Texas Electricity: Forever in transition Robert Michaels Professor of Economics California State University Fullerton CA 92834

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Presentation transcript:

Texas Electricity: Forever in transition Robert Michaels Professor of Economics California State University Fullerton CA

Electricity: Last of the great deregulations  Electricity going to market in over 100 nations  Intrinsically complex – Technology and Regulation  Public interest – efficiency, equity, environmental matters  Failure? U.S. switching growing as % of eligible volumes Share of residentials in switched load rising

Where Texas stands  At both retail and wholesale, Texas [ERCOT] the greatest state success story  Success is Efficient, competitive wholesale markets Benefits of retail markets available to all users Long term predictability of investment climate, freedom to contract  Texas notable for mistakes it didn’t make

How to measure success  Real success and future investments Who does the planning?  Short-term rate effects and long-run efficiency Object was to put risks on investors, not ratepayers  Wholesale: accurate price signals, new contracts  Retail: New choices -- suppliers, rates, sources  Do not use measures of regulation to measure success under competition

Retail: What happened  Competitive suppliers started at PTB, immediately went below New service offerings  Power prices and gas prices Down vs. up? All markets pass costs through Consumers value predictability Resource diversity issues

The future of retail markets  Competition and Switching statistics Is “stickiness” rational? [Dallas City Hall] Mandatory customer reassignments? Which customers need help?  Growth in suppliers and plans Innovative rate designs New service packages New information resources (Houston) Here comes Wal-Mart (?)

The future of ERCOT markets  ERCOT markets continue contract- dominated How important is the balancing market? Market power in generation? By zones?  2009 changes will improve efficiency Day-ahead markets and generator commitment Nodal prices as signals re both transmission and generation scarcity  Renewables, small generation, and demand response are compatible with competition But integrating resources like wind not easy