UNITED STATES OF AMERICA
ELECTRIC ENERGY MARKET COMPETITION
INTERAGENCY TASK FORCE
|Electric Energy Market Competition Task Force|| Docket No.
NOTICE REQUESTING COMMENTS ON
WHOLESALE AND RETAIL ELECTRICITY
(October 13, 2005)
Section 1815 of the Energy Policy Act of 2005 requires the Electric Energy
Market Competition Task Force to conduct a study of competition in wholesale
and retail markets for electric energy in the United States. Over the past several
years, wholesale competition has developed unevenly in many regions of the
country. Moreover, fewer than 20 states have adopted retail choice programs
that allow some electricity consumers to choose their retail electric generation
supplier. The purpose of this study is to analyze and report to Congress on the
critical elements for effective wholesale and retail competition, the status of
each element, impediments to realizing each element, and suggestions for
overcoming these impediments.
In recent years, some states and the federal government have taken steps
to encourage competition in the electric power industry. In the Energy Policy
Act of 2005, Congress established an inter-agency task force, known as the
"Electric Energy Market Competition Task Force" (the Task Force), to conduct a
study and analysis of competition within the wholesale markets and retail
markets for electric energy in the United States. The Task Force consists of 5
(1) 1 employee of the Department of Justice, appointed by the Attorney General of the
United States - J. Bruce McDonald, Deputy Assistant Attorney General, Antitrust
Division; (202) 514-1157, email@example.com.
(2) 1 employee of the Federal Energy Regulatory Commission, appointed by the
Chairperson of that Commission - Michael Bardee, Associate General Counsel, Office of
the General Counsel- Markets, Tariffs, and Rates; (202) 502-8068,
(3) 1 employee of the Federal Trade Commission, appointed by the Chairperson of that
Commission - Michael Wroblewski, Assistant General Counsel for Policy Studies;
(202) 326-2166, firstname.lastname@example.org.
(4) 1 employee of the Department of Energy, appointed by the Secretary of Energy -
David Meyer, Deputy Director, Division of Permitting, Siting, and Analysis, Office of
Electricity Delivery and Energy Reliability; (202) 586-1411, David.Meyer@hq.doe.gov.
(5) 1 employee of the Rural Utilities Service, appointed by the Secretary of Agriculture -
Karen Larsen, Office of Assistant Administrator, Electric Programs (202) 720-9545,
Section 1815(c) of the Energy Policy Act of 2005 requires the Task Force to
"consult with and solicit comments from any advisory entity of the task force,
the States, representatives of the electric power industry, and the public." This
Notice begins this process. The Task Force also will publish a draft final report
for public comment, before submitting the final version to Congress as required
by Section 1815(b)(2)(B).
Listed below is a series of questions for which the Task Force seeks public
comment. For both wholesale and retail competition for electric power, we focus
on the current state of competition and on factors that help support competition,
or that otherwise may limit competition, among suppliers and buyers in
markets and retail markets at the state level. The questions listed below are by
no means exhaustive. The Task Force encourages commentors to raise any other
additional factors that affect competition in wholesale and retail electric power
markets. It is not necessary to respond to each question. Rather, it would be
helpful for respondents to provide, for example, specific information about
market responses to particular governing regulations, or to compare and
contrast the market reaction to the means individual states have used to address
various retail competition issues (e.g., generation siting, provider of last resort
- What are the critical elements or attributes of competition in wholesale
electricity markets that the Task Force should examine?
- What are the critical elements or attributes of competition in retail
electricity markets that the Task Force should examine?
- What benefits have occurred because of competition in wholesale and retail
electricity markets? What additional benefits are expected? What benefits
were forecasted and have not occurred? Why? What harms have occurred
because of competition in wholesale and retail electricity markets ?
- What are the major public policy concerns that the Task Force should
examine in its review of competition in wholesale and retail electricity
- In what significant ways do wholesale and retail electricity markets differ
from other energy or commodity markets? What implications do their
differences have for public policy?
Wholesale Market Questions
Commentors should answer with a specific regional wholesale market in mind
and should be as specific as possible.
A. Wholesale Supply Trading and Participation
- To what extent does wholesale trading help result in an economic and
reliable supply of electricity in each region? What are ways to improve the
provision of an economic and reliable supply of electricity?
- What share of electric power used to serve retail (or ultimate consumer)
load is obtained through wholesale market transactions in each state or
region? In what ways has this share changed over the past 10 years and the
past 5 years and why?
- What share of electric power used to serve ultimate consumer load is
generated by a utility for its own native load? What share of electric power
used to serve utility customer load comes from utility affiliates? What
share comes from unaffiliated generators?
- What opportunities exist for generation owners to sell output in wholesale
- What opportunities exist for wholesale power buyers to purchase electricity
in wholesale markets? Is demand (negawatts) a product that can be traded
in the wholesale market?
- Is there an organized regional market or exchange serving buyers and
sellers in the region? What products does the organized market provide?
What percentage of energy supplied is secured through organized markets
and through bilateral trades? Are there liquid trading points in the region?
