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80% of Businesses Choose Competitive Electricity Retailers in Deregulated Areas

July 29, 2015 By Cheryl Kaften

About 17.1 million North American residential consumers (44 percent of those eligible) and most large business consumers (80 percent) have exercised their right to choose their own electric retail service providers, according to the Annual Baseline Assessment of Choice (ABACCUS), a report released by the Houston-based consulting firm Distributed Energy Financial Group (DEFG).

About 39.2 million electricity customers in North America live in states and provinces that make them eligible to shop for electric services and savings, according to lead author of the report and DEFG Managing Partner Nat Treadway.

Treadway identified Texas as the best state for power shopping for the eighth consecutive year– a state where “the best deals for residential consumers reveal commodity prices far below the regulated rates of 15 or even 20 years ago.” In Texas today, he said, the researchers found that all eligible residential customers are taking competitive electric service – 64 percent of them, from companies other than their original, incumbent electric provider.

“A key feature of choice relates to electric price risk,” Treadway stated. “Most consumers lock in a price that is not subject to market volatility or changes in regulatory decisions. Others prefer bargain-shopping, and they willingly and frequently switch providers.”

“After 15 years, it is now crystal clear that Texans can save money under retail electric competition,” agreed Donna Nelson, chairman of the Public Utility Commission (PUC) of Texas. “When customers take time to shop for the best value, they can find a rate that is actually lower than the regulated rates they were paying when they had no choice.”

But pricing is not the only factor. During a conference call following release of the ABACCUS report,  Nelson said that one key reason why retail services have become so popular in the Lone Star State is the level of choice available. “Customers have many options in Texas and they are not related just to plan pricing,” she said. “For example, within a given plan, they may be able to select time of use (TOU) rates; or a prepaid option, or a number of variable products that can change within a month; or a fixed-price plan that holds rates anywhere from a month to five years.”

Commercial and industrial (C&I) consumers also are satisfied. The report finds that more than eight-out-of-10 units sold to the largest business consumers in a dozen US states rely on direct retail access between consumer and supplier.

And retail access is driving C&I costs down, according to William Massey, a counsel for the COMPETE coalition who also joined the conference call.  “In jurisdictions that offer retail choice, prices have increased over the past 18 years only 4.5 percent less than inflation. In markets where there is a provider monopoly, prices have increased in that same amount of time by 8.4 percent more than inflation.”

In addition to Texas, the Canadian province of Alberta, and the US states of Connecticut, Illinois, Maine, Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania all were recognized by the  ABACCUS study as leading competitive retail electricity markets. Each jurisdiction is making regulatory reforms that will have an impact on the ABACCUS scores and rankings, the authors said.

DEFG develops ABACCUS scores and rankings based on data available in the market. DEFG is a management consulting firm specializing in energy, focused on retail consumers.

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