EnergyWindow, Inc.: MarketElert(TM) - May 2004 Supplement: Case Study

Despite some evidence to the contrary, it would appear the deregulation genie may yet remain outside his proverbial bottle. Recent retrenchments by a few states have sent warning signals to free market proponents, but others are marching forward. More importantly, while debate continues regarding retail markets, wholesale markets are expanding to provide the physical and financial infrastructure necessary to promote competition.

Against the tide of deregulation are states like Michigan, where DTE has levied significant rate increases that disproportionately penalize switchers, and now is endorsing legislation to ban switching below 1 MW, Ohio where Rate Stabilization Plans (RSP) are allowing utilities to extend the period of time they collect transition costs (keeping distribution rates high) and keeping supply rates below that which competitive suppliers can match, and Virginia, where price caps, which keep supply costs artificially low and distribution costs high, have been extended until December 31, 2010.

States that have been improving the climate for deregulation include New Jersey and Maryland, where market-based default supply offers opportunities, Connecticut which has also procured its default supply through competitive bids, Pennsylvania where the PUC is likely to introduce competitive default service next year in Duquesne territory and even California where Governor Schwarzenegger has proposed to reinstate direct access for larger electric users.

One of the less-discussed but highly significant issues keeping our genie on the loose is that of the expansion of the PJM Interconnection. PJM, which used to stand for the Pennsylvania, New Jersey and Maryland power pool, is generally considered to be the best current model for FERC's Standard Market Design - and it is on the move. Chicago-based ComEd joined the interconnection on May first. Duquesne Light in Pennsylvania will be joining in January 2005. AEP's eastern transmission system in Ohio and Dayton Power & Light are slated for integration on October 1, 2004. And Dominion Resources transmission system in Virginia and North Carolina are slated to join PJM in November of this year. PJM isn't likely to stop there, either. There are already plans to integrate PJM with the entire Midwest ISO (MISO), creating a joint and common market that would span from the Atlantic to the Mississippi, and Manitoba to Missouri.

What does this expansion mean for energy buyers? PJM and the MISO-PJM integration will bring lower transmission prices and liquid spot markets, allowing generators access to more markets and more participants to compete. It also promises to continue giving our genie friend lots of elbow room. You can see more details about planned MISO-PJM market expansion at http://www.miso-pjm.com/.

Copyright © 2004 EnergyWindow, Inc. All Rights Reserved.