PFT to FERC: Traditionally Regulated Utilities are Connecting Large Loads—Don't Fix What Isn't Broken

Power for Tomorrow (PFT) has responded to the Department of Energy's proposal to FERC to speed up how the largest new electricity users, particularly data centers, connect to the grid. While PFT agrees the surge in large energy demand is a growing challenge in some regions, PFT argues that traditionally regulated utilities are best equipped to manage large load growth and interconnection. These utilities and their state regulators are already using proven tools—like resource planning and cost-allocation—to add large customers cost-effectively and without hurting reliability, ensuring that residential customers are protected. 

PFT urges FERC to respect state authority, make sure that any new federal policy protects reliability and affordability, and take care not to harm what is clearly working in many traditionally regulated states—the places where data centers are choosing to locate.

Read the full comments here.

Power for Tomorrow congratulates Commissioners Laura V. Swett and David LaCerte on FERC appointments

Power for Tomorrow congratulates Commissioners Laura V. Swett and David LaCerte on their appointments to the Federal Energy Regulatory Commission. Their leadership comes at a pivotal moment, as electricity demand across the United States continues to climb. Population growth, data centers, and other technologies are all pushing the grid harder than ever. The challenge ahead is clear: how do we build an energy system that is resilient, affordable, and reliable enough to meet this moment?

At Power for Tomorrow, we believe the answer lies in balanced, well-regulated markets. A secure energy future requires an all-of-the-above strategy that includes renewables, nuclear, storage, and natural gas. Each plays a vital role in ensuring the lights stay on, prices stay reasonable, and our economy keeps moving.

Experience shows that deregulated energy markets are falling short. In places like PJM, families and businesses are facing higher bills, blackouts, and delays in building the generation we need. In contrast, regulated utilities in Southeast states, like Georgia and Louisiana, are planning for the future, investing in new infrastructure, and keeping power dependable and affordable.

America’s energy future depends on practical regulation that prioritizes people over speculation, planning over profit, and reliability over ideology. We look forward to working with FERC’s new leadership to advance policies that strengthen the grid and serve the public interest.

PFT Submits Comments to DEQ and SCC on the Value of CERC

On Wednesday, September 23, PFT delivered supportive public comments in the Virginia State Corporation Commission’s (SCC) hearing on Dominion's proposed Chesterfield Energy Reliability Center (CERC).

Also related to CERC, PFT’s Gary Meltz submitted comments to both the state Department of Environmental Quality and State Corporation Commission, emphasizing that CERC will be crucial in providing reliable backup during periods of peak demand and help reduce the need to import expensive, out-of-state power.

Rising Energy Demand Requires Real Solutions, Not Wishful Thinking

Forbes recently published an article entitled “Natural Gas Harms U.S. Economy And Won’t Solve Rising Electricity Demand,” criticizing the cost and construction times of new natural gas generation and suggesting energy investments be focused on non-dispatchable sources like solar. What this piece fails to take seriously is the magnitude of the energy crisis facing Americans today and the dangers of putting all our eggs in the renewables basket.

 Electricity demand is rising sharply across the country. This is driven by a few factors, including population growth, data center expansion, electric vehicle adoption, and AI-driven technologies that require immense computing power. Many states are already seeing strains on their grids and national forecasts show U.S. electricity demand could double in the coming decades.

Solar and wind are part of the solution. But we cannot afford to treat them as the only answer. America needs an all-of-the-above energy strategy that includes nuclear, storage, renewables, and yes, natural gas. 

The idea of dismissing natural gas reflects a misunderstanding of what the grid actually needs to ensure reliability, flexibility, and real-time responsiveness. Natural gas provides power when and where we need it, especially when the sun isn’t shining or the wind isn’t blowing. It also helps prevent blackouts and price surges during periods of extreme weather or high demand. 

The reality is this: a secure energy future means using every source we have to keep power affordable, reliable, and American-made. Leveraging these sources strengthens U.S. energy independence, supports innovation, and gives families and businesses the peace of mind they deserve every day.

The piece gets one thing right: building new infrastructure takes time. So, let’s get to work. If we want to meet the energy demand, it’s going to require a balanced approach, not wishful thinking that renewables can meet all of our capacity needs. It’s time to stop choosing sides and start building an energy future that works for everyone.

Commentary: For Hoteliers Like Me, Reliable Energy Isn't a Luxury. It's a Necessity

A column published in the Richmond Times-Dispatch by Neil Amin, CEO of Shamin Hotels, emphasizes the critical need for reliable, affordable electricity for businesses across Virginia.

