A five-state study, conducted by the National Center for Appropriate Technology (NCAT), documents the adverse impacts of electric and natural gas market restructuring on some residential consumers.
"While these are early findings from a handful of restructured states, the study pinpoints those aspects of state's programs that are detrimental to consumers, as well as those that serve consumers well," said Kathleen Hadley, NCAT executive director. The study reviews Georgia's restructuring of its natural gas market, as well as the restructuring of electricity markets in Massachusetts, Texas, Ohio, and part of New York.
"In the states that have relied on the pass through of short-term market-based rates for default service, residential customers appear to be worse off compared to pre-restructuring rate policies and are certainly worse off compared to customers in those states that have adopted rate caps and rate freezes that insulated customers from price volatility," said Barbara Alexander, one of the study authors.
At a minimum, the consumer experiences documented by the project suggest that legislators and regulators should develop policies that rely more on long-term stable rates and avoid short-term price volatility.
The NCAT study also found that, with few exceptions, restructuring laws have not resulted in the lower prices or increased choices that many policymakers had anticipated. The exceptions noted in the study occurred in selected regions in two states (Ohio and Massachusetts) that have used a strategy called opt-out aggregation, a low-cost way to pool the buying power of a large number of customers. The study found that this strategy has yielded significant electric bill savings for consumers and given them access to competitively-determined electricity prices and green power.
"The experiences in these two states are notable," said study author Matthew Brown, "because they offer lessons about keeping electricity costs low while bringing the benefits of competition to residential and other small customers.