Study: Pennsylvania, New York lead in deregulation

Michigan, Ohio, West Virginia, and Rhode Island have made the greatest strides toward electric restructuring this year, according to the Retail Energy Deregulation Index 2000 compiled by the Center for the Advancement of Energy Markets. But there are also signs that California which pioneered the concept is retreating from deregulation, says CAEM Pres. Ken Malloy.


Michigan, Ohio, West Virginia, and Rhode Island have made the greatest strides toward electric restructuring this year, according to the Retail Energy Deregulation Index 2000 (RED Index) compiled by the Center for the Advancement of Energy Markets (CAEM), Burke, Va.

The July update to the RED Index, originally issued in February, also showed Pennsylvania and New York continue to be nearly tied for the national lead in electric restructuring. Pennsylvania and New York, with scores of 65 and 64 out of 100, respectively, lead the nation in customer choice.

While the index indicates the transition from a monopoly model to competition has begun in earnest, there are also signs that California which pioneered the concept is retreating from deregulation, says CAEM Pres. Ken Malloy. California is in 16th place with a score of 34.

New California public utility commissioners are signaling possible dissatisfaction with deregulation. Unexpectedly high electric prices this summer have triggered a political backlash in the state. In comments on a staff report, Commissioner Carl Wood and Pres. Loretta Lynch suggested in the past the commission failed to consider the potential adverse consequences to consumers resulting from deregulation, adding they will not support more deregulation of the electric industry without a better understanding of the consequences.

"It's almost like an earthquake," says Malloy, a former state and federal regulator. "California provided an enormous amount of intellectual leadership to deregulation. This is nothing short of amazing."

The July update of the index showed that four states, Michigan, Ohio, West Virginia, and Rhode Island, made significant strides, with jumps of more than 20 points since the original study in February 2000.

In the past 6 months, these four states took dramatic action, increasing their index scores, Malloy says. Michigan and Ohio both passed restructuring legislation, West Virginia adopted a major order, and Rhode Island's largest utility had a merger.

Texas, a relative newcomer to restructuring, leads the South with a score of 53 and a ranking of fifth in the nation. The national average score is 21, up from 17 in February.

However, thirty-five states had either no change or an increase of less than 5 points. "The vast majority are moving at a snail's pace," Malloy says.

In an analysis, Malloy says it is becoming increasingly clear that retail restructuring is a completely different and more complex undertaking than the restructuring of wholesale gas and electric markets.

The RED Index 2000 measures the progress states have made in moving from the monopoly model of public utility regulation to the competitive model. A RED Index score of zero represents the monopoly model and a score of 100 represents complete and effective implementation of the competitive model, said CAEM, a nonprofit think tank which describes its mission as promoting the transition from a monopoly to a competitive model of regulation.

Among the attributes measured are whether a state has a deregulation plan, the percent of eligible customers, the percent switching, stranded costs calculation, regulatory convergence, and default provider rates, among others.

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