“For more than 40 years, my family has operated a business that never sleeps. From the front desk and the guest services to the housekeeping and the kitchen and conference rooms, Shamin Hotels runs 24 hours a day, seven days a week. And every part of that operation depends on one thing most people take for granted — reliable electricity…” writes Amin. “Just one outage can damage our revenue, our reputation and the trust we’ve worked so hard to earn and keep. And in hospitality, trust is everything.”

“We’re not alone in this either. Across Virginia, countless businesses — hospitals, manufacturing plants, grocery stores, local retailers and restaurants — face the same serious risks to their operations and livelihood without reliable power.

“The 21st-century economy is increasingly vulnerable to power disruptions caused by extreme weather, aging infrastructure and rising energy demand. That’s why I believe reliable energy isn’t a luxury — it’s a necessity. And it’s time we start treating it that way.”

 Virginia’s families and businesses benefit from a reliable mix of energy sources like wind, solar, energy storage, nuclear and natural gas. This all-of-the-above and common sense approach helps ensure a dependable power supply across the Commonwealth.

Read the full column.

Why Deregulating Utilities Fails to Deliver More Power

As the federal government explores ways to boost electricity supply for America’s growing data and AI economy, some are advocating for more “competition” through utility deregulation. But as economist Ed Hirs argues in The Hill, this approach is deeply flawed—and the data backs him up.

Deregulated states like Texas are falling behind when it comes to building the power infrastructure we need. Despite claims of “free-market” innovation, Texas and other deregulated markets are plagued by blackouts, massive overcharges ($28 billion, by one estimate), and little investment in new power plants. Instead of funding new generation, profits are flowing to shareholders and hedge funds.

In contrast, regulated utility states like Virginia and Georgia are actually delivering, attracting new data centers and building the generation capacity to support future demand. Why? Because regulated utilities must plan for long-term reliability, not just short-term price signals.

Hirs likens deregulated grid operators to Soviet-style entities—powerful, unaccountable, and ineffective. His message to the Department of Justice: if you want more power and lower prices, look to the states that never bought into the deregulation hype.

Bottom line: Deregulation isn’t delivering. If America wants reliable, affordable electricity to fuel its future, it’s time to stick with—and strengthen—traditional regulation.

New Report: Regulated Utilities Are Best Positioned to Power the U.S. Data Center Boom

Data centers are driving a massive surge in electricity demand across the U.S. and well-regulated, vertically integrated utilities are proving better equipped than their deregulated counterparts to handle it. Further, data centers are more interested in working with regulated utilities to develop projects because of these utilities’ commitment to serve customers, willingness to develop just and reasonable pricing, and consistent and practical interconnection requirements, according to a new report from Wood Mackenzie. 

The report finds that the pipeline of proposed data centers has skyrocketed from 50 gigawatts (GW) to 134 GW this year. That growth could increase national electricity demand by 12% in a single year. But not all power providers are keeping up. The report shows that well-regulated vertically integrated utilities – those that plan and own generation to serve their customers – are leading the way in connecting these large, energy-intensive facilities to the grid. As Wood Mackenzie notes: “A data centre developer knows that when it has a [regulated] utility’s commitment for an interconnection, it will be able to secure power supply.”

There are a number of reasons why regulated vertically integrated utilities have the edge, according to Wood Mackenzie, including key benefits to new and existing customers: 

• Better planning: Vertically integrated utilities can match new demand with new generation through integrated long-term planning. As Wood Mackenzie explains: “In markets with vertically integrated utilities, the utility commits to serve a new load only when it can ensure it has the power supply to do so reliably.” Careful planning and approval of integrated resource plans allows vertically integrated utilities to secure the resources needed to serve load growth. 

• Faster connections: Their control over infrastructure helps reduce delays. “Because of [regulated utilities’] integrated planning processes, they are best placed to advise data centre developers on how to shorten development timelines,” says the report.

• Local support: They often have stronger community and political relationships that help move projects forward.

• Strategic land: Many own former power plant sites with grid and fiber access, ideal for data center development.

• Well-established and functioning regulation: Through state-based regulation, vertically integrated utilities have well-understood and well-functioning processes for moving projects through on reasonable timelines. As the report notes: “In regulated markets, it is easier, through regulation, to allocate the increased investment costs needed to serve large loads directly.”

In contrast, deregulated markets are struggling to build new power plants fast enough. Without centralized planning, they face growing risks of grid congestion and outages as demand outpaces supply. As the report says,  “In deregulated markets, which rely on the wholesale power market to match supply and demand, it is the price of wholesale power that provides the signal for new investment. If higher prices are required to incentivise that investment, all customers will face higher prices.”

