POWER July 2011 - 20

One Million Pennsylvanians Switch
The big buzz at the conference was that in less than a year, more
than 1 million Pennsylvania residential customers had switched
from the default supplier, and the rate of switching was accelerating
in the wide-open Philadelphia market.
PUC Chairman Robert Powelson, a passionate supporter of
competitive markets, noted that the debate in Pennsylvania
was " what do we do about the default supply? " Customers are
not obligated to shop for electricity and change suppliers,
but if they do not, they will be served by the default supplier
at a price above the competitive market. Often, these
non-shopping customers are the ones who can least afford an
excessive electric bill.
Powelson said that continuing education is needed to remind
residential customers that shopping for electricity is encouraged
and that switching will not affect the reliability of service at
their home. If there is a storm that causes a major power outage,
restoration of service will be no faster or no slower for electricity
shoppers.
2. Fierce competition. Competitive electricity markets continue
to grow because residential users are demanding choice of electricity
supplier. During 2010, the total quantity of electricity purchased by consumers
who switched electricity suppliers was up 25% for residential
customers and 18% for nonresidential customers. Source: KEMA
Residential
700
600
500
400
300
200
100
Nonresidential
Illinois Protects Consumers
In the summer of 2007, the Illinois General Assembly created the
Illinois Power Agency (IPA), an independent government agency,
to develop and manage a new electric supply procurement process
for customers of Ameren Illinois and ComEd. After overseeing the
procurement of electric supply, the IPA directs the utilities to enter
into wholesale electric supply contracts of various durations
to purchase electric supply from different sources.
According to a plan developed by the IPA and approved by
the Illinois Commerce Commission, Ameren and ComEd purchase
the electric supply for customers who have not chosen to receive
supply from a REP. The utilities charge customers for the costs of
purchasing electric supply, without any markup or profit. Ameren
and ComEd also pass through a transmission charge and the
regulated cost of delivering the electricity. A typical residential
customer in Chicago can currently reduce the commodity portion
of the electric bill by 15% to 20% by switching to an REP
for a one-year term. Promotional codes are available for further
savings on some plans and at least one REP offers frequent flier
miles for each $1 of electricity purchased.
Currently, about 75% of the electricity consumed by Illinois'
commercial and industrial customers is provided by a REP. In addition,
there are seven REP companies competing for residential
customers in Ameren territory and 12 in ComEd territory. Customers
in MidAmerican Energy's service territory also have the right
to choose a retail electric supplier. However, no suppliers have
registered with MidAmerican to serve these customers, likely because
the competitive market is small and has lower retail rates.
According to the Illinois Commerce Commission, residential
114
86
88
91
shopping for electricity increased during the first quarter of
2011, but exact data has not been released. As of November 30,
2010, only 0.3% of residential customers in ComEd's territory
had switched to a REP. It would not surprise me to see as much
as 5.0% of the residential load switched over to the competitive
396
401
401
473
market by the end of 2011.
-Mark Axford is the principal of Axford Consultants LP and a
POWER contributing editor.
2007
2008
2009
2010 (est)
3. Change leaders. Ohio and Pennsylvania led the deregulated
electricity markets with the number of residential retail customers
switching electricity suppliers. This chart illustrates the total competitive
retail electricity sales in 2009 on the left, the electricity purchased
by customers who switched from the default supplier in selected
states, and total electricity sales in 2010. Source: KEMA
600
580
560
520
500
480
460
440
20
+15
+9
+10
+25
+35
493
2009
OH
PA
TX
NJ IL, MI, other
2010
588
New Opportunities Abound for Retail
Electric Suppliers
Following the conclusion of the KEMA conference (see previous
story), Mark Axford had the opportunity to talk with Phillip
Tonge, recently appointed president of Spark Energy LP. Spark
Energy is a retail energy provider (REP) of electricity and natural
gas in 16 states that have opened their markets to competition
for industrial, commercial, or residential customers.
Axford: Did Spark Energy see a resurgence in retail electric
markets during 2010?
Tonge: Absolutely. Texas has become a mature market that is
working well after 10 years of competition. For Spark, 2010 was
a " hold your own " year in Texas, but we saw lots of growth and
excitement in other regions. Pennsylvania is perhaps the best example
of a rapidly growing market. They are getting good media
coverage and public awareness of competitive choice. As a result,
large numbers of customers have switched to a new electric provider
in a short time.
Axford: As Spark arranges its electricity supply for customers,
what fraction is hedged in bilateral contracts versus spot market
purchases? Would you consider your fraction to be typical for
REPs?
Tonge: Our goal with managing the supply portfolio is to run a
flat book, which means we endeavor to match our supply exactly
to our load obligations as much as possible for any given hour.
www.powermag.com
POWER | July 2011
Competitive energy sales (TWh)
Competitive energy sales (TWh)
http://www.powermag.com
POWER July 2011

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