Report Looks at Electricity Competition 20 Years after Restructuring

Philadelphia, PA—The Kleinman Center for Energy Policy at the University of Pennsylvania today released a report examining the performance of wholesale and retail electricity restructuring in Pennsylvania.

A Case Study of Electricity Competition Results in Pennsylvania: Real Benefits and Important Choices Ahead,” was officially released at the Innovation, Change, and Challenge Conference this morning in Hershey, Pennsylvania. The report and its findings are particularly relevant as Pennsylvania marks the 20th anniversary of its state electricity restructuring law.

Christina Simeone, director of policy and external affairs at the Kleinman Center, and John Hanger, president of Hanger Consulting LLC co-authored the timely report.

"This report provides important data and insights into the performance of wholesale and retail electricity power markets in Pennsylvania that have produced significant gains for consumers and the environment," said Hanger.

Report Findings: The report found that in real terms wholesale energy prices in 2015 are lower than they were in 2000, primarily due to competitive markets taking advantage of sustained, low-priced natural gas. Competitive market constructs have attracted significant investments into new generation capacity, as well as retirement of uncompetitive resources, with Pennsylvania being home to many of these new assets.

Data shows a significant shift in the fuel mix used to power the regional wholesale market, as power from coal resources declined and power from natural gas resources increased—a trend also seen in Pennsylvania.  Environmental emissions of carbon dioxide, nitrogen oxides, and sulphur dioxides all decreased significantly—throughout the regional market and in Pennsylvania—over the time period examined.

Prior to restructuring, Pennsylvania’s overall average retail price was 15 percent above the national average. By 2015, it was 0.1 percent below the national average. Commercial and industrial retail customers experienced cost savings from retail electricity shopping, and also enjoyed decreasing distribution rates (which are not impacted by restructuring). On average, residential customers did not experience cost savings from retail shopping and also experienced increasing distribution rates. However, residential customers did see benefits from retail restructuring, including the potential for over $800 million in savings from utility-offered default service, and access to new rate and innovative product plans.

­Moving forward, the report highlights key issues impacting wholesale and retail markets, for which policy choices will be needed. The issues generally pertain to balancing economic feasibility with development of a modern, resilient, and secure power distribution grid, and ensuring wholesale markets remain effective and competitive.

“Looking back, restructuring has enabled low-priced natural gas to bring down power prices, replace inefficient generation with more efficient resources, and facilitate real reductions in air pollution, “ said Simeone. “Without low-priced natural gas, these results would have looked different. Looking forward, these markets will wrestle with new challenges, for which creative policy solutions will be needed.”

>>> READ THE REPORT: Download a copy of the full report at http://kleinmanenergy.upenn.edu/paper/electricity-competition

About the Kleinman Center: The Kleinman Center for Energy Policy at the University of Pennsylvania cultivates energy policy innovation and promotes its application—creating opportunities for students, researchers, and professionals to debate viewpoints, explore options, and develop agendas for decision and action.

About the Conference: The Innovation, Change, and Challenge Conference brings together energy industry policymakers, top energy company executives, and environmentalists to explore 20 years of electric retail competition and discuss the outcomes of this new report.  

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For media inquiries, please contact:

Lindsey Samahon
Kleinman Center for Energy Policy
University of Pennsylvania
(484) 362-8316
kleinmanenergy@upenn.edu