Restructuring Today
September 25, 2006

When is a retail market `workably competitive?'

NEMA wants to know.

            New York regulators used the term in explaining their decision that New York State Electric & Gas may keep offering a fixed-rate next year and maybe the year after that (RT, 8/24).

            NEMA is asking the PSC to clarify its view.

            It wants to make sure too that a monopoly can't "protect its market share by blocking market entry or undermining competition, only to return the next year claiming the market is still not workably competitive."

            The PSC should confirm that the case is unique and won't set a precedent, NEMA urged.

            NEMA wants the PSC to make clear that the State Action Doctrine won't apply once the retail power market is declared competitive.

            That doctrine, of course, exempts state regulators' rules from antitrust enforcement.

            The doctrine wasn't intended, NEMA stressed, to protect monopolies in competitive markets.

            Making that clear would "place a scintilla of risk on the utility ledger" if the utility is allowed to compete with competitive products rather than stay in its traditional cost-of-service role, NEMA noted.

            NEMA asked what risk NYSEG was taking where it's allowed to earn a regulated rate of return -- without apparent risk -- and earn a profit on top of that.

            The marketers doubt that's the policy signal the PSC intended to send to other utilities.

            NEMA asked too how soon NYSEG must give notice that it plans to continue its fixed-rate plan for another year. 

            Marketers need some warning to create their own fixed-price offers once they know the utility won't be competing with them.

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