What are the volumes traded? What is the trend of bid/ask spreads (getting
greater or smaller)?
- To what extent do wholesale buyers and sellers participate in futures or
others commodity markets or transactions to balance the financial risks of
competitive electricity markets? How liquid are forward markets in
different regions and how far ahead can one transact in these markets?
- What role have credit issues played in the ability of market participants to
participate in wholesale markets, including forward markets?
- Are there competitive processes by which distribution utilities solicit
proposals for native load or default service?
- How can changes and trends in wholesale market prices by region be
- How should the performance of wholesale markets in serving the needs
various types of power sellers (e.g., marketer, generator, independent
producer, merchant, public utility, nonpublic utility, qualified facility,
renewable power producer, co-generator) be measured?
- How has restructuring of incumbent utility operations and the
of competitive retail markets in retail choice states affected participation
regional wholesale markets? Has the introduction of retail markets
the level of long-term contracting in wholesale markets?
- Please describe instances in which competition has resulted in relatively
higher prices or lower reliability in a specific regional market.
B. Generation Ownership:
- How has ownership of electric generating plants changed over the past
- In the past 10 years, when generations assets have been sold or
how much capacity was sold or transferred to a) utility or utility affiliates,
b) existing non-utility market participants; c) new market participants?
- How much existing merchant or non-utility generation assets have been
sold or transferred? What were the reasons for these transactions?
- How much existing capacity has been sold or transferred to utilities and
converted to rate-based assets? Of those how many were previously
affiliated with a utility and how many were purchased from other
C. Generation Adequacy:
- How is generation adequacy addressed in each region or system? Is
specific enforceable requirement that load serving entities or market
participants must meet? How is planning for generation adequacy
- Has new generation construction kept pace with demand growth in the
or market region? If not, why not? What are the most important factors
affect whether generation will be built?
- What role does the ability to enter into long-term contracts play in
financing new generation projects?
- What generation facilities have been installed in the past five years?
was the experience in the process?
- What generation facilities have been cancelled in the past five years and
- What difficulties, if any, have developers of new generation facilities
encountered in bringing generation supply to market? (E.g., difficulties in
financing, siting, permitting, licensing, interconnection, transmission
access, fuel supply). What are ways to improve the process?
- Are there instances in the past five years in which a new generation
has been completed that caused prices in a previously congested area to
- How do the approaches and responsibilities for assuring the availability
sufficient generation capacity to meet peak load and load growth vary
among regions and states that have retail choice and/or tightly organized
regional markets and those that do not?
- What incentives do competitive suppliers have to maintain adequate
- What incentives or responsibilities do load serving utilities have to
adequate reserve capacity?
- How can competitive markets assure adequacy of generation supply?
is reserve sharing to meet state or regional generation adequacy standards
accomplished in competitive markets? How can other institutions/market
processes provide an effective substitute for reserve sharing?
D. Transmission Investment and Regulation
- What are the most important factors that affect whether
transmission will be built? What are ways to improve the process?
What difficulties have transmission owners had in upgrading or
building new transmission facilities? What are the prospects for
- Over the past 10 years, what have been the trends in investments in
transmission by utilities by state or region? Are there any prevailing
patterns in transmission investments in upgrades and replacement of
existing plant versus new lines, interconnections, automation? Have these
patterns of investment shifted over this period? Are there any projected
changes in patterns of transmission investment over the next 5 years?
- How are transmission needs of merchant generators and renewable energy
projects included in regional or utility transmission planning and upgrades?
- How has the establishment of Regional Transmission Organizations
(RTOs) changed transmission operations, transmission planning, and
- Within a region or RTO, is there a different process for transmission
upgrades that are not required for reliability but would increase access to
lower priced power in areas with economic congestion?
- In the absence of RTOs, how is transmission planning, siting, and
construction for regional needs coordinated among utilities, generators, and
State regulators? What challenges do transmission owners face upgrading
or building new transmission facilities?
- How have transmission costs changed for transmission owners and for
transmission customers over the past 10 years? What are the reasons for
any increases or decreases?
E. Wholesale Market Transparency and Information
- Do purchasers and sellers view markets as providing stable, transparent
prices? Are there differences among products and markets?
- Is there sufficient timely and accurate publicly available information to
assure that market participants can adequately assess the economics of
proposed wholesale power transactions or assess the financial implications
of self build versus competitive alternatives for generation supply?
- How can any information deficits be remedied to improve the utility of
market information? Are there any competitive risks associated with
greater transparency of prices or of other information about market
- Are there open and transparent processes by which load serving
entities solicit proposals for generation from independent firms
and/or from affiliated generators?
Retail Market Questions
Commentors can answer the following questions based on their
knowledge and experience in any state with retail competition:
A. Retail Markets Overview
- What factors or measures should the Task Force examine in reviewing
retail choice experiences? How should these factors and measures be
- How should the Task Force assess the performance of evolving
- How can the performance of competitive retail markets for retail
be measured in the absence of competitive suppliers for residential and
small business customers in many areas?
