Does energy choice work in other states?

By Joshua D. Weber, Partner at Davison Van Cleve and national renowned energy attorney

The decision of whether or not to implement energy choice in Nevada this fall is a big one—and Nevadans are clamoring to know if restructuring the energy market has worked for other states before they cast their votes.

Fortunately, studies done in recent years by universities and organizations across the country have shown that, yes—energy choice has led to lower prices, higher savings, and overall superior economic performance in the 14 states that have introduced competition to their energy markets.

The big picture

According to an April 2017 study from the Retail Energy Supply Association, states with energy choice have overall better economic performance than their monopoly-led cousins, including lower electricity rates over time.

Relying on data from the U.S. Energy Information Administration, the study noted that electricity prices in competitive states have trended downward over time, falling at a rate of 10.04 percent when adjusted for inflation. Meanwhile, retail electricity prices rose 5.44 percent in monopoly states.

These lower rates on electricity lead to savings for consumers across the country. According to a study by Thomas Klitgaard and Rekha Reddy, researchers with the Federal Reserve Bank of New York, energy choice will save a typical family of four “about $250 a year through lower energy bills.”

Additionally, in the Midwest, researchers at Cleveland State University reported both that “deregulation of electricity has saved consumers an average of $3 billion per year” as well as that “Midwestern deregulated states (Ohio, Pennsylvania and Illinois) have, over time, outperformed their regulated Midwestern neighbors (Michigan, Indiana and Wisconsin) in terms of constraining electricity cost increases for their consumers.”

Case studies

Though all energy choice states have benefited from energy choice, Texas and Pennsylvania are two states that have seen particularly marked economic improvements since restructuring their markets.

Dr. Peter Hartley of the Rice University Center for Energy Studies says that Texas electricity providers are “minimizing costs in meeting market demands.”

Additionally, Dr. Hartley said, “all competitive areas’ prices declined from 2002 to 2016, but they increased in non-competitive areas over the same time period.”

In Pennsylvania’s case, introducing choice into the energy market knocked rates down from a pre-restructuring rate of “15 percent higher than the national average” to a “statewide annual average retail price of electricity [that was] 0.1 percent below the national average” as of 2015, says Christina Simeone of the Kleinman Center for Energy Policy. Pennsylvanians have now saved over $1 billion on their power bills since they opened their energy market up to competition.

The results are clear—energy choice has worked well to lower costs and expand options in other states, and it will work well in Nevada, too.

About Joshua D. Weber

Mr. Weber is a partner at Davison Van Cleve and one of the nation’s leading energy attorneys. He has built significant expertise in procurement of energy resources, including renewables, and in helping both large direct access customers as well as consumer-owned utilities in the Northwest and Southwest navigate rapidly changing energy markets. He has also served as Energy Counsel for several cooperative utilities, and general counsel to Nevada’s largest electric cooperative.