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Questioning deregulation market was left open, however, and is still managed today by their independent system operator, CAISO. Texas is seen by many as the gold standard of open energy markets, with some of the lowest rates in the nation. It didn’t MY STAFF WILL TELL YOU I ASK THEM A LOT OF QUESTIONS. begin that way. In 1995 the Texas legislature required utilities If you’re kind, you might say that I’m an inquisitive person. to provide independent generators access to transmission to Another way of saying it, however, is that my staff is being support wholesale competition. Seven years later, the Texas “Mike-romanaged.” electricity market was opened to retail competition. Even with Either way you look at it, I find asking questions, especially the benefit of lessons learned from California, Texas rate the right ones, to be the best start to any new initiative. payers were still saddled with costs associated with the tranThe General Assembly will be asking questions as it considers tasking a joint study committee to look into restrucsition. After Texas securitized the divestment of the utilities’ generation assets, ratepayers were left with $9.5 billion in turing the state’s energy market—a process in which the stranded costs. In the first 10 years, customers in restructured cooperatives plan to participate. Any conclusions drawn from parts of the state faced higher rates than those who were this investigation should start with the crucial questions at a served by regulated utilities (like Texas cooperatives). high level. While we’re up there, let’s look at how other states When Ohio restructured retail elecencountered these questions when they restructured their energy markets. in 1999, it wasn’t just following There is a certain amount tricity the national trend. It was also trying to Deregulation, wholesale or retail? take advantage of low natural gas prices of investment inherent in and the recently deregulated wholesale Generally, a deregulated competitive energy generation and market. The state’s large industrial sector market exists at two levels: wholesale and also pressed for deregulation. The legisretail. The wholesale market includes delivery, and you can’t the bulk purchase and sale of electriclation provided a five-year development compete away the real period that required a residential rate ity among energy producers and energy and freeze. But as that period distributors. That market must exist costs of those investments. reduction came to a close, there were still a limited first within a Regional Transmission number of choices in the market, espeOrganization (RTO) or an Independent Service Operator (ISO) before retail deregulation—allowing cially in rural areas, and growing concerns that an immediconsumers to choose from whom they want to buy their ate shift to market-based rates would create a sticker shock power—could ever take place. for consumers. A second restructuring bill in 2008 stimulated more choices in the retail market while also making it easier Texas, California and Ohio were three of the first states in for utilities to collect distribution charges. the nation to deregulate their energy markets. They took different approaches initially, but all three found the need to go What factors other than market forces affect back and enact new policies as their experiences yielded new what we pay for power? questions. California deliberated restructuring throughout the As Texas saw in its first 10 years of deregulation, competition 1990s, finally yielding to stakeholder pressure to fully deregwasn’t a magic potion. In the last decade, ratepayers have benefitted from the drop in natural gas prices as well as the ulate (both wholesale and retail) in 1998. Errors in their abundance of wind energy in the state. An argument could market designs and restrictions on pricing and generator conbe made that these advantages have been realized primartracts contributed to a California energy crisis. High demand exceeded energy supply, and prices spiked, costing rate ily in the wholesale market and then passed down to retail payers tens of billions of dollars. There were blackouts, and customers. the state’s largest investor-owned utility, Pacific Gas and California focused on resource adequacy, energy efficiency Electric (PG&E), went into bankruptcy. In response, California and decarbonization in responding to its early deregulation re-regulated its retail market in 2001, then later opened comfailures. While that has created some of the highest rates in the nation, it has also reduced the amount of power the petition back up for non-residential consumers and municipal average Californian consumes. In 2016, their average monthly aggregation, which are programs that allow local governments bill was $31.90 less than the average Texan’s. to procure power on behalf of their residents. The wholesale BY MIKE COUICK
President and CEO, The Electric Cooperatives of South Carolina
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SOUTH CAROLINA LIVING | MARCH 2020 | SCLIVING.COOP