As the U.S. faces an unprecedented wave of data center development, the report makes one thing clear: regulated utilities are best positioned to deliver the power reliably and at scale.

Read the full report.

The PJM Crisis: It’s Time to End the Deregulation Experiment

Something is broken in the wholesale markets. And finally, a group of bipartisan governors are calling it out.

The New York Times just laid bare what many of us have warned for years: PJM, the largest grid operator in the U.S.,has become a poster child for how deregulated energy markets fail the public. Bills are skyrocketing. Power plants are retiring faster than replacements are coming online. Promising clean energy projects are stalled in bureaucracy. And worst of all, no one—not even elected governors—seems to have real oversight.

Deregulation was supposed to deliver competition, innovation, and lower prices. Instead, it has handed the keys to electric generators and energy traders, while families and businesses across 13 states and D.C. are left paying out of control bills. In Maryland, Delaware, Pennsylvania, and beyond, energy costs have jumped 30–40% in just five years. And PJM’s response? Auctions and more secrecy.

Governors from both parties are right to be angry. Gov. Wes Moore of Maryland called PJM “out of touch.” Gov. Josh Shapiro of Pennsylvania went further—suing the grid operator and securing a $21 billion ratepayer reprieve. But it shouldn’t take a lawsuit to stop a broken pricing system.

The truth is deregulated markets were never built for reliability, affordability, or accountability. They were built for speculation and profit.

It’s time to bring back real oversight. Regulated utility models, like those in much of the West and Southeast, have consistently delivered lower costs, more planning, and greater accountability to the public. Governors across the PJM footprint should seriously consider exiting the RTO and restoring regulatory authority at the state level.

This isn’t about politics. it’s about protecting people from a system that no longer serves them. PJM is melting down. The governors know it. The public is feeling it. The fix isn’t tweaking a failed model. It’s replacing it.

Let’s stop pretending deregulation works. It doesn’t.

Power for Tomorrow Responds to DOJ’s Anticompetitive Regulations Review

On March 27, 2025, the U.S. Department of Justice (DOJ) launched its Anticompetitive Regulations Task Force to identify and eliminate laws that hinder free market competition and harm consumers, workers, and businesses. As part of this effort, the DOJ is seeking public comment on regulations that raise barriers to competition, particularly in high-impact sectors like energy.

In its formal comments, Power for Tomorrow warns that in the electric sector, promoting competition simply for its own sake risks undermining the Task Force’s stated goals. In fact, many of the states that embraced deregulated “open markets” are now grappling with the highest energy costs and least reliable service.

Ironically, the same proponents pushing competitive models today are targeting states with well-regulated utilities—systems that reliably produce power to meet demand at the lowest reasonable cost. Power for Tomorrow identifies this pressure to deregulate as a root cause of ongoing regional electricity challenges.

The organization was formed in direct response to Winter Storm Uri in 2021, when millions in Texas lost power for days in the nation’s most “competitive” energy market, resulting in hundreds of deaths and billions in losses. That failure exposed the deep flaws of deregulated markets and reinforced the value of the traditional public utility model, which has delivered reliable, affordable power for over a century.

Now, four years later, Power for Tomorrow is a leading voice for energy consumers, providing research and analysis on how regulation protects the public and promotes the very consumer welfare that antitrust laws are designed to uphold.

As the DOJ reviews public input, Power for Tomorrow urges decision-makers to recognize the critical balance between competition and regulation and to support policies that ensure all Americans have access to reliable, affordable electricity.

Read the full comments here.

Why Regulated Electricity Markets Attract Big Business—and Big Investment

Big news out of Louisiana: Hyundai has announced plans to build a $5 billion steel plant in the state. One key reason cited for the move stands out: Louisiana’s low-cost natural gas and electricity. 

This isn’t a fluke—it’s part of a broader trend.

Many Southern states operate in regulated electricity markets, where utilities provide reliable power at stable, state-approved rates. In contrast to volatile, market-based electricity pricing seen elsewhere, these regulated environments offer predictability and affordability. And that’s exactly what energy-intensive industries like steel production—and increasingly, data centers powering AI and cloud infrastructure—are looking for.

In short: Reliable, affordable energy isn’t just good policy. It’s an economic development strategy.

When global companies choose to build in states with regulated utilities, it means billions in investment, thousands of jobs, and millions in tax revenues flowing into local communities. These projects don’t just happen—they go where the conditions are right.

Regulated utilities = economic growth. It’s a formula that’s working—and one more states may want to pay attention to.

Read the article.

PFT Supports Arkansas SB 307, the “Create the Generating Arkansas Jobs Act of 2025.”

