Powering Strong Communities

ELCON Asks Congress To study How Wholesale Markets Have Affected Consumer Prices

The Electricity Consumers Resource Council (ELCON), leading a coalition of 11 organizations, on July 8 sent a letter to Congressional leaders calling for an independent study on the impacts on consumers of wholesale electric power markets under the jurisdiction of the Federal Energy Regulatory Commission (FERC).

The letter requests that the Congressional leaders direct the Government Accountability Office (GAO) or other independent oversight organization “to undertake a detailed and objective study of the cost of electricity” and specifically of how FERC policies regarding wholesale power markets impact the cost and reliability of delivered power.

“We need regulators who base their policy decisions on objective data and real-world impacts rather than assumptions by advocates,” the signatories said in the letter.

While FERC commissioned a report on the benefits of wholesale competition in the Entergy region in 2010, that study looked at future prices, not actual historical costs and benefits. “To our knowledge, no one has studied the impacts of RTOs [regional transmission organizations] on customer bills,” the letter said.

“Government studies published more than a decade ago regarding wholesale markets claimed to lack the necessary data—the time is right to revisit these issues with fresh data so we can have an informed debate about the impacts of wholesale markets on consumers,” Travis Fisher, president and CEO of ELCON, said in a statement.

ELCON is a national association of large industrial consumers of electricity. ELCON was joined in the request by other industrial consumer advocates, as well as public policy organizations, including Energy Choice Coalition, Public Citizen, Conservative Energy Network, Industrial Energy Consumers of Pennsylvania, Louisiana Energy Users Group, and R Street Institute.

The letter was addressed to the leaders of the energy committees of both the Senate and the House of Representatives. It was also copied to the chairman and commissioners of FERC.

“At minimum,” the letter’s authors said, the study “should examine how existing RTO market structures have impacted the cost of electricity to retail consumers. We also ask that the study explore the reliability impacts of wholesale market structure and, if resources allow, develop a set of best practices regarding RTO expansion.”

The letter cited a letter by nine former FERC chairmen and commissioners who advocated for an expansion of RTOs.

Saying that the requested study is “long overdue,” the signatories also cited a 2008 study in which the GAO said, “there is no consensus about whether RTO markets provide benefits to consumers or how they have influenced consumer electricity prices.”

With “no guidance from federal regulators, states and regions are independently exploring the impacts of RTOs,” the letter says, citing proceedings under way in North Carolina, South Carolina, Colorado, Nevada, Missouri, and Oregon.

Many of those battles are primarily between incumbent utilities and “a growing chorus of consumers who want more choice, better access to new technologies, or less exposure to the ratepayer risks associated with monopoly utilities,” the signatories said.

The issue is not matter of “historical trivia,” the signatories said, but is “more important than ever” because of three trends: discussions about the voluntary or mandatory expansion of RTOs, state and federal policies driving changes in resource mix that will require large spending increases in transmission infrastructure, and increased electrification to the economy.