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Commentary: All electricity customers can benefit from competition

Pat Wood III mug

Pat Wood III, a former Federal Energy Regulatory Commission chairman and former head of the Texas Public Utility Commission, is the principal of Wood3 Resources.

Today, competitive power markets deliver reliable, cost-effective power to two-thirds of the country. The remaining one-third is catching on to competition’s benefits.

Two decades ago, as chairman of the Federal Energy Regulatory Commission, I worked with lawmakers, utilities and customers to unleash a new electricity model based on the idea that competition, rather than traditional monopolies, would achieve better outcomes for electricity customers.

We know now that the model worked. Numerous studies have found that regions with competitive wholesale power markets have seen significant value, including cost savings from power generation, better reliability and increased investment in advanced technologies that make the system more efficient and responsive to customer needs. The regional transmission organization in Mid-Atlantic states provides about $3 billion in annual benefits; in the Midwest, the annual number is closer to $4 billion, and benefits since 2007 total $24 billion.

Savings like these are exactly why more utilities in the Southeast and the West, where most customers still must buy power from traditional monopolies, are choosing to participate in competitive wholesale power markets.

In recent years, major utilities in the South have joined regional transmission organizations, and the benefits are clear. Entergy Louisiana reports its customers have saved $560 million since it joined a regional transmission entity, and Dominion Energy enjoys lower wholesale electricity costs than any other utility in the Southeast.

In the West, eight utilities across multiple states have joined with a state grid operator to form the Western Energy Imbalance Market.While this market is evolving into a regional transmission entity, its members have already seen $650 million in benefits, and seven additional utilities are slated to join between now and 2022.

Now lawmakers in South Carolina are asking: Can we benefit too?

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In South Carolina, legislation is moving in both chambers. Sens. Wes Climer, Tom Davis, Paul Campbell and John Matthews as well as Reps. Bill Sandifer, Mike Forrester, Russell Ott, Jay West, Mac Toole, Gilda Cobb-Hunter, Mandy Powers-Norrell and Laurie Funderburk have authored legislation (S.998 and H.4940, respectively) to study how electricity customers would benefit from utilities in the state joining or establishing a regional transmission entity as well as examining the benefits of other types of electricity market reforms. These efforts are necessary to move the electricity market forward, foster competition and save customers money.

I applaud the bipartisan leadership of these elected officials for prompting this critical conversation and for listening to voters. A recent poll found that more than 80% of people surveyed support energy policies that allow more competition and customer choice. The results should be no surprise, given that a recent study by The Brattle Group found, using North Carolina as a test case, that customers could save nearly $700 million annually by joining a regional transmission organization.

The energy system looks a lot different than it did when we embarked on a path toward competitive power markets 20 years ago. Innovative technologies are transforming the grid into a more decentralized system and giving customers greater options to meet their power needs.

Despite this evolution, one thing that hasn’t changed is the best way to ensure customers’ benefit. Competitive power markets are a proven tool for achieving generation and transmission cost savings, reliability and resiliency improvements, resource diversity, improved energy efficiency, and deployment of cost-effective renewable energy. Markets also give utilities better options for keeping the lights on; instead of only building new power plants and costly infrastructure, markets make prices transparent and often drive innovators to find more effective solutions.

We don’t know exactly how the grid will look in another 20 years. But no matter how it looks, lawmakers in South Carolina and other Southeastern states are smart to be looking at how competition can help ensure their economies and their customers continue to thrive.

Pat Wood III is principal of Wood3 Resources. He served as Federal Energy Regulatory Commission chairman from 2001-05 and as Public Utility Commission of Texas chairman from 1995-2001.

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