In a letter sent to Arkansas legislators, Power for Tomorrow Executive Director Gary Meltz, expresses support for Senate Bill 307.

“We back SB307 because it will increase investment in the state’s electric grid, protect Arkansas customers from high power bills, and attract large-scale business investment to the state."

“As an organization that focuses on promoting sensible regulation of electric utilities, we support SB307 because it empowers the Arkansas Public Service Commission to protect ratepayers from cost spikes due to events like heat waves, cold snaps or energy shortages. As electricity costs continue to go up around the nation, having this regulatory backstop in place to protect customers is sound public policy and the right thing to do.”

Read the full letter here.

Massachusetts Regulators Crack Down on Electric Supply Scams

Massachusetts regulators are calling for a major overhaul of the state’s competitive electricity market after years of deceptive marketing, skyrocketing prices, and financial losses—particularly for low-income residents. The Department of Public Utilities (DPU) has launched multiple investigations over the past decade, culminating in a new push for a "market reset" to better protect consumers.

Key Findings:

• The Attorney General’s latest report reveals that residential customers have overpaid by $651 million in the past nine years due to misleading sales tactics and inflated rates.

• Predatory marketing, especially telemarketing and door-to-door sales, has disproportionately harmed vulnerable communities.

• Automatic renewals and variable pricing structures have led to unchecked price increases, leaving consumers with unexpectedly high bills.

Proposed Market Reset:

1. All enrollments must go through the state-run Energy Switch website to ensure transparency and informed decision-making.

2. Eliminate automatic renewals, requiring consumers to actively re-enroll to avoid hidden rate hikes.

3. Require monthly reauthorization for variable-rate plans, limiting them to customers who fully understand the risks.

4. Tighter controls on renewable energy claims to prevent “greenwashing” by suppliers.

Read the full presentation here.

Multi-Year Rate Plans: A Key to Energy Reliability, Affordability, and Growth

In today’s complex energy landscape, soaring demand is strained by a limited supply of reliable, always-available energy, making it challenging to ensure a resilient grid that delivers power where it’s needed, when it’s needed. Policymakers across the country are tasked with encouraging and signaling the construction of new infrastructure to address existing and future demand. The success of our national goal of energy dominance hinges on our ability to meet the growing power requirements of data centers, AI, and a manufacturing reshoring renaissance, all while keeping energy prices reasonable for consumers.

An option that best meets these challenges and keeps energy reliable and affordable for electric customers is a regulatory mechanism known as multi-year rate plans (MYRP). An MYRP is an alternative regulatory framework in which electric distribution rates are set for multiple years—typically 3 to 5 years—instead of being adjusted annually through traditional rate cases.

MYRPs often include investment and spending forecasts, performance-based incentives, and adjustment mechanisms to protect customers’ wallets while encouraging reasonable and prudent energy infrastructure investments. More precisely, an MYRP establishes electric rates for multiple years, streamlining the regulatory process to get necessary infrastructure projects on the grid sooner. MYRPs also provide transparency into the financial conditions and earnings of electric distribution utilities.

Several states, including Florida, North Carolina, North Dakota, Minnesota, Louisiana, and others, have adopted some version of multi-year rate plans because the model promotes regulatory efficiency through reduced administrative costs and added predictability—both of which ultimately benefit customers who can count on MYRPs to offer a clearer picture of what their electric distribution utility is doing for them and on what timeframe. 

Given the benefits that MYRPs provide across the board, including leveling of electricity rates, financial transparency, customer protections, and required regulatory filings, more states should consider multi-year rate plans as a viable option to drive grid investments in support of our national energy dominance strategy.

Southeast Attracts Investment with Sensible Utility Regulation and Adequate Electric Supply

Southeast Attracts Investment with Sensible Utility Regulation and Adequate Electric Supply

Across the Southeast, an ever-increasing number of corporations are investing in building large-scale facilities. Key reasons for this economic development are sensible utility regulation and adequate electricity supply in the region. Effective electricity oversight enables utilities and regulators to work together to fully meet our growing energy needs.

A recent example of this trend is Meta’s decision to invest $10 billion in an artificial intelligence-optimized data center in Northeast Louisiana. According to Meta, this new project is estimated to create 500 operational jobs and 5,000 temporary construction jobs and will be the company’s largest AI data center to date. This significant investment underscores how sensible utility regulation fosters long-term economic growth while ensuring that homes and businesses have access to affordable, reliable, and increasingly clean electricity.

