American consumers would save $10 billion from lower electricity prices, if states matched the best practices of 13 fully deregulated US states, said the
Fraser Institute.
     It describes itself as Canada's leading public policy research organization.
     The 30-year-old organization is dedicated to enhancing the quality of life by researching the role of competitive markets, lower taxes and less regulation.
     The group says it seeks market solutions to public policy problems.
     It's funded by tax-deductible contributions.
     Moving Ontario and the rest of Canada to the Alberta level of competition would cut prices in Canada by an equivalent amount, saving residential customers alone about $1 billion.
     The pro-market study also concluded that:
     • US states that have yet to reform could deregulate and drop prices by 7% to 9% over five years;
     • Alberta and 13 US states lead the way in North American deregulation but Ontario has turned the furthest away from deregulation reforms since 2000 and now ranks below California, and
     • Deregulated states are attracting more new generation supplies with 80% faster per capita growth in the US and even more in Canada.
     Opponents of deregulation point to the failed California experience and Enron as evidence against reforming electricity markets, said Mark Mullins, principal author of the study.
     "This study shows that they are dead wrong in that belief.  The benefits of competition and consumer choice can already be demonstrated in places that have chosen to deregulate: much greater supply and lower electricity prices."
     Participants in electricity markets are despondent because of the public opinion fallout from industry setbacks and have done a poor job in disseminating the consumer benefits of competition to counter those attacks, the study said.
     "The real constraints on deriving consumer benefits from this industry are public misconceptions and the unwillingness of many politicians to create positive change."
     The report assesses how deregulation affects new electricity supply and retail prices and examines the experiences of global deregulation reform leaders in Canada, the US, Australia, UK and New Zealand.
It concludes that deregulation has lowered after-inflation electricity prices in the US, UK and Australia.
     Retail residential prices in deregulated US states dropped 80% faster than non-competitive states over the last five years and non-residential prices dropped 65% faster, the report said.
     Prices in Alberta and New Zealand have risen "for exceptional reasons unrelated to deregulation."
     The Australian states of New South Wales and Queensland would see smaller price drops -- between 3% and 4% -- because they are already substantially deregulated, the report said.
     Recommendations to non-competitive jurisdictions, include:
     • Create a competitive frame by preparing a deregulation plan backed by legislation, opening the market to all customers with full competition in generation and distribution and competitive billing and metering;
     • Restructure the generation sector by separating generation from transmission, privatizing generation assets, encouraging bilateral contracting in wholesale markets and recovery of all stranded costs;
     • Restructure distribution with no automatic default provider, implement performance-based price regulation along with full-cost network pricing and open access to the transmission grid;
     • Empower customers through customer education programs, full choice to switch providers and open access to customer information, and
     • Improve regulation by integrating retail gas and electricity regulation, reforming regulatory organizations and practices and providing sufficient funding for regulatory duties.
     The study did not attempt its own ranking of jurisdictions.
     It cited the existing RED (Retail Electricity Deregulation) Index rankings compiled by the Center for the Advancement of Energy Markets.
     The study was funded out of general revenue from The Fraser Institute, Mullins told RT.
     "We keep donations and donors completely separate from our researchers and their research agenda," Mullins said.
     (Story originally published in Restructuring Today 10/26/04)