Restructuring Today
January 4, 2006

NEMA senses 2006 will be the year for markets

What goes up must come down  -- even energy prices.

          NEMA President Craig Goodman sees that downward move as inevitable and perhaps the final proof that competition produces better deals for consumers.

          It could be "the year of the marketer," he told us.

          Goodman doesn't think the Saudis will allow alternative energies to get off the ground by keeping oil prices high.

          They've stepped in before to get prices down before investments in new technology begin to look too good, he told RT.

          Once the Saudis act, natural gas and power prices will descend, he predicted.

          And then how do competitive markets benefit from that?

          Some utilities have talked regulators into OKing price stability by buying years’ worth of energy at record high prices, Goodman reminded.

          He cited FirstEnergy's attempt at "rate certainty" that would mortgage power rates in northern Ohio for 25 years to keep rates down now (RT, 12/20).

          More recently, Massachusetts regulators OKd a plan cooked up by Nstar, Attorney General Tom Reilly, a low-income consumer group and the Associated Industries of Massachusetts (see story) that trades market-responsive generation rates, for longer-term procurements and a short-term rate cut.

          Both cases force utility customers to "go long" on energy at a time when market prices are high, Goodman said.

          Ohio and Massachusetts regulators took the road most traveled -- intervening to "protect" customers by committing to what inevitably will be higher-than-market rates in the future in exchange for modest savings today.

          By contrast, states like New York that are encouraging shopping and consumer education will look far more consumer-friendly when energy prices come down, Goodman observed.

          Marketers in New York's well-established marketplace will be quick to respond to lower prices in their offers, Goodman added.

          Massachusetts and Ohio consumers are likely to be stuck with all-time

high rates until marketers see it's safe to move in.

          Every time politicians have intervened in the market in the cause of consumer protection they've ended up doing more harm than good, said Goodman.

© 1997-2006 ghi, Washington, DC, USA. All rights reserved.