“All of the Above” -- PFT Addresses Resource Adequacy Challenges in Virginia and South Carolina

“Resource adequacy”, or the concern that there are insufficient energy sources to produce enough electricity to meet demands, is a growing problem across the nation. In Virginia and South Carolina, this challenge stems from the growth of data centers operating in those states. Combine this with energy demands of artificial intelligence and electric vehicles, and there needs to be sensible, long-term planning to ensure that residents and businesses in those states have access to reliable, affordable and increasingly clean electricity. To achieve these goals, PFT is urging lawmakers in Virginia and South Carolina to adopt an “all of the above” policy that (from the letters): “promotes the construction and implementation of a diverse mix of power generation sources. This approach does not prioritize one energy source over another but rather, focuses on reliability, efficiency, and meeting the growing demand.” 

The letter concluded: “Bipartisan collaboration will be essential to addressing these challenges. Reaching consensus on strategies to expand energy capacity, adopt a balanced energy approach, and ensure a stable, reliable power supply will be crucial to our future.”

Click here to read the letter to lawmakers in Virginia. 

Click here to read the letter to lawmakers in South Carolina.

Sorry Virginia, There is No Electric Deregulation Santa Claus

Even in the face of clear-as-day reality, some fantasies just won’t go away.  Such is the case with those who continue to promote Texas-style electric deregulation in Virginia.  Their latest vehicle is Senate Bill 591, and their latest advocacy salvo is a web post from the deregulation cheerleaders over at the DC-based advocacy group, “R Street Institute.”  In it, the authors tout a list of too-good-to-be-true benefits of utility deregulation.  It defies all common-sense, since they must willfully ignore the overwhelming evidence that the policy is an abject failure.

R Street makes several specious claims in support of SB 591, but lest anyone forget, it should be emphasized that R Street is pushing policy prescriptions that gave Texas an unreliable power grid, cost Texans billions of dollars, and most tragically, killed hundreds during preventable blackouts.  As to R Street’s specific arguments, let’s debunk the biggest whoppers.

R Street Claim:  Deregulation leads to cost savings

Fact:  States with so-called “electricity competition” have, on average the highest cost electricity rates in the United States – and far higher than in Virginia.  The first chart provides a snapshot of average electricity rates in 2001 – when full deregulation was taking hold in the states that ordered it – and compares them to rates 20 years later.  The takeaway from the government data is that there is not a single state that deregulated with which Virginia consumers would want to trade places. 

The second chart provides a deeper dive by comparing the jurisdiction R Street most hopes Virgnia will copy: Texas.  While Virginia and Texas residential rates started out roughly equal in 2001 – Texas rates have been generally higher and more volatile over the succeeding two decades.  Knowing all the electric grid turmoil and disaster Texans have endured, is there really any voter in Virginia that would look at this chart and conclude that the Commonwealth should be looking to Austin, TX for policy solutions?

Still not convinced?  Take a gander at multiple analyses from across the country that all arrive at the very same conclusion: electric deregulation costs customers money.

Wall Street Journal

“U.S. consumers who signed up with retail energy companies that emerged from deregulation paid $19.2 billion more than they would have if they’d stuck with incumbent utilities from 2010 through 2019, a Wall Street Journal analysis of U.S. Energy Information Administration data found.”

NY Times

“On average, residents living in a deregulated market pay $40 more per month for electricity than those in the states that let individual utilities control most or all parts of the grid. Deregulated areas have had higher prices as far back as 1998.”

Connecticut

“As demonstrated through the bill analysis and shown above, for the five years examined, between 70% and 62% of customers with a supplier overpaid each year. Residential customers with a supplier overpaid between $37 million and $25 million each year, resulting in approximately $151 million total overpayment over the course of the five years examined.”

Maine

“Rates charged by competitive electric providers were on average 70% higher in 2021 than the state-run standard offer, the report found. An analysis showed that between 2018 and 2021, Maine households getting their supply from competitive providers paid between $78.1 million and $90.6 million more than standard offer rates, translating to an average overpayment of $280 a year.”

Massachusetts

“Massachusetts Attorney General Andrea Joy Campbell issued a market study report finding that customers of competitive electricity suppliers paid $525 million more in electricity rates than what utilities would have charged. This report followed three earlier reports with similar findings. According to the study, “the continuation of consumer losses is disproportionately borne by residents in zip codes with a higher concentration of low-income and residents of color.” AG Campbell urged state legislators to pass regulations to ban these companies from operating in the state.”

R Street Claim:  Deregulation leads to innovation

Fact: It depends on what R Street means by “innovation.”  If they mean innovative schemes to take advantage of low-income and vulnerable customers, then they are correct.  One of the hallmarks of electric deregulation is the unscrupulous marketers that descend on vulnerable populations coercing them into signing bad energy supply contracts at elevated rates, and engaging in other unethical behavior related to customer switching practices.  Again, the evidence from across the country is damning.

