed in California in the 1990s. This claim is refuted through an examination of California Energy Commission data. Although other states’ experiences are not as dramatic as California’s, serious problems will emerge if deregulation continues to dominate the policy agenda.”
Spees, K., and Lave, L. B. 2007. “Demand Response and Electricity Market Efficiency.” The Electricity Journal 20, no. 3: 69-85. [link]
Abstract: “Customer response is a neglected way of solving electricity industry problems. Historically, providers have focused on supply, assuming that consumers are unwilling or unable to modify their consumption. Contrary to these expectations, customers respond to higher prices that they expect to continue by purchasing more efficient appliances and taking other efficiency measures, a review of published studies indicates.”
Swadley, A. and Yucel, M. 2011. “Did Residential Electricity Rates Fall After Retail Competition? A Dynamic Panel Analysis.” Energy Policy 39, no. 12: 7702-7711. [link]
Abstract: “A key selling point for the restructuring of electricity markets was the promise of lower prices. There is not much consensus in earlier studies on the effects of electricity deregulation in the U.S., particularly for residential customers. Part of the reason for not finding a consistent link with deregulation and lower prices was that the removal of transitional price caps led to higher prices. In addition, the timing of the removal of price caps coincided with rising fuel prices, which were passed on to consumers in a competitive market. Using a dynamic panel model, we analyze the effect of participation rates, fuel costs, market size, a rate cap and switch to competition for 16 states and the District of Columbia. We find that an increase in participation rates, price controls, a larger market, and high shares of hydro in electricity generation lower retail prices, while increases in natural gas and coal prices increase rates. We also find that retail competition makes the market more efficient by lowering the markup of retail prices over wholesale costs. The effects of a competitive retail electricity market are mixed across states, but generally appear to lower prices in states with high participation rates.”
Taber, J.T., Chapman, D., and Mount, T.D. 2005. “Examining the Effects of Deregulation on Retail Electricity Prices”. Working Paper Series, Cornell University [link]
Abstract: A primary aim of deregulation is to reduce the customer cost of electricity. In this paper, we examine the degree of success in reaching that goal using a variety of methods. We examine rates for each of four customer classes; for regulated, deregulated and publicly owned utilities; and for three definitions of deregulation. We control for a variety of factors which may independently affect differences in electricity price: climate, fuel costs, and electricity generation by energy source. Taken as a whole, the results from our analysis do not support a conclusion that deregulation has led to lower electricity rates.
Treadway, N. 2015. ABACCUS 2015: Annual Baseline Assessment of Choice in Canada and the United States. DEFG. [link]
Abstract: “Since 2007, the Annual Baseline Assessment of Choice in Canada and the United States ABACCUS has scored the U.S. states and Canadian provinces with respect to their efforts and achievements in the promotion of a competitive retail electric sector. Texas is once again the leading jurisdiction. One third of the states and provinces in North America have taken steps to allow the direct sale of electric power to retail energy consumers by non-utilities. Eighteen jurisdictions in North America allow direct retail access to residential electricity consumers. Eligibility extends to more than 39.2 million residential accounts. Of these, 17.1 million 44% receive comprehensive electric service or generation service power only from a competitive retail energy provider REP in 2014. Nineteen jurisdictions in North America allow direct retail access to commercial and industrial customers. Large energy consumers are sophisticated and fully able to manage a power contract that best suits their operations. Most large business consumers more than eighty percent of eligible consumption in most jurisdictions and close to one hundred percent in several exercised their right to choose in 2014.”
Uritskaya, O. Y., and Uritsky, V. M. 2015. “Predictability of Price Movements in Deregulated Electricity Markets.” Energy Economics 49: 72-81. [link]
Abstract: “In this paper we investigate predictability of electricity prices in the Canadian provinces of Alberta and Ontario, as well as in the US Mid-C market. Using scale-dependent detrended fluctuation analysis, spectral analysis, and the probability distribution analysis we show that the studied markets exhibit strongly anti-persistent properties suggesting that their dynamics can be predicted based on historic price records across the range of time scales from 1 h to one month. For both Canadian markets, the price movements reveal three types of correlated behavior which can be used for forecasting. The discovered scenarios remain the same on different time scales up to one month as well as for on- and off-peak electricity data. These scenarios represent sharp increases of prices and are not present in the Mid-C market due to its lower volatility. We argue that extreme price movements in this market should follow the same tendency as the more volatile Canadian markets. The estimated values of the Pareto indices suggest that the prediction of these events can be statistically stable. The results obtained provide new relevant information for managing financial risks associated with the dynamics of electricity derivatives over time frame exceeding one day.”
Woo, C. K., King, M., and Chow, L. C. H. 2006. “Costs of Electricity Deregulation.” Energy 31, no.6-7: 747-768. [link]
Abstract: “The last decade has witnessed efforts throughout the world to deregulate the electricity industry, with varied results. While there have been a few qualified success stories, many challenges of deregulation have come to light. These challenges can lead to negative, even disastrous, outcomes. Based on a comprehensive literature review, this paper catalogues problems experienced in various deregulation efforts, and considers the application of the lessons learned from this history to Israel, which is considering deregulation. Failings of deregulation are found to center around the following problems: high set-up cost; complicated market design; inevitable spot price volatility; market power abuse; inefficient investment; difficulty in reducing generation cost; dysfunctional input markets; stranded cost; unequal distribution of benefits. We find that many of these problems are exacerbated by the particular circumstances faced by Israel, and advise any country or region considering deregulation to carefully consider these obstacles to success.”
Zarnikau, J., and Whitworth, D. 2006. “Has Electric Utility Restructuring Led to Lower Electricity Prices for Residential Customers in Texas?” Energy Policy 34, no.15: 2191-2200. [link]
Abstract: “This paper analyzes the determination of residential electricity prices in the competitive Electric Reliability Council of Texas ERCOT market. This analysis suggests that electricity restructuring in Texas has not yet resulted in lower prices for the majority of residential energy consumers in areas open to competition. Contrary to common expectations, residential electricity costs for consumers at a typical 1000 kWh per month consumption level have increased at a greater rate in the areas of Texas offering retail choice than in the areas of the State where retail competition has not been introduced.”