https://www.ftc.gov/sites/default/f...ory-reform-focus-retail/electricityreport.pdf
Holy hell is this a complicated issue. I challenge anyone here to actually read and understand this report by the FTC about how this actually has to work in order to take advantage of the 'invisible hand'. Yes, competition is in theory good for customers. But the devil is in the details. It is not so simple, the benefits of a competitive market depend on price signals actually making a round trip to customer and back to the supplier, and there isn't a single supplier, there is a chain of wholesale to retail suppliers, etc. The report concludes that competition can work but it has to be set up correctly, and of course MA is doing it wrong (see their case studies of different states).
Conclusion
• So far, neither retail nor wholesale markets for electricity generation encourage effective demand-side responses. Generally, retail customers do not have price information and timesensitive rates that reflect the changing price of obtaining electricity at various times of the day and over the course of the year. Prices are likely to be lower and reliability is likely to improve if more customers have time-sensitive rates and timely and accurate price information. With these things, customers can make better consumption and investment decisions that determine an efficient market equilibrium for electricity services. Increasing the price sensitivity of demand also will help to constrain existing or potential market power in generation. This is true because a price increase will be less profitable for generators if it is passed through and retail buyers respond by reducing their consumption by a significant amount.
• Real-time meters, which use two-way electronic linkages between customers and suppliers to allow the retail supplier to charge prices that echo changes in wholesale prices,provide retail customers with instantaneous information about prices, and record not only the amount of electricity used, but when it is used (especially for industrial and large commercial customers). State policies that eliminate barriers that limit the ability or incentive of electricity suppliers to offer variable pricing through the use of real-time meters are likely to increase the demand-side response. Real-time pricing will help alleviate market power concerns and reduce the fluctuations in quantity demanded. Seasonal and timeof-day pricing differences also will increase the demand-side response, but not as effectively as real-time metering and pricing.
In conjunction with variable pricing for generation services, retail suppliers should be permitted to offer competitive metering and billing services to their customers. Such competition would encourage the development of innovative new services (e.g., real-time pricing).
At present, in most organized wholesale spot markets, retail electricity suppliers bid only quantities, not prices. This characteristic should be modified to permit buyers to bid a variety of combinations of price and quantityso that wholesale prices arenot established solely by sellers’ supply offers. Because wholesale supplier demand is derived from retail demand levels, this policy will be most effective when retail customers are provided accurate and timely price information and real-time rates so that they can adjust their consumption according to price changes. These varying levels of retail demand can then be passed on to retail suppliers so that they can participate in wholesale spot markets in a more effective manner. Currently, most wholesale spot markets do not allow retail customers to participate directly as suppliers at all.
Very few customers have real-time or time-of-day meters. In addition to cost considerations, this may reflect the fact that very few states have opened up metering services to competition. Some states, such as Massachusetts, have determined that subjecting metering services to competition would not be in the public interest.16 Alternative suppliers have contended, however, that if metering services are not open to competition, they cannot offer creative service offerings, such as variable p...