Massachusetts

“Gov. Maura Healey, Attorney General Andrea Campbell, and Boston Mayor Michelle Wu formed a united front at the hearing, calling on lawmakers to eradicate the retail market for electricity. They accused the retailers of lying, cheating, and using deceptive sales practices to sell homeowners overpriced electricity. The best way to address the problem, they said, is to get rid of the retailers.

“This is not just a few bad apples,” testified Michael Judge, Healey’s undersecretary of energy, who previously grappled with the problem at the Department of Public Utilities. “The consumer experience of being marketed these products is consistently awful.”

Maryland

“The commission — which licenses nonutility gas and electric suppliers, but does not regulate their prices — said it is taking the rare step because of record-high numbers of complaints, many concentrated in low-income neighborhoods in Baltimore. Already, nearly a dozen companies have been barred from taking on new customers.  Consumers say suppliers have overbilled them, enrolled them in contracts without their permission and falsely claimed affiliations with a utility or state agency.”

Texas

“Three retail electric companies owned by Houston-based NRG Energy have been ordered to pay a combined $900,000 fine for violating state rules that allow electric companies to prevent customers from switch providers until bills are paid.” 

Pennsylvania

“The Pennsylvania Public Utility Commission (PUC) today approved a settlement agreement between Reliant Energy Northeast LLC (NRG Home or company) and the PUC’s independent Bureau of Investigation & Enforcement (I&E), following an investigation into the company’s marketing and sales practices as a licensed electric generation supplier (EGS) in Pennsylvania.”

R Street Claim:  Deregulation leads to reliability

Fact: No need to beat a dead horse.  One word: Texas

R Street Claim:  Deregulation leads to emissions reductions

Fact: Switching from coal to natural gas generation leads to emissions reductions.  The use of nuclear generation leads to emissions reductions.  Widespread use of renewables leads to emissions reductions.  But little suggests deregulation leads to emissions reductions. Rather, clean energy technologies that have been deployed in recent years are driven far more by public policies like renewable mandates, tax subsidies and legislative and regulatory support for technologies like advanced nuclear and offshore wind than anything to do with whether a state is regulated or deregulated.

R Street Claim:  Deregulation leads to reduced cronyism and governance quality

Fact: Unfortunately, deregulation seems to coincide with an increase in cronyism and abuses of market power.  To highlight just one case, deregulated merchant power generators in Texas were recently found to have exercised anti-competitive market power in the wake of Winter Storm Uri – overcharging customers between $285 to $380 million over the course of just one year.  These companies wield enormous influence in the halls of the capitols in deregulated states.  It’s gotten so bad that now only 2 companies control nearly 80% of the Texas residential market, hardly healthy competition.  The lesson is clear – when deregulation occurs, scandals, crony capitalism and anti-competitive behavior ensues.

R Street Claim:  States are migrating towards deregulation

Fact: No states have embraced deregulation since the initial group that transitioned to it in the early 2000’s.  Rather, the more common path has been for states to recognize the harm of deregulation and reverse course – such as happened in Virginia, or in places like Arizona, California, and Montana.

SB 591 – A Needless Risk for Virginians

R Street makes clear it views SB 591 as just a first step towards Texas-style deregulation.  It states plainly that it would “open the way for deeper restructuring in future years.”  There is no doubt that SB 591 is the troubling first step towards repeating the mistakes of other states.

As noted by R Street – SB 591 would make it easier for large customers to take a portion of their power needs off the regulated system.  Far from protecting smaller customers, this action would place them at greater risk of blackouts and extra costs.  Why?  Because under Virginia’s regulated electric system, new customers such as the Big Tech monopolies, must be able to prove that it is done in a way that benefits all customers.  That means all customers pay their fair share.  All customers help pay for reliability.  And all customers are treated on a non-discriminatory basis.  SB 591 disrupts this balance.  The largest customers will seek to exercise their tremendous market power by striking deals that allow them access to cheap – but often unreliable sources of power – while dumping the costs of maintaining systemwide grid reliability services on the remaining smaller customers, like homeowners.  The big get bigger and richer – and the little guy pays for it.  SB 591 would let the largest, most sophisticated energy purchasers have their cake and eat it too.  They want all the benefits of being connected to a grid – while shifting as much of their costs to other customers.   

