Customers win when companies compete. Whether you’re talking about phones, cars, or grocery stores, we all know that having more options on the market gives us better solutions on price, quality, and more.
The same holds true for the electricity that powers our homes, businesses, and the nation’s critical infrastructure and services like hospitals and data centers. And voters understand – 79-88% of U.S. adults surveyed say that market competition increases reliability, lowers energy costs, encourages energy innovation, and promotes cleaner energy.
That’s why at EPSA, which represents competitive power suppliers, we’re celebrating “Electric Competition Week” and spreading awareness about how competitive electricity markets benefit consumers, the power grid, and the environment. We’re spreading the word on social media using #ElectricCompetitionWeek.
The Trouble With Monopolies
But power generation wasn’t always a competitive industry. For decades, utility companies had monopoly control, owning all aspects of electric generation and delivery in their territories. That means the utility owned and controlled power from the point of generation at the plant, to delivery through transmission wires, to the distribution wires that deliver it to your electric outlets and appliances—also known as a vertically integrated business model. Overseen by regulators, these utilities pass the costs of their operations and new projects on to the customer – or ratepayer – with little opportunity for lower cost, more efficient, or cleaner solutions to be considered.
A Transformative Change – FERC Order 888
That changed in the 1990s, and on April 24, 1996, the Federal Energy Regulatory Commission (FERC) passed a landmark decision to allow more competition among power generators nationwide. Order No. 888 sought to “promote wholesale competition through open access non-discriminatory transmission services.” FERC noted its goal was to “remove impediments to competition in the wholesale bulk power marketplace and to bring more efficient, lower cost power to the Nation’s electricity consumers.” No longer would utilities have a monopoly over all aspects of power generation and delivery in their designated service areas, with silos impeding efficiency and resource-sharing over a larger region.
Since Order 888 was passed, electric competition has delivered tremendous progress – clearing a path for cost savings, efficiencies, greater reliability, significant decarbonization, and swift adoption of new and cleaner power generation technologies. Competition and restructured markets also freed captive ratepayers from the burden of paying for new power plant investments, construction, operations, and closures – putting the risk of investment on private companies and shareholders.
Moving Forward
Unfortunately, the monopoly scenario still exists in many parts of the country, with utilities still largely having monopoly control over the generation, transmission, and distribution in their service areas. Because they are guaranteed a return on their operational costs and overhead, utilities often have less incentive to manage costs, and customers have little say in or understanding of what costs show up on their monthly bills. Utilities also have little incentive to be more efficient or adopt new technology or cleaner resources such as renewables even as the price of those resources became more affordable. And some are calling to return more states to a less competitive system.
Learn more and spread the word!
So today, learn more about how electric competition benefits you – and why it is necessary to address climate change in an affordable and reliable way and drive America’s energy transition. Find out if you live in a state with a competitive power market, and dig into the key stats on how competitive power markets have improved the energy that runs our nation.
Key Stats and Facts:
Reliability
- 183,175 MW: The total installed power generation capacity available to serve PJM customers in May 2021 – well in excess of forecasted peak summer demand. Throughout 2020, PJM dispatched reliable, secure power for the 65 million consumers its serves across 13 states and the District of Columbia (2020 PJM Annual Report).
- With the introduction of competition in the 1990s, competitive generators immediately began to reduce power plant outages and invest in reliability-enhancing innovation relative to monopolies (R Street Institute, 2021).
- Joining an organized market has led to improved reliability in monopoly states like Louisiana (R Street Institute, 2021).
Cost Savings
- $3.2-$4 billion: Annual savings enjoyed by consumers in the PJM Interconnection footprint, served by the nation’s largest competitive power market, reaching 65 million customers in 13 states and the District of Columbia.
- 41.7%: The drop in wholesale electricity costs in PJM Interconnection as of 2020, which at $21.40/MWh were the lowest prices of the competitive markets examined.
- 44.3%: The decrease in prices in the New England ISO as of 2020.
- States with competitive retail electricity markets have had lower prices than states with monopolies. From 2008 to 2020, the 37 states with monopoly or partial competition models saw power prices rise 20.7%, while the 14 jurisdictions (13 states and the District of Columbia) with retail electricity competition saw prices decline 0.3% (Pacific Research Institute, 2021).
Environmental Benefits
- 35%: The approximate average reduction in power sector CO2 emissions across ISO regions from 2005 levels. In contrast, non-ISO regions have reduced their power-sector CO2 emissions by about 27% over the same period.
- 39%: The drop in carbon dioxide emissions across the PJM Interconnection footprint since 2005, encouraged by the investment in and entry of new, more efficient power generation technologies and renewables.
- 51%: The decrease in New York state’s carbon dioxide emissions since the New York Independent System Operator launched competitive markets.
Innovation and Clean Energy
- 80%: The share of utility-scale renewable generation capacity deployed in ISO regions, despite only accounting for about 67% of all existing power plant capacity, of all types.
- 214%: The growth in distributed solar PV in ISO regions versus non-ISO regions at 199%, since the U.S. Energy Information Administration began keeping track in 2014.
Go Deeper
Competitive Power FAQ – Answers to frequently asked questions about EPSA and competitive power generation
Competitive Market Spotlights – Get a deeper dive on the major competitive power markets across the U.S.
Benefits of Competitive Power – Discover how competition brings more reliable, affordable, innovative, and cleaner electricity to the nation.
Power Markets 101 – The 101 on what power markets are and how they work.
