Andrew N. Kleit

Moving Forward: A Road Map for Choice and Competition

Posted on July 15, 2013 | Type: Report | Authors: Andrew N. Kleit, Nick Dranias, Byron Schlomach
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Choice and competition can drive Arizona's electricity market to produce more power at a lower cost - with greater economic efficiency propelling greater economic growth and job creation. Since restructuring their electricity markets for choice and competition, Pennsylvania and Texas have seen their capacity increase nearly 25 percent and 45 percent respectively. Texas has seen prices drop 13 percent below the national average. Texans choose among numerous competitive electricity retailers and plans, much like Arizonans choose from multiple cell phone service companies and plans. These experiences are not isolated - countries around the world, including the United Kingdom, New Zealand, Canada and Chile, have similarly restructured their markets for choice and competition, and have similarly experienced greater capacity and lower prices as a result.

That does not mean, however, that restructuring for choice and competition is an easy or instantaneous process. It must be done right. Fortunately, competitive electrical markets in the United States and around the world are now mature enough to chart out a road map for Arizona to follow. This article provides that road map with specific recommendations tailored to Arizona's unique market conditions to ensure the reform is a success.

In essence, the Arizona Corporation Commission needs to restructure Arizona's electricity market for choice and competition in three phases. First, ACC should separate existing utilities from their generation, transmission, and distribution capacity to prevent them from abusing the monopoly power they have accrued under the existing regulatory system. At the same time, a system operator needs to be empowered to neutrally balance the load on the grid that will be created by an influx of competitive energy producers. Second, the ACC should take action to create competitive generation markets in which energy producers can freely enter, exit and compete for business. Third, customers should be empowered by the ACC with the freedom to choose among competitive retailers of electricity. If these steps are taken in the right order, Arizona's electricity market will finally move forward towards greater capacity, choice, competition, innovation and lower prices - spurring new economic growth and job opportunities for Arizonans.

Read Moving Forward: A Road Map for Choice and Competition in Arizona's Electricity Markets and A Time for Choosing: Why Choice and Competition in Electricity are Right for Arizona.

The Goldwater Institute's filing before the ACC in support of restructuring Arizona's electricity markets for choice and competition.

The Goldwater Institute's reply brief in support of Choice and Competition.

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