News Release Contact: Craig Goodman
FOR IMMEDIATE RELEASE Telephone: (202) 333-3288
August 8, 2000 Facsimile: (202) 333-3266
E-mail:
National Energy Marketers Association
Cites Political as well as Economic Factors for Price Volatility
Urges Congressional and PUC Action
Washington, DC – The National Energy Marketers Association (NEM) is urging Congress and State PUCs to help fight the recent price volatility in wholesale energy markets. "At our April meeting, Secretary Richardson warned the country about price spikes and possible shortages. Now that it has come to pass, many politicians are surprised and are calling for actions that could make matters worse," said Craig Goodman, President of the National Energy Marketers Association and former energy policy official in the Reagan and Bush Administrations.
Congress stripped down the proposed restructuring legislation to a point that no meaningful federal overhaul of the electricity industry is now in sight. State legislatures and PUCs in major energy markets that are now experiencing price volatility have enacted a series of regulations that have exacerbated a shortfall in new power supply. Industry experts on NEM's Policy Development Team have identified the following issues to address public concerns about price volatility:
Ø Consumers will always be best served when energy suppliers can compete aggressively on the basis of lower prices and value-added products and services. Prices in other industries that have deregulated have declined an average of 40 percent.
Ø Electricity price volatility is basically a result of continued regulations, resource scarcity and a lack of liquidity in wholesale energy markets. The Energy Information Agency (EIA) reports a steady ten-year decline in retail prices in many of the nation's major energy markets.
Ø Electricity price volatility reflects volatility in the crude oil and natural gas markets which are also used as feedstocks for much of the country's peaking power generation.
Ø Price volatility is most dramatic in markets where generation capacity is in the shortest supply.
Ø Specific regulatory and political actions exacerbate the problem:
Ø Many states are legislating price freezes, roll-backs or discounts without any regard to market forces at the same time new generation to meet the demand generated by the lower prices is not being built or brought on line. Competitive prices can not be legislated.
Ø Policymakers should avoid actions that increase the risk of building new generation. Higher risks increase the cost of capital and ultimately increase the cost of electricity.
Ø Consumers cannot shop for competitively priced energy supplies as long as retail shopping credits are fixed and wholesale prices are fluctuating wildly. Consumers also need better access to their energy usage data so they can make informed choices.
Ø Until utility rates are fully unbundled, meaningful price competition will be difficult or impossible.
Ø Many of the simplest rules, tariffs, operating procedures and data requirements lack basic uniformity from state to state. Uniformity will save energy consumers billions of dollars.
"You can't legislate or regulate lower prices, block new power plants from coming on line and then expect prices to remain stable," said Goodman. "Retail customers suffer when regulators fail to provide for truly liquid wholesale markets. Either the federal government needs to mandate price decontrol and grant FERC the powers necessary to get the job done, or the states will have to fully unbundle utility rate bases quickly and fairly so consumers can start shopping for competitively priced energy with shopping credits that reflect the full costs of serving retail load. Under partial decontrol, consumers are forced to pay twice for these services, whether they want them, or not," said Goodman.
The National Energy Marketers Association is a national, non-profit trade association representing both wholesale and retail marketers of energy and energy-related services and technologies throughout the United States. NEM's membership includes: small regional marketers, large international wholesale and retail energy suppliers, billing and metering firms, Internet energy providers, energy-related software developers, risk managers, energy brokerage firms, and information technology providers. NEM membership includes both affiliated and unaffiliated companies.
NEM will convene an Industry Leadership Roundtable on October 30-31, 2000, in The Woodlands, Texas. Invitations will be extended to leaders in the energy information, services, technology and telecom-bandwidth industries to join NEM's policy development efforts to identify the solutions to bring competitively priced power to all consumers across the country.
For information on the October Meeting, or for copies of NEM policy papers, contact NEM's Washington, DC headquarters at (202) 333-3288 or www.energymarketers.com.
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