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Retail Energy – RESA Research: Residential Electric Rates Rising Faster In Monopoly States Compared To Choice States

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The Retail Energy Supply Association published an update to prior research comparing electric rates in states with electric choice and monopoly states, to reflect data through 2018

RESA’s report said that, using EIA all-in data (generation and distribution), the residential nominal annual “weighted” average electric price in 35 monopoly states was 21.6% higher in 2018 than in 2008. In contrast, the residential annual weighted average price for the competitive retail markets was only 3.1% higher than in 2008.

RESA’s report said that if the 2008-2018 annual percentage price changes for residential customers in the 35 monopoly states had tracked with the residential percentage price changes in the fourteen competitive jurisdictions, then residential customers in the monopoly states would have saved $128.3 billion. “The flip side is that if the same price trend patterns that occurred in the monopoly group had also prevailed in the competitive jurisdictions, the hypothetical incremental cost to residential electricity customers in the fourteen choice markets would have been higher by $82.7 billion,” RESA said

The RESA report notes that Texas had the largest decline in residential rates from 2008-2018, at over 10% (the only state with a decline of over 10%).

The RESA research relies on weighted comparisons. As described in RESA’s initial report. “Weighted and unweighted absolute percent change in average prices were considered when building the dataset. The unweighted mean percentage change in average prices was calculated by taking the average absolute price change from one month to another by state. The weighted absolute percentage change was calculated by considering the percentage of sales in each state multiplied by the absolute percentage change.”

“Advocates for the monopoly model sometimes promote the notion that residential, small-business and non-profit customers such as schools are disadvantaged by choice. The assertion is that large commercial and industrial customers will reap the bulk of the benefits and that competitive suppliers will ‘cherry pick.’ Opponents of retail choice argue that allowing large customers to leave utility service will necessarily drive up costs for the remaining customers. In a monopoly state with a commission-approved revenue requirement, that may be true. However, the data show that prices for residential customers in competitive retail markets have been on a favorable track alongside the benefits that have accrued to C&I customers (all customers benefit, although the non-residential customers benefit more). While percentage changes in price differ among the customer classes in both the monopoly and choice states, this is due in part to the greater volumes and more constant demand characteristics of larger customers. Additionally, the costs of delivery services allocable to residential and small business customers constitute a greater share of total price,” RESA’s report said

On an all-sector basis, RESA’s research said that:

  • The all-sector annual weighted average price in the 35 monopoly states was 18.7% higher in 2018 than in 2008.
  • The all-sector annual weighted average price for the competitive retail markets was 6.1% lower in 2018 than in 2008.

More details from RESA’s research can be found here