Furthermore, SB 591 is a threat to reliability.  It would allow quicker switching of customers while gutting State Corporation Commission (SCC) oversight that exists to protect the public’s interests.  Reliable electric generation requires planning and long construction lead times to ensure adequate capacity to serve all customers on the very hottest and coldest days.  SB 591 incentivizes companies to underinvest in resilient generation technologies because tight and volatile electric markets mean more profits for unregulated merchant generators.  This race to the bottom is exactly what has happened in the unreliable Texas market, and SB 591 is a step in that direction.  Furthermore, the SCC is the cop on the beat ensuring that the side-deals for electricity struck by large customers don’t harm other Virginians.  Encouraging rapid switching and hobbling SCC oversight and customer protections is a recipe for disaster in the Commonwealth.  It will lead to underinvestment in generation, tight reliability reserves, higher prices and reduced customer protections for smaller customers.

In the final analysis, there is one statement R Street makes which is undoubtedly true; “stakeholders and policymakers can learn from states that have introduced electric competition already.”  It is clear that once Virginians do survey the wreckage of state electric deregulation policy around the country, they’ll be well advised to reject SB 591 and other similar policy dead-ends.

O Canada- It Turns Out Deregulation Fails on Both Sides of the Border

It’s sometimes said that Alberta is the Texas of Canada.  When it comes to electricity deregulation, that has some truth to it.  And in case you were under the impression that the failure of electricity deregulation is an exclusively American phenomena, you need look no further than to our northern neighbors.  Alberta is the one Canadian province that most fully adopted Texas-style electricity deregulation, and like Texas, its electricity prices are surging - up 128%.  Customer bills have spiked dramatically.  Alberta now has by far the highest electricity prices of any province in Canada.

Experts are taking notice.  Junaid B. Jahangir, an Asscoiate Professor of Economics at Edmonton’s MacEwan University recently authored an article that lays the blame for the problem squarely at the feet of deregulation.  As Professor Jahangir explains, “[t]he problems of insufficient capacity and market power are characteristic of the deregulated electricity market.”

If that sounds familiar, it should.  Chronic problems with available generation capacity – combined with a tendency towards a consolidation of market power are also the defining characteristics of today’s deregulated Texas energy grid.

Professor Jahangir suggests a path towards re-regulation, which includes long-term contracts between utilities and generation plant owners, as well as implementing average cost pricing to reduce the impact of market power concerns.  Professor Jahangir wrote his doctoral thesis on electricity deregulation in Alberta, so he has more than a layman’s understanding of the market.

Will Alberta’s leaders take the advice?  It’s hard to know.  Once the decision to deregulate is made, re-regulating presents challenges.  That’s not to say it hasn’t been done successfully elsewhere.  Montana, a jurisdiction that shares a long border with Alberta, did exactly that, but it took sustained public pressure and political leadership to right the ship.

Montana Public Service Commission President Jim Brown, a Republican, recently described electricity deregulation as “the worst policy decision in the history of the state.”  That seems to be a bi-partisan sentiment in the Treasure State, where former Democratic Governor Brian Schweitzer called deregulation “an unmitigated disaster.”  Montana also proves that re-regulating and stabilizing electricity service for the benefit of consumers can be done, since it largely repealed the policy.  Perhaps Alberta will be next and show another path forward for states looking to reclaim sensible regulation of the electric utility industry.

Practical Realities of Today’s Grid VS Assumptions Driving Market Design 20 Years Ago

If there is one thing that clean energy advocates should desire, it is a low-carbon energy transition that works for consumers.  New energy resources must be brought online affordably and reliably, or Americans will reject the transition outright.  That’s where a recent op-ed by former FERC Chairmen Jon Wellinghoff and Pat Wood misses the mark.  Their piece, “Competitive power markets are cleaner, cheaper and safer” advocates for policies that are not working in practice, are driving up customer utility bills, and are threatening grid reliability.

What seems to have upset the erstwhile regulators is that current officials, like FERC Commissioner Mark Christie, have begun asking whether the practical realities of today’s grid are undermining assumptions that drove wholesale market design 20 years ago.  While Mr. Wellinghoff and Mr. Wood call such questions “alarming,”, these are exactly the sort of questions conscientious regulators should ask.  More alarming would be if Commissioners were not engaged in serious inquiry.

By habit, Mr. Wellinghoff and Mr. Wood take a few obligatory shots at traditionally regulated regions of the country.  But this merely serves to distract from the significant challenges deregulated wholesale electricity markets are facing today.  Commissioner Christie has posed serious questions that deserve a more thoughtful response than recitations of talking points from 1990’s era deregulation debates.

