xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns="http://www.w3.org/TR/REC-html40"> Texas Remains Electric Choice Leader, RED Index Shows, But Upmusserpmusser2122002-10-30T14:44:00Z2002-10-30T14:57:00Z17524287Intertec Publishing35852649.38211206 pt22

Texas continues to lead the United States in electricity restructuring, but progress in this country has virtually ground to a halt, the update to the third edition of the Retail Energy Deregulation Index (RED Index) shows.

Progress toward restructuring continues to be made in Canada, England, Australia and New Zealand, the update notes.

The update, issued by the Center for the Advancement of Energy Markets (CAEM), shows that California’s well-publicized troubles, the Enron collapse and the financial crisis in the energy industry have slowed progress on electricity restructuring in the U.S. The most positive development in retail energy restructuring in the U.S. has been the emergence of the North American Energy Standards Board.

Texas leads the U.S. with a score of 70 out of 100 (ranked 3rd internationally), and Alberta leads Canada with a 61 (ranked 6th). Pennsylvania, Maine and New York all have barely passing scores (60 or more out of 100).

Ken Malloy, CEO of CAEM, commented that the best news on electricity restructuring comes from overseas. “While England has long been recognized as a leader in energy restructuring, the surprise is how much further ahead England is than the U.S. and Canada,” he said. Among the results:

  • England increased its score from 83 to 88 as a result of the complete elimination of price caps on residential customers earlier this year.
  • New Zealand, included for the first time in the RED Index, scored an impressive 75.
  • Ontario’s RED Index Score increased by 16 points (the greatest increase this year) as a result of its May 1, 2002 opening of the market to the mass retail market (100-percent access), a switching rate of 25 percent, the initiation of competitive billing, and a reclassification of Ontario’s practice for default provider price risk.
  • Victoria leads Australia with a score of 50, ranking 11th. Several states not included in our survey are making progress as well. South Australia has choice for customers above 160 megawatt-hours (MWH) per year, and mass-market competition is proposed for January 2003. The Australian Capital Territory allows choice for customers who use more than 100 MWH per year, and has recommended mass-market choice for January 2003. Tasmania is considering the introduction of retail competition following interconnection to national electricity grid.

Malloy noted, “The California crisis, Enron’s collapse and the financial meltdown of major sectors of the energy industry raise significant questions about the future of retail electric competition. While modest progress was made between 2001 and 2002, progress ground to a halt in the first half of 2002 and there has been no change in the national average yet this year.

“The most positive, important, and significant development in the U.S. is the progress that has been made by the North American Energy Standards Board. The work of NAESB, as was case for its predecessor, the Gas Industry Standards Board, is quiet, tedious, and largely unsung, but is critically important to the future of energy restructuring. GISB bears much responsibility for the success of gas restructuring. The positive impact of NAESB in setting standards that can be adopted by states that significantly lower the transactions costs for marketers and utilities, thus delivering benefits to consumers, will in the long run be viewed as the most significant development in 2002.

“Everyone wants to know how states have reacted to these events. The RED Index answers that question. It’s the only tool that quantitatively compares states to one another on a standard set of key attributes of restructuring,” Malloy said.

Texas is now in the spotlight, he pointed out, mainly because it represents a large, new, coherent retail market. “Texas has benefited from its integrated retail and wholesale regulation under one state legislature and one state public utility commission,” Malloy said. “Within the Electric Reliability Council of Texas, the commission has an opportunity to develop compatible wholesale and retail rules.”

The RED Index national score (see chart), averaging the scores of the 50 states plus the District of Columbia, has risen from 1 in 1997 to 17 in 2002. The median score is 3 and the mode is zero, indicating that the national average is skewed by the high scores of a limited number of states.

The RED Index is a reference tool that measures the progress states have made in moving from the monopoly model of public utility regulation to the competitive model. The index is based on 22 attributes that CAEM has identified as the foundation for an effective transition to competition.

A RED Index score of zero or less represents the traditional set of utility policies, or total monopoly; a score of 100 represents complete and effective implementation of the policies that CAEM believes are the necessary foundation of the customer choice or competitive model.

The index focuses on retail competition and currently covers only electric restructuring. A similar index on gas restructuring is in preparation for issuance later this year. A summary of the RED Index can be found at http://www.caem.org