- Why did your state implement a retail electric choice program?
- Why did your state decide not to implement a retail electric choice
B. State Retail Choice Experience
- How have consumers benefited from retail electric competition? How
consumers been harmed by retail electric competition?
- How have retail customer prices changed since the beginning of the
transition to retail choice? Have the changes been comparable across all
classes of customers?
- How many alternative competitive retail suppliers are currently
accepting new customers in each service area? Has the number increased
- Does the availability of alternative competitive suppliers differ among
service areas, customer classes, load size, rural and urban areas, or other
geographic areas, or by credit policies? If so, why? If not, why not?
- Have suppliers offered new types of products and services (e.g., time of
pricing, interruptible contracts, green power, etc.) in states where retail
competition has been implemented? If so, describe the products and what
customer response has been.
- How do retail customers obtain information about competitive
Do retail consumers have enough information to readily make informed
choices among competing suppliers?
- Does the state allow groups of retail customers to aggregate their
demand? How are they structured? What customer groups are included?
Is participation on an opt-in or an opt-out basis? Has aggregation enabled
consumers to benefit from retail electricity competition? If not, why not?
- Now that many state-mandated transition periods to phase-in retail
competition are ending, what issues do states face to ensure competitive
C. Retail Supply Questions in States with Retail Competition
- How does the state program address assurance of adequate generation
supplies for default service customers (i.e., customers that: (a) do not
choose a competitive provider, or (b) have lost their competitive supplier
for whatever reason)?
- How do default service obligations affect retail power competition? Do
transmission services allowed for default service obligations affect retail
competition and, if so, how? What changes, if any, would you suggest in
these transmission services?
- How has the development of RTOs affected the development of retail
competition in the state?
- Did the state require that the incumbent utility divest all or some of its
generation assets used to serve its retail native load when retail
was introduced? Did incumbent utilities voluntarily divest generation
assets as part of restructuring to implement retail competition? Did
incumbent utilities transfer ownership of generation assets used to serve
native load to an affiliated entity?
- What has been the result of generation ownership transfers serving the
or region since the start of retail competition? Has there been a
consolidation of generation ownership in the state or region?
- If a retail load serving utility no longer owns sufficient generation assets
meet its obligations to its retail customers (existing customers, or as the
supplier of last resort or default service provider) what mechanism (e.g.,
spot market purchases, buy back or output contracts, etc.) does it use to
obtain generation services to fulfill these obligations? What share of a
utility's load is obtained via the different mechanisms? How are these
- How do non-utility retail service providers in the state secure access to
transmission and distribution services needed to deliver power to their
- What difficulties have retail supplier entrants encountered in entering
market? What conditions/incentives attract suppliers to retail markets?
D. Demand Side Participation
- How do rate structures affect the incentives of large, medium, or small
electric customers to participate in demand side response programs? Does
this effect differ if a state has a retail choice program?
- What measures have states taken to make customer demand responsive
changes in availability and price of electricity supply? Do these measures
differ if a state has a retail choice program?
- What mechanisms allow for the participation of load response measures
interruptible load, self-generation, demand-side management,
and energy efficiency measures as alternatives in wholesale electric
and or load serving utility resource portfolios? How has the performance
these measures been monitored?
- Have states adopted alternatives to average cost pricing to encourage
- What has been the effect on demand and demand elasticity in light of
- How prevalent is the use of distributed resources (e.g., distributed
generation and distributed energy storage) within the state?
- To what extent are retail customers within the state or region
increasing use of distributed resources and what types of resources
E. Rising Fuel Prices
- Are changes in prices for oil, natural gas, and coal affecting the results of
competitive wholesale markets and viability of competitive suppliers and
- How are changes in prices for oil, natural gas, and coal affecting retail
- Are there differences in retail price impacts between states and/or
utility systems operating under retail competition models and those
that operate under traditional utility cost based rate models?
How to File Comments
Any interested person may submit a written comment that will be
considered part of the public record. Comments may be filed electronically via
the e-Filing link on the Federal Energy Regulatory Commission's web site at
http://www.ferc.gov for Docket No. AD05-17-000. Most standard word
processing formats are accepted, and the e-Filing link provides instructions for
how to Login and complete an electronic filing. First-time users will have to
establish a user name and password. User assistance for electronic filing is
available at 202-208-0258 or by E-Mail to efiling at ferc.gov. Comments should
not be submitted to the E-Mail address. Commentors filing electronically do not
need to make a paper filing. Commentors that are not able to file comments
electronically must send an original of their comments to: Federal Energy
Regulatory Commission, Office of the Secretary, 888 First Street N.E.,
Washington, DC, 20426.
This filing is accessible on-line at http://www.ferc.gov, using the
"eLibrary" link and is available for review in the Commission's Public
Reference Room in Washington, D.C. For assistance with any FERC Online
service, please email FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll
free). For TTY, call (202) 502-8659.
Comment Date: 5:00 pm Eastern Time on November 18, 2005
| ||Magalie R. Salas|