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RESA Releases Research Showing Cost Disparity Between Monopoly And Competitive Electricity States

February 11,2019



The Retail Energy Supply Association (RESA) released new research on electricity price trends which it said, "reveals an eye-opening cost disparity between monopoly and competitive states."

"Researchers have discovered that, while the electricity industry as a whole is facing unprecedented market conditions – lower demand for electricity and a natural gas revolution -- consumers in states that allow retail energy competition are paying less for electricity, while consumers in monopoly states are paying more," RESA said

In the white paper entitled, "The Great Divergence in Competitive and Monopoly Price Trends," Philip O'Connor, Ph.D. and Muhammad Asad Khan looked at data from the U.S. Energy Information Administration (EIA) and compared the weighted average price trends of the 35 U.S. monopoly states with the 14 U.S. jurisdictions that allow competition.

RESA said that their research shows that between 2008 and 2017:

• The all-sector annual weighted average price in the 35 monopoly states was 18.7 percent higher in 2017 than in 2008.

• The all-sector annual weighted average price for the competitive retail markets was 7 percent lower in 2017 than in 2008.

RESA said that the analysis shows:

• If the annual percentage price changes in the 35 monopoly states had tracked with the percentage prices in competitive jurisdictions, consumers in the monopoly states would have paid nearly one-third of a trillion dollars ($331.8 billion) less.

• If the same price trend patterns that occurred in the monopoly group had prevailed in the competitive jurisdictions, the cost to consumers in the 14 choice markets would have been higher by $225.6 billion.

"The research also reveals one partial explanation for this cost disparity may be found in the way competitive markets and monopoly regulation treat power plant utilization. While plant utilization has declined in greater proportion in monopoly states, plants in those states are granted full cost recovery -- with consumers left to absorb those costs. In contrast, if plants are underutilized in competitive markets, they will experience unfavorable financial consequences, but it is investors who pay the price, not customers," RESA said

"After conducing our research, we found it poses an important challenge for policy-makers," said Muhammad Asad Khan, co-author of "The Great Divergence in Competitive and Monopoly Price Trends." "That challenge is to come to a clear and accepted explanation for the price divergence so that it can then become the basis for future reform that benefits consumers in every state."

See the full white paper here



Tags:
Deregulation   Electric choice  

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