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Competition for small customers Next Steps in Massachusetts

This presentation by Sharon Rodriguez, Vice President of Market Development at National Grid USA, discusses the current Massachusetts market for small customers, a vision for the future market, barriers to competition, and potential solutions. It also examines the question of whether restructuring has failed, highlighting the estimated savings for Massachusetts customers. The presentation compares price reductions in Massachusetts to those in the UK and emphasizes the need for a vibrant retail market. The speaker proposes measures to facilitate the transition to a fully competitive market.

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Competition for small customers Next Steps in Massachusetts

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  1. Competition for small customersNext Steps in Massachusetts Sharon Rodriguez Vice President, Market Development National Grid USA

  2. Agenda • The Massachusetts market for small customers today • A vision for the future Massachusetts market • Barriers to competition • Potential solutions

  3. The market for small customers

  4. Has Restructuring Failed? • Despite the stagnated competitive market for small customers, Massachusetts’ customers have saved an estimated $3.6billion • UK • Electricity 26% real reduction • MA • Electricity 13% real reduction Massachusetts price data - City Gate Gas/Domestic Electricity Price (Department of Energy, EIA) UK price data- Gas at UK Delivery Points / UK Domestic Electricity Prices (Department of Trade and Industry) All Figures are rebased to 1990 levels using the country specific GDP deflator

  5. Has Restructuring Failed? • Despite the stagnated competitive market for small customers, Massachusetts’ customers have saved an estimated $3.6billion • Price reductions are comparable to those seen in the UK • UK • Electricity 26% real reduction • Gas prices fallen 25% (real) • MA • Electricity 13% real reduction • Gas prices risen 30% (real) Massachusetts price data - City Gate Gas/Domestic Electricity Price (Department of Energy, EIA) UK price data- Gas at UK Delivery Points / UK Domestic Electricity Prices (Department of Trade and Industry) All Figures are rebased to 1990 levels using the country specific GDP deflator

  6. Mass. Electric Vision – A vibrant retail market What is a vibrant retail market • Many suppliers competing to retain and acquire customers • Every customer has a choice of supplier and a choice of product • Customers are actively choosing to move between suppliers rather than away from utilities (utilities eventually exit commodity business) • Suppliers are entering and exiting the market • The occasional supplier default is seen as a sign of competition and managed within the market framework

  7. Mass. Electric Vision – A vibrant retail market Why do we need it • Competitive suppliers with a profit stake in actively managing risk on behalf of their customers will provide wholesale market pressure • Avoids unnecessary price increases and continuing market fixes – RMR/LICAP mechanisms • Sustainable solution to capacity adequacy • Customers can switch supplier thereby leaving the risks of procurement decisions with Competitive suppliers • Avoids future stranded costs • Customers can benefit from innovative products

  8. New Market Rules 8GW Asset Divestment UK experience - Capacity Adequacy

  9. Standard Offer Price Participation Barriers to a vibrant market Scale

  10. Standard Offer Price Standard Offer Prices Below Wholesale. Will Default Service Be Better?  • Current procurement approach • Provides reasonable balance between stability and connection to market price • Alternative utility procurement policies • Longer term contracts with utilities • Laddering • But, need to ensure competitive market is able to function effectively and there may be better ways than utility procurements  

  11. Organic growth is difficult and costly to achieve from a zero base Properly designed retail aggregations can provide a platform for competition From initial aggregation new customer links forged with aggregators Aggregators can compete against each other to retain and grow their customer base Other competitive suppliers can compete for customers who have left ‘mother utility’ Customer education possible at a time of real options All customers should be able to benefit from competitive market Customer credit is a key barrier Mass. Electric proposes fully reconciling purchase of supplier receivables within an aggregation program to permit all customers to participate without hindrance from their credit history Scale Participation Other Barriers

  12. Conclusion • Restructuring has delivered significant benefits • A vibrant retail market is essential • There are some steps that can be taken to facilitate the next stage of the transition to a fully competitive market

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