In every major industry except the electricity sector, we have embraced competition and abandoned outdated government regulations over price and service. The trucking, airlines, energy, communications and other formerly regulated industries are all more efficient and provide better value, products and innovation because of competition.
In 17 states like Texas, Pennsylvania, Maryland, and Massachusetts, legislators and state regulators have moved away from the Colorado-type monopoly system to a more competitive and restructured electricity market where companies and their investors, not ratepayers, pay for poor business decisions. Unfortunately, when it comes to electricity in Colorado, we have maintained the old monopoly regulation model.
The recent Xcel rate case demonstrates how maintaining traditional monopoly protections and price regulation has real consequences for consumers. Colorado consumers are being asked to reimburse the utility for what the Colorado Consumer Coalition called “its own bad business judgment” in canceling a power sales arrangement with Black Hills Energy.
The Denver Post called this “galling” and unfair. The fact is this would not have occurred in a competitive, restructured electricity market where company shareholders pay the price for uneconomic decisions.
Several studies have shown that restructured, competitive markets in many states bring lower prices, innovative products, renewable energy and demand response programs that benefit consumers.
Colorado can fully benefit from the technological revolution that is transforming the way we use electricity, much like the information technology that has bettered our lives with computers and smart phones. But lawmakers and regulators must first re-evaluate our stodgy electric industry.
The Edison Electric Institute recently estimated that within the next few years, more than half the country will have smart meters. Clean technology will combine elements of the Internet and mobile communications to transform how we relate to the electricity grid and one another. Innovators are waiting in the wings to design the next smart grid “killer app” innovatively enabling energy savings. Competition will help consumers with smart meters directly benefit by enabling them to take control of their energy usage and costs, respond to changing prices.
Meanwhile, experts project that in the next 20 years, the electric industry will need to invest more than $1 trillion to modernize the electric grid and meet rising demand.
How do we respond to these technological and supply challenges with private sector investments that minimize financial risk and costs to consumers? How do we modernize our electricity system and avoid the expensive utility investment mistakes of the past? An open and competitive market will enable this and more.
But we won’t be able to ride into the 21st century’s clean energy future on the back of a monopoly-protected structure that is the vestige of the last century.
Former Denver Mayor Federico Peña is national co-chair of COMPETE, which fosters competition in the electricity market. Adrian Tuck is chief executive of Boulder-based Tendril, a provider of applications for energy management.
