texas electricity: forever in transition robert michaels professor of economics california state...
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Texas Electricity: Forever in transition
Robert MichaelsProfessor of Economics
California State UniversityFullerton CA 92834
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
Load Switched to Non-Utility Supply (GW)
0
10
20
30
40
50
60
70
80
2001 2002 2003 2004 2005 2006
Year
Lo
ad
Sw
itc
he
d (
GW
)
Non-Residential Residential
U.S. Residential % of Total Load Switched
0
2
4
6
8
10
12
14
16
18
2001 2002 2003 2004 2005 2006
Year
Pe
rce
nta
ge
Residential %
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