NRG Energy’s fear-mongering misconstrues utilities’ role
NRG Energy’s fear-mongering about “re-monopolizing” the supply of electricity and gas fundamentally misconstrues the role Maryland’s electric and gas utilities play in the energy supply markets (“Maryland consumers stand to lose if gas and electricity is re-monopolized,” March 5).
NRG argues that the pending legislation (Senate Bill 1/House Bill 267), which intends to protect customers from retail supply price gouging run rampant, will return Maryland’s retail energy markets to how they were two decades ago. This argument is plainly wrong.
Two decades ago, utilities were vertically integrated, owning and controlling energy supply, such as generating plants, along with their distribution and transmission systems. The 1999 law that “de-monopolized” energy supply (only) forbids electric utilities from owning any generation. The law set up a system under which utilities procure — through competitively run RFPs — supply for customers that don’t choose a competitive supplier.
The Public Service Commission oversees the utilities’ supply procurements. Twice a year, the utilities procure two-year contracts for 25% of the electric load. This approach spreads the risk of supply market fluctuations across two years. The procurements, which our office monitors, take advantage of the competitive wholesale supply market and customers have benefited tremendously. Those benefits are evidenced by the fact that customers served by the utility procurements usually pay far less than those served by retailer suppliers.
Gas is similarly procured in a PSC-regulated process. Our office participates in annual procurement proceedings, called “purchased gas adjustments,” and we sometimes advocate for changes to procurements. These procurements, too, have benefited residential customers relative to their options in the retail supply market.
Further, unlike energy suppliers
that only profit from marking up their energy supply prices, utility profits are independent of their supply procurements. Except for a small administrative charge, utility supply procurement costs are passed directly through to customers. This supply pass-through stands in stark contrast to utility investments in energy delivery infrastructure for which utility profits go up as they spend more customer dollars on new infrastructure.
S.B. 1 doesn’t change any of these provisions of the 1999 law or current practices for utility supply procurements for non-shopping customers. Utilities will still be barred from owning generation and selling energy other than the PSC-regulated procurements. Non-shopping customers will still benefit from competitive procurements from the regional wholesale generation market. And energy suppliers can continue to sell to retail customers.
NRG incorrectly insinuates that the utilities compete in the retail supply market when they don’t. Their procurements of supply are regulated, they provide supply only as back-up for non-shopping customers and they aren’t allowed to market or promote it.
S.B. 1 also does not change the fundamentals of the utilities’ or retail suppliers’ market roles that have been in place for two decades. Rather, it seeks to protect customers from the egregiously high charges and deceptive sales practices that we have been witness to and litigated over for many years. These consumer harms are systemic — extending far beyond what retail suppliers attribute to a few bad actors — making it long past time for SB1’s added customer protections.