The op-ed asserts that today’s wholesale power markets drive cleaner resources.  To the contrary, the primary drivers of clean energy investments are, first and foremost, government policies that exist in spite of markets; and second, natural geographical factors that are unrelated to wholesale market structures.

One need look no further than the nation’s largest wholesale market, PJM.  Has the PJM market ushered in significantly more wind energy than other regions?  Clearly not.  PJM, sitting astride the prolific Marcellus shale region, has mostly added new natural gas assets, and projected offshore wind development in the Mid-Atlantic is almost entirely a function of government dictates.  None of this is a surprise.  Windy areas of the country have built more wind generation, and sunny areas have more solar arrays.  In places like Texas, it is not “competition”” that drove renewable deployment, it was a cocktail of favorable wind and solar profile, federal subsidies and the state legislature jump-starting renewables through the decision to mandate and socialize billions of dollars in transmission upgrades.   Meanwhile, the nation’s largest on-demand carbon-free resource, nuclear, tends to exist where regulatory and public policies support those units, irrespective of the existence of an organized market.

Since any clear-eyed assessment will conclude that it is government policy – not deregulated markets – that are driving investment decisions – the question must become: how do we bring these clean energy investments online most affordably and reliably?  Here the markets are failing, and Texas is Exhibit Number One.

In recent years, Texas has careened from reliability crisis to crisis, all while wholesale prices ping-pong erratically.  The most recent revelation comes from the ERCOT Independent Market Monitor, who reports that Texans will have paid more than $8 billion in charges in just a three-month period for artificial shortages the grid operator created as a means of shoveling more money to deregulated merchant power generators.  Bloomberg quotes Mr. Wood as saying that even this windfall may not be enough to bring needed reliability resources to the market.  And as the New York Times reports, consumer advocates are calling this all “a huge transfer of wealth.” 

Given this chaos in Texas, you should get your head checked if you think policymakers in other regions of the country are going to adopt that model.  As for the other idea floated by Mr. Wellinghoff and Mr. Wood, a “price on carbon,” it is a frequent suggestion, though a Quixotic one, given the politics of the issue.  While it is a theoretically straight-forward way to price externalities into the markets, it is no closer to adoption than it was two decades ago.  Furthermore, alone it would not repeal all the other market distorting public policies.  Rather, in future years, state leaders are more likely to look to planned, regulated utilities – whether inside or outside an organized market – to achieve their clean energy goals affordably and reliably.  While Mr. Wellinghoff and Mr. Wood may continue to proselytize their preferred, though struggling, market model; it is properly regulated utilities that will be the ones most likely to plan, finance and construct new energy resources in a way that consumers and voters will accept.  No amount of glossing over the problems of our power markets will change that fact.

Nothing to see here…

The E-mail below from ERCOT’s Emergency Alert system is merely ERCOT behaving the way it was designed to operate. Scarcity of supply drives up prices, and when that doesn’t work, we send out emails begging people to conserve.  Just like a real market….wait.

Vermonters Win; Deregulated New England Loses

Predicting future energy costs is a fraught exercise, or as Yogi Berra might have said, “it’s difficult to make predictions, especially about the future.”  So hopefully readers will forgive us if we highlight a recent PFT prediction that came true. Nearly a year ago, this blog suggested that energy wonks should keep an eye on state-by-state electricity prices in New England over the succeeding winter months. Given fast rising wholesale energy prices in the New England electricity market, PFT hypothesized that residents of Vermont would fare better than any other state, owing to Vermont’s decision not to deregulate its utilities, as happened in the other five states in the region.

The data are now available, and sure enough, the prediction came true. Vermonters won; deregulated New England lost. The chart below shows just how right (Vermont and PFT) was: .

Because Vermont maintains traditional regulation of its utilities, state regulators help ensure that utilities build a generation resource mix that benefits consumers. This helps stabilize rates, making them more predictable and affordable over the long-term. It also builds a cushion to soften the blow of wholesale price blowouts. As we said last year:

“because of Vermont’s public policy decisions, the state’s electricity rates – while still high compared to the national average – are likely to not rise as much as its regional peers. By building a diverse portfolio of assets, including long-term contracts for renewables that the markets will not support, Vermonters have built-in certain customer rate protections.”

In retrospect, perhaps we shouldn’t gloat over our prognostication skills. The trend in New England power rates was predictable, just as it has been predictable everywhere else across the country for the past 25 years. Electricity deregulation harms average customers. Volatile wholesale electricity market pricing quickly translates into volatile retail electricity prices paid by customers in deregulated states. It’s been this way since the advent of restructured utilities more than two decades ago, and it won’t change anytime soon. It’s not a random mistake. It’s how utility deregulation is designed.