Guest view: Modern power markets demand reform, not subsidies
It's an exciting time for competitive electricity markets.
I’ve worked in this industry for more than 20 years, and I cannot recall another time where there have been so many urgent “calls to action” for market reform — including right here in Pennsylvania.
And while this may seem like a topic best left to energy experts, it has meaningful consequences for every consumer in Pennsylvania who uses electricity every day.
Imagine a future where our energy infrastructure is robust and resilient; our electricity is produced and used in a sustainable way; and consumers have greater control over their energy choices. Think smart thermostats, renewable energy, smart appliances; once consumers realize the power they have over electricity production, use and price, I believe they will demand it.
The only real question is whether decision-makers will instead halt progress by preventing full and free competition, protecting incumbent utilities, subsidizing outdated and uneconomic technologies, and driving up costs for consumers.
Right here in Pennsylvania, owners of uneconomic power plants — including some nuclear and coal — say they need subsidies to keep their plants running. Shale gas is now cheap and plentiful, and renewable energy is becoming less expensive, so the owners of these plants are begging state legislators and regulators to put in place new subsidies. Let’s be clear: these are new taxes that would be imposed on citizens to benefit a few well-connected companies.
Regulators and legislators who give in to this kind of pressure are hurting consumers — and undermining the principles of competition.
While we agree that significant reforms are needed in the regional power markets, we unequivocally oppose state subsidies that are discriminatory, favor one form of existing generation over another, and seek to defeat the economic benefits of competition. Such subsidies impose new costs on consumers.
Speaking of consumers, we need to ensure they are more aware of the services that can be provided by a retail energy provider.
In a fully competitive market, electricity providers offer diverse payment plans and bundled services for the home, such as security and smart heating, and cooling. They have online apps that are powerful tools to interact directly with consumers, allowing them to better control and manage their energy use.
So how can we unleash the creativity, innovation and entrepreneurial forces that will bring Pennsylvania’s power industry into the 21st century?
The answer is, rather than play regulatory catch-up to the technology, regulators and innovators should work together so we can figure out the new competitive framework. That way, as consumers become increasingly sophisticated when it comes to energy choice and use, the rules will already be in place, allowing for a smooth transition.
We offer the following recommendations and changes to the power market:
The tariff structure under which the utilities operate needs to evolve to better support their core business of transmission and distribution.
Update our power markets so they recognize and compensate all services that generators provide to the system. This will be less costly to consumers than out-of-market subsidies and will encourage continued innovation and improvement.
Standardize the business transactions that enable customers to shop and choose energy products, services and suppliers. PJM, the regional system operator, should take on the role of facilitating market transactions associated with customers exercising their choices, like processing customer switches and sharing of meter consumption data for billing purposes.
Consumers must demand simplicity and convenience. They want a single energy bill that includes not only energy, but also the other products and services that they use. And the bill for these services should come from the company providing those services.
I am optimistic and excited about the energy future here in Pennsylvania and throughout the country. I am confident we can move our markets forward to meet the demands of consumers.
Mauricio Gutierrez is president and CEO of NRG Energy, an energy company based in Princeton, N.J. It operates several power plants in Pennsylvania, including a cogeneration plant in Harrisburg.