Chapter 12 - Unfinished Business: The Evolution of US Competitive Retail Electricity Markets

Abstract

In the United States, 16 states2626Four other states have restructuring laws in place—Arizona, Montana, Nevada, and Virginia—but choice is very limited. and the District of Columbia allow customer choice of electricity supply. Each of these jurisdictions has a unique set of policies and regulations that define the market structure for retail electric competition and customer choice. The most pressing set of issues in today’s competitive retail electricity markets is around the design of default service. Policy makers and regulators in some jurisdictions have laid the foundation for thriving retail markets regardless of movements in wholesale power prices. In other jurisdictions, the overriding priority of price stability has led to a “boom or bust” cycle as regulators tried to hedge wholesale price volatility through laddered or multiyear default service procurement. This chapter argues that the long-term viability of competitive retail markets depends on shorter term default service procurements, which creates more consistent opportunities for retailers to compete against the utility price. Unless more jurisdictions adopt the characteristics of well-functioning markets, much of the gains that competitive retailers have achieved in recent years will be given back.